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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMB PROPERTY CORPORATION AMB PROPERTY, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF REGISTRANT AS
IN ITS GOVERNING INSTRUMENTS) SPECIFIED IN ITS GOVERNING INSTRUMENTS)
MARYLAND DELAWARE
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation or Organization) Incorporation or Organization)
94-3281941 94-3285362
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
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505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(Address of Principal Executive Offices)
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DAVID S. FRIES, ESQ.
MANAGING DIRECTOR AND GENERAL COUNSEL
AMB PROPERTY CORPORATION
505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(Name and Address of Agent for Service)
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Copies to:
JEFFREY T. PERO, ESQ.
LAURA L. GABRIEL, ESQ.
LATHAM & WATKINS
505 MONTGOMERY STREET, SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
(415) 391-0600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ X ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING FEE(3)
(1)(2) PRICE
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AMB Property Corporation...............
Common Stock, $.01 par value per
share(4)..........................
Preferred Stock, $.01 par value per $600,000,000(9) (11) $ 600,000,000(9)
share(5)..........................
Depositary Shares representing
Preferred Stock(6)................ $166,800
Warrants(7).........................
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Guarantees of Debt Securities(8)....
AMB Property, L.P. $400,000,000(10) (11) $ 400,000,000(10)
Debt Securities(8).................. $111,200
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Total............................ $1,000,000,000 (11) $1,000,000,000 $278,000
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(1) Subject to footnotes (9) and (10), this Registration Statement also
covers contracts which may be issued by the Registrants under which the
counterparty may be required to purchase Common Stock, Preferred Stock,
Depositary Shares, Warrants or Debt Securities. Any securities
registered hereunder may be sold separately or as units with other
securities registered hereunder.
(2) Common Stock, Preferred Stock, Depositary Shares and Warrants will be
issued by AMB Property Corporation (the "Company") and Debt Securities
will be offered by AMB Property, L.P. (the "Operating Partnership").
(3) Calculated pursuant to Rule 457(o) of the rules and regulations under
the Securities Act of 1933, as amended.
(4) Subject to footnote (9), there are being registered hereunder shares of
Common Stock as may be sold, from time to time, by the Company. Subject
to footnote (9), there is also being registered hereunder an
indeterminate number of shares of Common Stock that may be issued upon
conversion of Preferred Stock registered hereunder or upon exercise of
Warrants registered hereunder, as the case may be.
(5) Subject to footnote (9), there are being registered hereunder shares of
Preferred Stock as may be sold, from time to time, by the Company.
Subject to footnote (9), there is also being registered hereunder an
indeterminate number of shares of Preferred Stock that may be issued
upon exchange of Depositary Shares registered hereunder or upon the
exercise of Warrants registered hereunder, as the case may be.
(6) To be represented by Depositary Receipts representing an interest in all
or a specified portion of a share of Preferred Stock.
(7) Subject to footnote (9), there are being registered hereunder Warrants
representing rights to purchase Preferred Stock or Common Stock (as
shall be designated by the Company at the time of any such offering)
registered hereunder.
(8) Debt Securities offered by the Operating Partnership may be accompanied
by Guarantees to be issued by the Company.
(9) In no event will the aggregate maximum offering price of shares of
Common Stock, shares of Preferred Stock, Depositary Shares representing
Preferred Stock and Warrants registered under this Registration
Statement exceed $600,000,000.
(10) Or, if any Debt Securities are issued at an original issue discount,
such greater principal amount as shall result in an aggregate offering
price equal to $400,000,000.
(11) The proposed maximum offering price per unit (a) has been omitted
pursuant to Instruction II.D. of Form S-3, and (b) will be determined,
from time to time, by the Registrants in connection with the issuance of
the securities registered hereunder.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED DECEMBER 3, 1998
PROSPECTUS
$600,000,000
AMB PROPERTY CORPORATION
Common Stock, Preferred Stock,
Depositary Shares and Warrants
$400,000,000
Guarantees
AMB PROPERTY, L.P.
Debt Securities
AMB Property Corporation may offer, from time to time, in one or more
series or classes and in amounts, at prices and on terms that it will determine
at the time of offering, with an aggregate public offering price of up to
$600,000,000 (or its equivalent in another currency based on the exchange rate
at the time of sale):
- shares of common stock, $.01 par value per share;
- shares of preferred stock, $.01 par value per share;
- shares of preferred stock represented by depositary shares; and
- warrants to purchase common stock or preferred stock.
AMB Property, L.P. may offer, from time to time, its debt securities in
one or more series, which may be either senior or subordinated, at prices and on
terms that it will determine at the time of offering, with an aggregate public
offering price of up to $400,000,000 (or its equivalent in another currency
based on the exchange rate at the time of sale). AMB Property Corporation may
unconditionally guarantee the payment obligations on the debt securities on the
terms described in this prospectus and in the applicable supplement to this
prospectus.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the applicable supplement
carefully before you invest.
Our common stock is listed on the New York Stock Exchange under the
symbol "AMB." On December 2, 1998, the last reported sales price of our common
stock on the New York Stock Exchange was $21 1/2 per share.
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To facilitate maintenance of our qualification as a Real Estate
Investment Trust (a "REIT") for federal income tax purposes, subject to certain
exceptions, we prohibit the ownership, actually or constructively, by any single
person of more than 9.8% (by value or number of shares, whichever is more
restrictive) of the issued and outstanding shares of our common stock and more
than 9.8% (by value or number of shares, whichever is more restrictive) of the
issued and outstanding shares of our Series A Preferred Stock. We will also
prohibit, subject to certain exceptions, the ownership, actually or
constructively, of any shares of our Series B Preferred Stock and any shares of
our Series C Preferred Stock by any single person so that no such person, taking
into account all of our stock so owned by such person, may own in excess of 9.8%
of our issued and outstanding capital stock.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is December , 1998
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS AND THE
ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DO THIS PROSPECTUS AND THE ACCOMPANYING
SUPPLEMENT TO THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS AND THE SUPPLEMENT TO
THIS PROSPECTUS IS CORRECT ON ANY DATE AFTER THEIR RESPECTIVE DATES, EVEN THOUGH
THIS PROSPECTUS OR A SUPPLEMENT IS DELIVERED OR SECURITIES ARE SOLD ON A LATER
DATE.
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TABLE OF CONTENTS
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PAGE
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About This Prospectus..............................................................1
Where You Can Find More Information................................................1
Incorporation Of Certain Documents By Reference....................................2
Forward Looking Statements.........................................................3
The Company........................................................................5
Use Of Proceeds....................................................................5
Ratios Of Earnings to Fixed Charges And Preferred Dividends and Distributions......5
Description Of Debt Securities.....................................................6
Description Of Common Stock.......................................................24
Description Of Preferred Stock....................................................25
Description Of Depositary Shares..................................................41
Description Of Warrants...........................................................45
Restrictions On Ownership And Transfer Of Capital Stock...........................46
Certain Provisions Of Maryland Law And Of Our Charter And Bylaws..................49
Description Of Certain Provisions Of The Partnership Agreement Of The Operating
Partnership...............................................................52
Certain Federal Income Tax Considerations.........................................65
Plan of Distribution..............................................................77
Legal Matters.....................................................................78
Experts...........................................................................79
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under this shelf process, we may sell any combination of the common stock,
preferred stock, depositary shares and warrants described in this prospectus in
one or more offerings up to a total dollar amount of $600,000,000 and the
Operating Partnership may sell the debt securities described in this prospectus
in one or more offerings up to a total dollar amount of $400,000,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and the applicable
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information."
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "we," "us," "our" or the "Company" mean AMB
Property Corporation and its subsidiaries, including AMB Property, L.P. (which
we refer to as the "Operating Partnership") and its subsidiaries and, with
respect to the period prior to the Company's initial public offering, the
Company's predecessor, AMB Institutional Realty Advisors, Inc., and certain real
estate investment funds, trusts, corporations and partnerships that prior to the
Company's initial public offering owned properties that they contributed to the
Operating Partnership. In some instances, in order to avoid confusion between
AMB Property Corporation and the Operating Partnership, we refer to AMB Property
Corporation alone as the "Company." When we refer to our "Charter" we mean the
Company's Articles of Incorporation, as supplemented by the Articles
Supplementary establishing the terms of our 8 1/2% Series A Cumulative
Redeemable Preferred Stock (the "Series A Preferred Stock"), the Articles
Supplementary establishing the terms of our 8 5/8% Series B Cumulative
Redeemable Preferred Stock (the "Series B Preferred Stock") and the Articles
Supplementary establishing the terms of our 8.75% Series C Cumulative Redeemable
Preferred Stock (the "Series C Preferred Stock"). When we refer to "Units" we
mean the Operating Partnership's common units and preferred units, including the
8 1/2% Series A Cumulative Redeemable Preferred Units (the "Series A Preferred
Units"), the 8 5/8% Series B Cumulative Redeemable Preferred Units (the "Series
B Preferred Units") and any 8 3/4% Series C Cumulative Redeemable Preferred
Units (the "Series C Preferred Units"), and other partnership interests of the
Operating Partnership of different classes and series with rights, preferences
and privileges that the Company may determine in its capacity as general partner
of the Operating Partnership.
WHERE YOU CAN FIND MORE INFORMATION
The Company and the Operating Partnership file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). You may read and copy any document we file with
the SEC at the SEC's public reference rooms at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at
Seven World Trade Center, 13th Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The SEC also maintains a web site that contains reports, proxy
and information statements, and other information regarding registrants that
file electronically with the SEC (http://www.sec.gov). You can inspect reports
and other information we file at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
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We have filed a registration statement of which this prospectus is a
part and related exhibits with the SEC under the Securities Act of 1933, as
amended (the "Securities Act"). The registration statement contains additional
information about us and the securities. You may inspect the registration
statement and exhibits without charge at the office of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, and you may obtain copies from the SEC at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus. Any statement contained in a document which
is incorporated by reference in this prospectus is automatically updated and
superseded if information contained in this prospectus, or information that we
later file with the SEC, modifies or replaces this information. We incorporate
by reference the following documents we filed with the SEC:
- Annual Report of the Company on Form 10-K for the year
ended December 31, 1997;
- Quarterly Reports of the Company on Form 10-Q for the
quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998;
- Quarterly Reports of the Operating Partnership on Form
10-Q for the quarters ended June 30, 1998 and September
30, 1998;
- Current Report of the Company on Form 8-K filed on
January 13, 1998;
- Current Report of the Company on Form 8-K filed on July
9, 1998;
- Current Report of the Company on Form 8-K filed on
December 2, 1998;
- Current Report of the Operating Partnership on Form 8-K
filed on December 2, 1998;
- the description of the Company's common stock contained
in the Company's Registration Statement on Form 8-A
filed with the SEC on October 28, 1997;
- the description of the Company's Series A Preferred
Stock contained in the Company's Registration Statement
on Form 8-A filed with the SEC on July 14, 1998;
- the report, financial statements and financial statement
schedule for the Operating Partnership from our
Registration Statement on Form S-11 (No. 333-49163);
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- the report, financial statements and financial statement
schedule for the AMB Contributed Properties from our
Registration Statement on Form S-11 (No. 333-49163);
- the reports and financial statements for the Boston
Industrial Portfolio, the Jamesburg Property, Orlando
Central Park, Totem Lake Malls, Dallas Warehouse
Portfolio (Garland Industrial Portfolio), Twin Cities
Office/Showroom Portfolio (Minnetonka Industrial
Portfolio), Crysen Corridor Warehouse, Cabot Industrial
Portfolio, Cabot Business Park, Manhattan Village
Shopping Center, Weslayan Plaza and Silicon Valley R&D
Portfolio from our Registration Statement on Form S-11
(No. 333-58107); and
- all documents filed by either the Company or the
Operating Partnership with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") after the date
of this prospectus and prior to the termination of the
offering.
To receive a free copy of any of the documents incorporated by reference
in this prospectus (other than exhibits, unless they are specifically
incorporated by reference in the documents), call or write AMB Property
Corporation, 505 Montgomery Street, San Francisco, CA, Attention: Secretary
(415/394-9000).
You should rely only on the information incorporated by reference or set
forth in this prospectus or the applicable prospectus supplement. We have not
authorized anyone else to provide you with different information. We may only
use this prospectus to sell securities if it is accompanied by a prospectus
supplement. We are only offering these securities in states where the offer is
permitted. You should not assume that the information in this prospectus or the
applicable prospectus supplement is accurate as of any date other than the dates
on the front of these documents.
FORWARD LOOKING STATEMENTS
Some of the information included and incorporated by reference in this
prospectus contains forward-looking statements, such as those pertaining to our
(including certain of our subsidiaries') capital resources, portfolio
performance and results of operations. Likewise, the pro forma financial
statements and other pro forma information contained or incorporated by
reference in this prospectus also contain forward-looking statements. In
addition, all statements regarding anticipated growth in our funds from
operations and anticipated market conditions, demographics and results of
operations are forward-looking statements. Forward-looking statements involve
numerous risks and uncertainties and you should not rely on them as predictions
of future events. There is no assurance that the events or circumstances
reflected in forward-looking statements will be achieved or will occur. You can
identify forward-looking statements by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," "seeks,"
"approximately," "intends," "plans," "pro forma," "estimates" or "anticipates"
or the negative of these words and phrases or similar words or phrases. You can
also identify forward-looking statements by discussions of strategy, plans or
intentions. Forward-looking statements are necessarily dependent on assumptions,
data or methods that may be incorrect or imprecise and we may not be able to
realize them. The following factors, among others, could cause actual results
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and future events to differ materially from those set forth or contemplated in
the forward-looking statements: defaults on or non-renewal of leases by tenants,
increased interest rates and operating costs, our failure to obtain necessary
outside financing, difficulties in identifying properties to acquire and in
effecting acquisitions, our failure to successfully integrate acquired
properties and operations, risks and uncertainties affecting property
development and construction (including construction delays, cost overruns, our
inability to obtain necessary permits and public opposition to such activities),
our failure to qualify and maintain our status as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"), environmental uncertainties,
risks related to natural disasters, financial market fluctuations, changes in
real estate and zoning laws and increases in real property tax rates. Our
success also depends upon economic trends generally, including interest rates,
income tax laws, governmental regulations, legislation, population changes and
certain other matters discussed in this prospectus and the applicable prospectus
supplement, including under the heading "Risk Factors" in the prospectus
supplement. We caution you not to place undue reliance on forward-looking
statements, which reflect our analysis only.
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THE COMPANY
We are one of the largest publicly-traded real estate companies in the
United States. As of November 30, 1998, we owned 587 industrial buildings
located in 26 markets throughout the United States, including 40 industrial
buildings acquired since September 30, 1998, and 38 retail centers located in 16
markets throughout the United States, including one center acquired since
September 30, 1998. As of September 30, 1998, our industrial buildings,
principally warehouse distribution properties, encompassed approximately 53.1
million rentable square feet and, as of the same date, were 95.9% leased to over
1,500 tenants. As of September 30, 1998, our retail centers, principally
grocer-anchored community shopping centers, encompassed approximately 6.9
million rentable square feet and, as of the same date, were 94.8% leased to over
900 tenants. We own substantially all of our assets, and conduct substantially
all of our business, through the Operating Partnership and its subsidiaries.
We are engaged in the business of acquiring and operating industrial
buildings and community shopping centers in target markets nationwide. We are
led by Hamid R. Moghadam, our Chief Executive Officer and one of our three
founders. Douglas D. Abbey and T. Robert Burke, our other two founders, also
play active roles in our operations as the Chairman of our Investment Committee
and the Chairman of our Board of Directors, respectively. Our 10 executive
officers have an average of 23 years of experience in the real estate industry
and have worked together for an average of nine years building the AMB real
estate business.
The Company was organized in November 1997 and commenced operations upon
the completion of the initial public offering on November 26, 1997. We operate
as a self-administered and self-managed real estate company and believe that we
have qualified and that we will continue to qualify as a REIT for federal income
tax purposes beginning with the year ended December 31, 1997.
USE OF PROCEEDS
Unless we indicate otherwise in the applicable prospectus supplement,
the Operating Partnership intends to use the net proceeds from the sale of debt
securities for general purposes, which may include the acquisition or
development of additional properties and the repayment of indebtedness. Unless
we indicate otherwise in the applicable prospectus supplement, the Company will
invest any proceeds from the sale of common stock, preferred stock, depositary
shares or warrants in the Operating Partnership, which will use the proceeds as
described above unless we indicate otherwise in the applicable prospectus
supplement. Initially, we may temporarily invest net proceeds from the sale of
the securities in short-term securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS AND DISTRIBUTIONS
The ratio of earnings to fixed charges and preferred dividends for the
Company for the nine month period ended September 30, 1998 was 2.6x. Prior to
1998, the Company did not have any outstanding preference securities. The ratio
of earnings to fixed charges for the Company for the nine month period ended
September 30, 1998 was 2.7x and for the fiscal year ended December 31, 1997 was
5.6x. The Company's fiscal year ended December 31, 1997 includes the historical
results of AMB Institutional Realty Advisors, Inc., the Company's predecessor,
for the period from January 1, 1997 through November 25, 1997 and the Company's
historical results for the period from November 26, 1997 to December 31, 1997.
The ratio of earnings to fixed charges for AMB Institutional Realty Advisors,
Inc. for the fiscal years ended December 31, 1993, 1994, 1995 and 1996 are not
applicable because AMB Institutional Realty Advisors, Inc. had no or immaterial
fixed charges.
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The ratio of earnings to fixed charges and preferred distributions for
the Operating Partnership for the nine month period ended September 30, 1998 was
2.6x. Prior to 1998, the Operating Partnership did not have any outstanding
preference securities. The ratios of earnings to fixed charges for the Operating
Partnership for the nine month period ended September 30, 1998 was 2.7x and for
the period from inception (November 26, 1997) to December 31, 1997 was 3.1x.
We have computed the ratios of earnings to fixed charges by dividing
fixed charges, excluding capitalized interest, plus income from continuing
operations including income from minority interests which have fixed charges and
including distributed operating income from unconsolidated joint ventures
instead of income from unconsolidated joint ventures, by fixed charges. Fixed
charges consist of interest costs, whether expensed or capitalized, the interest
component of rental expense and amortization of debt issuance costs.
We have computed the ratios of earnings to fixed charges and preferred
dividends/distributions by dividing fixed charges, excluding capitalized
interest, plus income from continuing operations including income from minority
interests which have fixed charges and including distributed operating income
from unconsolidated joint ventures instead of income from unconsolidated joint
ventures, by fixed charges plus preferred dividends/distributions. Fixed charges
consist of interest costs, whether expensed or capitalized, the interest
component of rental expense and amortization of debt issuance costs.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The debt securities will be direct, non-convertible, obligations of the
Operating Partnership, which may be secured or unsecured, and which may be
senior or subordinated indebtedness of the Operating Partnership. The Operating
Partnership will issue the debt securities under an Indenture dated as of June
30, 1998, as supplemented by the First Supplemental Indenture dated as of June
30, 1998, the Second Supplemental Indenture dated as of June 30, 1998 and the
Third Supplemental Indenture dated as of June 30, 1998, and as further amended
or supplemented from time to time, among the Operating Partnership, the Company
and State Street Bank and Trust Company of California, N.A., as Trustee
(together with any other trustee(s) appointed in a supplemental indenture with
respect to a particular series of debt securities, the "trustee"). The indenture
is subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made in this section relating to the indenture and the debt
securities are summaries of certain provisions of the debt securities and the
indenture. These summaries are not complete. For more detail you should refer to
the indenture, which we have filed as an exhibit to the registration statement
of which this prospectus is a part.
TERM
We will describe the particular terms of the debt securities offered by
a prospectus supplement in the applicable prospectus supplement, along with any
applicable modifications of or additions to the general terms of the debt
securities as described in this prospectus. Accordingly, for a description of
the terms of any series of debt securities, you must refer to both the
prospectus supplement relating to that series and the description of the debt
securities set forth in this prospectus. A prospectus supplement may change any
of the terms of the debt securities described in this prospectus.
The Operating Partnership may offer under this prospectus up to
$400,000,000 (or its equivalent in another currency based on the exchange rate
at the time of sale) aggregate principal amount of debt securities or if debt
securities are issued at a discount, such principal amount as may be sold for an
initial public offering price of up to $400,000,000. Unless we state otherwise
in any prospectus supplement, the Operating Partnership may issue the debt
securities in one or more series, as established from time to time by the
Operating Partnership. The Operating Partnership need not issue all debt
securities of one series at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the holders of the debt
securities of that series, for issuances of additional debt securities of that
series.
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The Operating Partnership may, but need not, designate more than one
trustee under the indenture, each with respect to one or more series of debt
securities. Any trustee may resign or be removed with respect to one or more
series of debt securities, and a successor trustee may be appointed to act with
respect to the series. If two or more persons are acting as trustee with respect
to different series of debt securities, each such trustee will be a trustee of a
trust under the indenture separate and apart from the trust administered by any
other trustee and, except as we state otherwise in this prospectus, any action
to be taken by a trustee may be taken by each trustee with respect to, and only
with respect to, the one or more series of debt securities for which it is
trustee.
The following summaries set forth certain general terms and provisions
of the indenture and the debt securities. The prospectus supplement relating to
the series of debt securities being offered will contain further terms of the
debt securities, including the following specific terms:
- the title of the debt securities;
- the limit on the aggregate principal amount of the debt
securities of the series that may be authenticated and delivered under the
indenture;
- the date or dates, or the method for determining the date or
dates, on which the Operating Partnership will pay the principal of the debt
securities;
- the rate or rates (which may be fixed or variable), or the
method by which such rate or rates will be determined, at which the debt
securities will bear interest, if any;
- the date or dates (or the method for determining the date or
dates) from which any interest will accrue, the dates upon which any interest
will be payable and the record dates for payment of interest (or the method by
which the record dates will be determined);
- the place or places, if any, other than or in addition to the
Borough of Manhattan, The City of New York, where the principal of (and premium,
if any) and interest, if any, on the debt securities will be payable, where the
debt securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Operating Partnership in
respect of the debt securities and the indenture may be served;
- any obligation the Operating Partnership has to redeem, repay or
repurchase the debt securities, in whole or in part, at the option of a holder
of the debt securities, and the period or periods within which, the date or
dates on which the price or prices at which and the terms and conditions upon
which the Operating Partnership will redeem, repay or repurchase the debt
securities;
- if other than the trustee, the identity of each security
registrar and/or paying agent;
- any provisions granting special rights to holders of the debt
securities;
- any deletions from, modifications of, or additions to the events
of default or covenants of the Operating Partnership with respect to the debt
securities, whether or not such events of default or covenants are consistent
with the events of default or covenants with the indenture;
- the person to whom any interest will be payable, if other than
the person in whose name the debt security is registered; and
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- any other terms of the debt securities and any deletions from or
modifications or additions to the indenture in respect of the debt securities
(whether or not consistent with the other provisions of the indenture).
The Operating Partnership may issue debt securities at a discount below
their principal amount and provide for less than the entire principal amount of
the debt securities to be payable upon declaration of acceleration of maturity.
In such cases, we will describe any material U.S. federal income tax, accounting
and other considerations in the applicable prospectus supplement.
DENOMINATIONS AND INTEREST
Unless we specify otherwise in the applicable prospectus supplement, the
debt securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Unless we specify otherwise in the applicable
prospectus supplement, interest on any series of debt securities will be payable
to the person in whose name the security is registered at the close of business
on the record date for such interest at the office of the Operating Partnership
maintained for such purpose within the City and State of New York. However,
unless we provide otherwise in the applicable prospectus supplement, the
Operating Partnership may make interest payments by check mailed to the address
of the person entitled to the interest as it appears in the applicable register
for debt securities or by wire transfer of funds to such person at an account
maintained within the United States.
GLOBAL NOTES
Unless we specify otherwise in the applicable prospectus supplement, the
debt securities of each series will be issued in the form of one or more fully
registered book-entry debt securities of such series (each, a "Global Note")
that will be deposited with, or on behalf of The Depository Trust Company, New
York, New York ("DTC"). Global Notes will be issued in fully registered form.
The Operating Partnership anticipates that the Global Notes will be
deposited with, or on behalf of DTC, and that such Global Note will be
registered in the name of Cede & Co., DTC's nominee. Unless we specify otherwise
in the applicable prospectus supplement, the Operating Partnership further
anticipates that the following provisions will apply to the depository
arrangements with respect to the Global Notes.
So long as DTC or its nominee is the registered owner of the Global
Notes, DTC or its nominee, as the case may be, will be considered the sole
holder of the debt securities represented by the Global Note for all purposes
under the indenture. Except as described below, owners of beneficial interests
in the Global Notes will not be entitled to have debt securities represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of debt securities in certificated form and will not
be considered the owners or holders of the debt securities under the indenture.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in certificated form; accordingly, such
laws may limit the transferability of beneficial interests in the Global Notes.
The Global Notes will be exchangeable for certificated debt securities
only if:
- DTC notifies the Operating Partnership that it is unwilling or
unable to continue as depository or DTC ceases to be a clearing
agency registered under the Exchange Act (if so required by
applicable law or regulation) and, in either case, a successor
depository is
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not appointed by the Operating Partnership within 90 days after
the Operating Partnership receives such notice or becomes aware
of such ineligibility;
- the Operating Partnership in its sole discretion determines that
the Global Notes shall be exchangeable for certificated debt
securities; or
- there shall have occurred and be continuing an event of default
with respect to debt securities of any series under the
indenture and beneficial owners representing a majority in
aggregate principal amount of the debt securities of such series
represented by a Global Note advise DTC to cease acting as
depository. Upon any such exchange, owners of a beneficial
interest in such Global Note will be entitled to physical
delivery of individual debt securities of such series in
certificated form of like tenor, terms and rank, equal in
principal amount to such beneficial interest, and to have such
debt securities in certificated form registered in the names of
the beneficial owners, which names are expected to be provided
by DTC's relevant Participants (as identified by DTC) to the
trustee.
Debt securities so issued in certificated form will be issued in denominations
of $1,000 or any integral multiple thereof, and will be issued in registered
form only, without coupons.
The following is based on information furnished to us by DTC:
DTC will act as securities depository for the debt securities. The debt
securities will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). One fully registered certificate will
be issued with respect to each $200 million (or such other amount as shall be
permitted by DTC from time to time) of principal amount of the debt securities,
and an additional certificate will be issued with respect to any remaining
principal amount.
DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("participants") deposit with DTC. DTC
also facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("direct participants"). DTC is
owned by a number of its direct participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, and banks and trust companies that clear
through or maintain a custodial relationship with a direct participant, either
directly or indirectly ("indirect participants"). The rules applicable to DTC
and its Participants are on file with the SEC.
Purchases of debt securities under the DTC system must be made by or
through direct participants, which will receive a credit for the debt securities
on DTC's records. The ownership interest of each actual purchaser of each debt
security ("beneficial owner") is in turn recorded on the Direct and Indirect
participants' records. A beneficial owner does not receive written confirmation
from DTC of its purchase, but is expected to receive a written confirmation
providing details of the transaction, as well as
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periodic statements of its holdings, from the direct or indirect participant
through which such beneficial owner entered into the transaction. Transfers of
ownership interests in debt securities are accomplished by entries made on the
books of direct and indirect participants acting on behalf of beneficial owners.
Beneficial owners do not receive certificates representing their ownership
interests in debt securities, except under the circumstances described above.
To facilitate subsequent transfers, the debt securities are registered
in the name of DTC's nominee, Cede & Co. The deposit of the debt securities with
DTC and their registration in the name of Cede & Co. will effect no change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the debt securities; DTC records reflect only the identity of the direct
participants to whose accounts debt securities are credited, which may or may
not be the beneficial owners. The participants remain responsible for keeping
account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners are governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the debt
securities. Under its usual procedures, DTC mails a proxy (an "omnibus proxy")
to the issuer as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants to
whose accounts the debt securities are credited on the record date (identified
on a list attached to the omnibus proxy).
Principal payments, premium payments, if any, and interest payments, if
any, on the debt securities will be made to DTC. DTC's practice is to credit
direct participants' accounts on the payment date in accordance with their
respective holdings as shown on DTC's records unless DTC has reason to believe
that it will not receive payment on the payment date. Payments by direct and
indirect participants to beneficial owners are governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and are the
responsibility of such direct and indirect participants and not of DTC, the
Trustee or the Operating Partnership, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal (and
premium, if any) and interest, if any, to DTC is the responsibility of the
Operating Partnership or the trustee, disbursement of such payments to direct
participants is the responsibility of DTC, and disbursement of such payments to
the beneficial owners is the responsibility of direct and indirect participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the debt securities of any series represented by the Global Notes
are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each direct participant in such issue to be redeemed.
DTC may discontinue providing its services as securities depository with
respect to the debt securities of any series at any time by giving reasonable
notice to the Operating Partnership or the trustee. Under such circumstances, in
the event that a successor securities depository is not appointed, certificates
are required to be printed and delivered as described above.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, certificates will be printed and delivered as described above.
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Neither the Operating Partnership, the underwriters, the trustee, or any
applicable paying agent will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial interests
in the debt securities, or for maintaining, supervising or reviewing any records
relating to such beneficial interest.
Notices or demands to or upon the Operating Partnership in respect of
the debt securities and the indenture may be served and, in the event that debt
securities are issued in definitive certificated form, debt securities may be
surrendered for payment, registration of transfer or exchange, at the office or
agency of the Operating Partnership maintained for such purpose in the Borough
of Manhattan, The City of New York, which shall initially be the office of State
Street Bank and Trust Company, an affiliate of the Trustee, which on the date of
this Prospectus is located at 61 Broadway, 15th Floor, New York, New York.
GUARANTEES
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the Operating Partnership's obligations under the debt
securities will be guaranteed by the Company. The obligations of the Company
under any guarantee will be limited to the maximum amount permitted under
applicable federal or state law. A supplemental indenture establishing the terms
of a particular series of debt securities may provide that such series will not
be guaranteed by the Company.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the Operating Partnership will not, in any transaction
or series of transactions, consolidate with, or sell, lease, assign, transfer or
otherwise convey all or substantially all of its assets to, or merge with or
into any other person unless:
- either the Operating Partnership is the continuing
person or the successor person (if other than the
Operating Partnership) is a corporation, partnership,
limited liability company or other entity organized and
existing under the laws of the United States of America
or a State of the United States of America or the
District of Columbia and expressly assumes the Operating
Partnership's obligations on the debt securities and
under the indenture;
- immediately after giving effect to the transaction and
treating any Debt (including Acquired Debt) which
becomes an obligation of the Operating Partnership or
any of its affiliates as a result of such transaction as
having been incurred by the Operating Partnership or
such affiliate at the time of such transaction, no event
of default under the indenture, and no event which,
after notice or lapse of time, or both, would become an
event of default, shall have occurred and be continuing;
and
- the Operating Partnership delivers to the trustee an
officers' certificate and legal opinion covering these
conditions.
In the event that the Operating Partnership is not the continuing person, then,
for purposes of the second bullet point above, the successor person will be
deemed to be the Operating Partnership.
Upon any such merger, consolidation, sale, assignment, transfer, lease
or conveyance in which the Operating Partnership is not the continuing legal
entity, the successor entity formed by the consolidation or into which the
Operating Partnership is merged or to which the sale, assignment, transfer,
lease or other conveyance is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Operating Partnership under the
indenture with the same effect as if the
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successor entity has been named as the Operating Partnership in the indenture
and the Operating Partnership will be released (except in the case of a lease)
from its obligations under the indenture and the debt securities.
The indenture provides that neither the Company, as guarantor of a
series of debt securities, nor any other guarantor, will in any transaction or
series of transactions, consolidate with, or sell, lease, assign, transfer or
otherwise convey all or substantially all of its assets to, or merge with or
into any other person unless:
- either such guarantor is the continuing person or the
successor person (if other than such guarantor) is a
corporation, partnership, limited liability company or
other entity organized and existing under the laws of
the United States of America or a State of the United
States of America or the District of Columbia and
expressly assumes such guarantor's obligations on the
debt securities and under the indenture;
- immediately after giving effect to the transaction, no
event of default, and no event which, after notice or
lapse of time, or both, would become an event of
default, shall have occurred and be continuing; and
- such guarantor delivers to the trustee an officers'
certificate and legal opinion covering these conditions.
In the event that such guarantor is not the continuing corporation, then, for
purposes of the second bullet point above, the successor corporation will be
deemed to be such guarantor.
Any consolidation, merger, sale, lease, assignment, transfer or
conveyance permitted above is also subject to the condition precedent that the
trustee receive an officers' certificate and legal opinion to the effect that
any such consolidation, merger, sale, lease, assignment, transfer or conveyance,
and the assumption by any successor corporation, complies with the provisions of
the indenture and that all conditions precedent provided for in the indenture
relating to such transaction have been complied with.
A supplemental indenture establishing the terms of a particular series
of debt securities may provide that such series will not be guaranteed by the
Company.
CERTAIN COVENANTS
Unless we specify otherwise in the applicable prospectus supplement, the
indenture contains the following covenants:
Aggregate Debt Test. The Operating Partnership will not, and will not
permit any of its subsidiaries to, incur any Debt (including Acquired Debt) if,
immediately after giving effect to the incurrence of such Debt and the
application of the proceeds from such Debt on a pro forma basis, the aggregate
principal amount of all outstanding Debt of the Operating Partnership and its
subsidiaries (determined on a consolidated basis in accordance with generally
accepted accounting principles) is greater than 60% of the sum of the following
(without duplication):
- the Total Assets of the Operating Partnership and its
subsidiaries as of the last day of the then most recently ended
fiscal quarter; and
- the aggregate purchase price of any real estate assets or
mortgages receivable acquired, and the aggregate amount of any
securities offering proceeds received (to the extent such
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proceeds were not used to acquire real estate assets or
mortgages receivable or used to reduce Debt) by the Operating
Partnership or any of its subsidiaries since the end of such
fiscal quarter, including the proceeds obtained from the
incurrence of such additional Debt, determined on a consolidated
basis in accordance with generally accepted accounting
principles.
Debt Service Test. The Operating Partnership will not, and will not
permit any of its subsidiaries to, incur any Debt (including Acquired Debt) if
the ratio of Consolidated Income Available for Debt Service to Annual Debt
Service Charge for the period consisting of the four consecutive fiscal quarters
most recently ended prior to the date on which such additional Debt is to be
incurred shall have been less than 1.5:1 on a pro forma basis after giving
effect to the incurrence of such Debt and the application of the proceeds from
such Debt, and calculated on the following assumptions:
- such Debt and any other Debt (including Acquired Debt) incurred
by the Operating Partnership or any of its subsidiaries since
the first day of such four-quarter period had been incurred, and
the application of the proceeds from such Debt (including to
repay or retire other Debt) had occurred, on the first day of
such period;
- the repayment or retirement of any other Debt of the Operating
Partnership or any of its subsidiaries since the first day of
such four-quarter period had occurred on the first day of such
period (except that, in making this computation, the amount of
Debt under any revolving credit facility, line of credit or
similar facility will be computed based upon the average daily
balance of such Debt during such period); and
- in the case of any acquisition or disposition by the Operating
Partnership or any of its subsidiaries of any asset or group of
assets with a fair market value in excess of $1 million, since
the first day of such four-quarter period, whether by merger,
stock purchase or sale or asset purchase or sale or otherwise,
such acquisition or disposition had occurred as of the first day
of such period with the appropriate adjustments with respect to
such acquisition or disposition being included in such pro forma
calculation.
If the Debt giving rise to the need to make the calculation described
above or any other Debt incurred after the first day of the relevant
four-quarter period bears interest at a floating rate, then, for purposes of
calculating the Annual Debt Service Charge, the interest rate on such Debt will
be computed on a pro forma basis by applying the average daily rate which would
have been in effect during the entire four-quarter period to the greater of the
amount of such Debt outstanding at the end of such period or the average amount
of Debt outstanding during such period.
Secured Debt Test. The Operating Partnership will not, and will not
permit any of its subsidiaries to, incur any Debt (including Acquired Debt)
secured by any Lien on any property or assets of the Operating Partnership or
any of its subsidiaries, whether owned on the date of this indenture or
subsequently acquired, if, immediately after giving effect to the incurrence of
such Debt and the application of the proceeds from such debt on a pro forma
basis, the aggregate principal amount (determined on a consolidated basis in
accordance with generally accepted accounting principles) of all outstanding
Debt of the Operating Partnership and its subsidiaries which is secured by a
Lien on any property or assets of the Operating Partnership or any of its
subsidiaries is greater than 40% of the sum of (without duplication) the
following:
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- the Total Assets of the Operating Partnership and its
subsidiaries as of the last day of the then most recently ended
fiscal quarter; and
- the aggregate purchase price of any real estate assets or
mortgages receivable acquired, and the aggregate amount of any
securities offering proceeds received (to the extent such
proceeds were not used to acquire real estate assets or
mortgages receivable or used to reduce Debt) by the Operating
Partnership or any of its subsidiaries since the end of such
fiscal quarter, including the proceeds obtained from the
incurrence of such additional debt, determined on a consolidated
basis in accordance with generally accepted accounting
principles.
Maintenance of Total Unencumbered Assets. The Operating Partnership will
not have at any time Total Unencumbered Assets of less than 150% of the
aggregate principal amount of all outstanding Unsecured Debt of the Operating
Partnership and its subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles.
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Operating Partnership will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises. However, the Operating Partnership will
not be required to preserve any right or franchise if the Board of Directors of
the Company determines that the preservation of the right or franchise is no
longer desirable in the conduct of its business and that the loss of the right
or franchise is not disadvantageous in any material respect to the holders of
the debt securities.
Maintenance of Properties. The Operating Partnership will cause all of
its properties used or useful in the conduct of its business or the business of
any subsidiary to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and cause all necessary repairs
to be made, all as in the judgment of the Operating Partnership and the Company
may be necessary in order for the Operating Partnership to all times properly
and advantageously conduct its business in connection with the properties.
Insurance. The Operating Partnership will, and will cause each of its
subsidiaries to, keep in force upon all of its properties and operations
insurance policies carried with responsible companies in customary amounts and
covering customary risks in accordance with prevailing market conditions and
availability.
Payment of Taxes and Other Claims. The Operating Partnership will pay or
discharge or cause to be paid or discharged before it becomes delinquent:
- all taxes, assessments and governmental charges levied or
imposed on it or any subsidiary or on its or any subsidiary's
income, profits or property; and
- all lawful claims for labor, materials and supplies that, if
unpaid, might by law become a lien upon its or any subsidiary's
property. However, the Operating Partnership will not be
required to pay or discharge or cause to be paid or discharged
any tax, assessment, charge or claim the amount, applicability
or validity of which it is contesting in good faith by
appropriate proceedings.
Provision of Financial Information. The Operating Partnership will:
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- file with the trustee, within 15 days after the Operating
Partnership or the Company is required to file them with the
SEC, copies of the annual reports and information, documents and
other reports which the Operating Partnership or the Company may
be required to file with the SEC pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Operating
Partnership or the Company is not required to file information,
documents or reports pursuant to those Sections, then the
Operating Partnership will file with the trustee and the SEC, in
accordance with rules and regulations prescribed by the SEC,
such of the supplementary and periodic information, documents
and reports which Section 13 of the Exchange Act may require
with respect to a security listed and registered on a national
securities exchange;
- file with the trustee and the SEC, in accordance with the rules
and regulations prescribed from time to time by the SEC, any
additional information, documents and reports with respect to
compliance by the Operating Partnership and the Company with the
conditions and covenants of the indenture as such rules and
regulations may require; and
- transmit to the holders of the debt securities, within 30 days
after filing with the trustee, in the manner and to the extent
provided in the Trust Indenture Act of 1939, as amended, such
summaries of any information, documents and reports required to
be filed by the Operating Partnership and the Company pursuant
to the bullet points above as the Commission's rules and
regulations may require.
Subsidiary Guarantees. The Operating Partnership will not permit any of
its subsidiaries to guarantee or secure through the granting of liens, the
payment of any Debt of the Operating Partnership or any guarantor. The indenture
also provides that the Operating Partnership will not and will not permit any of
its subsidiaries to pledge any intercompany notes representing obligations of
any of its subsidiaries, to secure the payment of any debt of the Operating
Partnership or any guarantor unless such subsidiary (a "Subsidiary Guarantor"),
the Operating Partnership and the trustee execute and deliver a supplemental
indenture evidencing such subsidiary's guarantee providing for the unconditional
guarantee by the subsidiary, on a senior basis, of the debt securities. If any
Subsidiary Guarantor is released from all of its obligations described above, it
will also be released from its unconditional guarantee.
Deletions, Modifications or Additions. We will specify in the applicable
prospectus supplement any deletions of, modifications of, or additions to the
covenants described above with respect to any series of debt securities.
DEFINITIONS
As used in this prospectus,
"Acquired Debt" means Debt of a person:
- existing at the time such person is merged or consolidated with
or into, or becomes a subsidiary of, the Operating Partnership;
or
- assumed by the Operating Partnership or any of its subsidiaries
in connection with the acquisition of assets from such person.
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"Annual Debt Service Charge" means, for any period, the interest expense
of the Operating Partnership and its subsidiaries for such period, determined on
a consolidated basis in accordance with generally accepted accounting
principles, including, without duplication:
- all amortization of debt discount and premiums;
- all accrued interest;
- all capitalized interest; and
- the interest component of capitalized lease obligations.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income of the Operating Partnership and its subsidiaries for
such period, plus amounts which have been deducted and minus amounts which have
been added for, without duplication:
- interest expense on Debt;
- provision for taxes based on income;
- amortization of debt discount, premium and deferred financing
costs;
- provisions for gains and losses on sales or other dispositions
of properties and other investments;
- property depreciation and amortization;
- the effect of any non-cash items; and
- amortization of deferred charges, all determined on a
consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Net Income" for any period means the amount of net income
(or loss) of the Operating Partnership and its subsidiaries for such period,
excluding, without duplication:
- extraordinary items; and
- the portion of net income (but not losses) of the Operating
Partnership and its subsidiaries allocable to minority interests
in unconsolidated persons to the extent that cash dividends or
distributions have not actually been received by the Operating
Partnership or one of subsidiaries, all determined on a
consolidated basis in accordance with generally accepted
accounting principles.
"Debt" means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of:
- borrowed money or evidenced by bonds, notes, debentures or
similar instruments;
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- indebtedness secured by any Lien on any property or asset owned
by such person, but only to the extent of the lesser of:
- the amount of indebtedness so secured; and
- the fair market value (determined in good faith by the
board of directors of such person or, in the case of the
Operating Partnership or a subsidiary, by the Company's
Board of Directors) of the property subject to such
Lien;
- reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts
representing the balance deferred and unpaid of the purchase
price of any property except any such balance that constitutes
an accrued expense or trade payable; or
- any lease of property by such person as lessee which is required
to be reflected on such person's balance sheet as a capitalized
lease in accordance with generally accepted accounting
principles, and also includes, to the extent not otherwise
included, any obligation of such person to be liable for, or to
pay, as obligor, guarantor or otherwise (other than for purposes
of collection in the ordinary course of business), Debt of the
types referred to above of another person (it being understood
that Debt shall be deemed to be incurred by such person whenever
such person shall create, assume, guarantee or otherwise become
liable in respect thereof).
"Lien" means any mortgage, deed of trust, lien, charge, pledge, security
interest, security agreement, or other encumbrance of any kind.
"Total Assets" means the sum of, without duplication:
- Undepreciated Real Estate Assets; and
- all other assets (excluding accounts receivable and intangibles)
of the Operating Partnership and its subsidiaries, all
determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Total Unencumbered Assets" means the sum of, without duplication:
- those Undepreciated Real Estate Assets which are not subject to
a Lien securing Debt; and
- all other assets (excluding accounts receivable and intangibles)
of the Operating Partnership and its subsidiaries not subject to
a Lien securing Debt, all determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Undepreciated Real Estate Assets" means, as of any date, the cost
(original cost plus capital improvements) of real estate assets of the Operating
Partnership and its subsidiaries on such date, before depreciation and
amortization, all determined on a consolidated basis in accordance with
generally accepted accounting principles.
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"Unsecured Debt" means Debt of the Operating Partnership or any of its
subsidiaries which is not secured by a Lien on any property or assets of the
Operating Partnership or any of its subsidiaries.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the following events are "events of default" with
respect to any series of debt securities issued under the indenture:
- default in the payment of any interest upon any debt security of
that series when it becomes due and payable, and continuance of
that default for a period of 30 days;
- default in the payment of principal of or premium, if any, on
any debt security of that series when due and payable;
- default in the performance or breach of any covenant or warranty
of the Operating Partnership in the indenture with respect to
any debt security of that series (other than a covenant or
warranty the default or breach of which is specifically dealt
with in the indenture or that has been included in the indenture
solely for the benefit of a series of debt securities other than
that series), which default continues uncured for a period of 60
days after receipt of written notice as provided in the
indenture;
- the following:
- default by the Operating Partnership or any subsidiary
of the Operating Partnership in the payment, beyond any
grace period, of any principal of or interest on any
bond, note, debenture or other evidence of indebtedness;
or
- the occurrence of any other breach or default (or other
event or condition) under any agreement, indenture or
instrument relating to any such bond, note, debenture or
other evidence of indebtedness beyond any cure period,
if as a result, the holder or holders of any such instrument has
the immediate right to cause any such instrument to become or be
declared due and payable, or required to be prepaid, redeemed,
purchased or defeased (or an offer of prepayment, redemption,
purchase or defeasance be made), prior to its stated maturity
(other than by a scheduled mandatory prepayment), which in the
aggregate under the bullet points above have a principal amount
equal to or greater than $20,000,000 without such instrument
having been discharged, or such breach or default having been
cured, within a period of 10 days after the notice specified in
the indenture has been provided;
- certain events of bankruptcy, insolvency or reorganization with
respect to the Operating Partnership, the Company or any
significant subsidiary of the Operating Partnership (as defined
in Regulation S-X under the Securities Act); and
- any other event of default provided with respect to debt
securities of that series that is described in the applicable
prospectus supplement.
A supplemental indenture establishing the terms of a particular series
of debt securities may delete, modify or add to the events of default described
above.
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No event of default with respect to a particular series of debt
securities necessarily constitutes an event of default with respect to any other
series of debt securities. The occurrence of an event of default may constitute
an event of default under our bank credit agreements in existence from time to
time. In addition, the occurrence of certain events of default or an
acceleration under the indenture may constitute an event of default under
certain of our other indebtedness outstanding from time to time.
If an event of default with respect to debt securities of any series at
the time outstanding occurs and is continuing, then the trustee or the holders
of 25% in principal amount of the outstanding debt securities of that series
may, by a notice in writing to us (and to the trustee if given by the holders),
declare all debt securities of that series to be due and payable immediately.
At any time after a declaration of acceleration with respect to debt
securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities of that series
may rescind and annul the acceleration if:
- the Operating Partnership has paid or deposited with the trustee
a sum sufficient to pay:
- all overdue installments of interest on all outstanding
debt securities of that series;
- the principal of (and premium, if any, on) any
outstanding debt securities of that series which have
become due otherwise than by such declaration of
acceleration, and interest thereon at the rates provided
for in such debt securities; and
- to the extent lawful, interest upon overdue installments
of interest at the rate or rates provided in such debt
securities; and
- all events of default with respect to debt securities of that
series, other than the nonpayment of the principal of (or
premium, if any) or interest on debt securities of that series
which have become due solely by such declaration of
acceleration, have been cured or waived.
The indenture also provides that the holders of a majority in principal
amount of the outstanding debt securities of any series may on behalf of the
holders of all debt securities of such series waive any past default under the
indenture with respect to such debt securities and its consequences, except a
default:
- in the payment of the principal of (or premium, if any) or
interest on or payable in respect of any debt security of such
series; or
- in respect of a covenant or provision of the indenture which
cannot be modified or amended without the consent of the holder
of each outstanding debt security of such series affected.
If the trustee knows of a default with respect to the debt securities of
any series, the indenture requires the trustee, within 90 days after the
default, to give notice to the holders of such debt securities, unless such
default shall have been cured or waived. However the trustee may withhold notice
to the holders of any debt securities of such series of any default (except a
default in the payment of the principal of (or premium, if any) or interest, if
any, on any debt security of such series) if the trustee determines such
withholding is in the interest of such holders.
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The indenture provides that the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holders of outstanding debt securities, unless the holders offer the trustee
security or indemnity reasonably satisfactory to it against the costs, expenses
and liabilities which might be incurred by it in compliance with such request.
Subject to certain rights of the trustee, the holders of a majority in principal
amount of the outstanding debt securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series.
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the indenture
or for the appointment of a receiver or trustee, or for any remedy under the
indenture, unless:
- that holder has previously given to the trustee written notice
of a continuing event of default with respect to debt securities
of that series; and
- the holders of 25% in principal amount of the outstanding debt
securities of that series have made written request, and offered
reasonable indemnity, to the trustee to institute the proceeding
as trustee, and the trustee has not received from the holders of
a majority in principal amount of the outstanding debt
securities of that series a direction inconsistent with that
request and has failed to institute the proceeding within 60
days.
Notwithstanding the foregoing, the holder of any debt security will have
an absolute and unconditional right to receive payment of the principal of,
premium and any interest on that debt security on or after the due dates
expressed in that debt security and to institute suit for the enforcement of
payment.
The indenture requires the Operating Partnership, within 120 days after
the end of each fiscal year, to furnish to the trustee a statement as to
compliance with the indenture. Further, upon any request by the Operating
Partnership to take any action under the indenture, the Operating Partnership
will furnish to the trustee:
- an officers' certificate stating that all conditions precedent,
if any, provided for in the indenture relating to the proposed
action have been complied with; and
- an opinion of counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been
complied with.
MODIFICATION AND WAIVER
We may modify and amend the indenture with the consent of the holders of
a majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments except that we may not make any
modification or amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
- change the stated maturity of the principal of (or
premium, if any, on) or any installment of principal of,
or premium, if any, or the interest payment date with
respect to such debt security;
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- reduce the principal amount of debt securities or the
rate or amount of interest on such debt securities, or
any premium payable on such debt security;
- adversely affect the right of any holder of debt
securities to repayment of such debt security at the
holder's option;
- change the place, or the currency, for payment of
principal of (or premium, if any) such debt security;
- impair the right to institute suit for enforcement of
any payment on or with respect to such debt security;
- impair the right to institute suit for the enforcement
of any payment on or with respect to such debt security;
- reduce the amount of debt securities whose holders must
consent to an amendment or waiver or reduce the quorum
or voting requirements set forth in the indenture; or
- modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the
required percentage to effect such action or to provide
that certain other provisions may not be modified or
waived without the consent of the holder of such debt
security.
The holders of a majority in principal amount of the outstanding debt
securities of any series may on behalf of the holders of all debt securities of
that series waive the Operating Partnership's compliance with certain covenants
of the indenture.
Modifications and amendments of the indenture may be made by the
Operating Partnership and the trustee without the consent of any holder of debt
securities issued thereunder for any of the following purposes:
- to evidence the succession of another person to the Operating
Partnership or any guarantor under the indenture;
- to add to the covenants of the Operating Partnership or any
guarantor for the benefit of the holders of the debt securities
or to surrender any right or power conferred upon the Operating
Partnership or any guarantor in the indenture;
- to add events of default for the benefit of the holders of all
or any series of debt securities;
- to add or change any provisions of the indenture to facilitate
the issuance of the debt securities in certificated form,
provided that such action shall not adversely affect the
interests of the holders of any debt securities in any material
respect;
- to secure the debt securities or guarantees;
- to provide for the acceptance of appointment by a successor
trustee or to facilitate the administration of the trusts under
the indenture by more than one trustee;
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- to cure any ambiguity, defect or inconsistency in the indenture
or to add or change any other provisions with respect to matters
or questions arising under the indenture, provided that such
action shall not adversely affect the interests of holders of
debt securities of any series or any related guarantees in any
material respect; or
- to supplement any of the provisions of the indenture to the
extent necessary to permit or facilitate discharge, legal
defeasance, or covenant defeasance of any series of debt
securities, provided that such action shall not adversely affect
the interests of the holders of the debt securities in any
material respect.
The indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver under
the indenture or whether a quorum is present at a meeting of holders of the debt
securities of a series, debt securities of each series owned by the Operating
Partnership or any other obligor upon such debt securities or any affiliate of
the Operating Partnership or of such other obligor will be disregarded.
The indenture contains provisions for convening meetings of the holders
of debt securities of a series. A meeting may be called at any time by the
trustee and also, upon request, by the Operating Partnership or the Holders of
25% in principal amount of the outstanding debt securities of such series, in
any such case upon notice given as provided in the indenture. Except for any
consent that must be given by the holder of each debt security affected by
certain modifications and amendments of the indenture, any resolution presented
at a meeting or adjourned meeting duly reconvened at which a quorum is present
may be adopted by the affirmative vote of the holders of a majority in principal
amount of the outstanding debt securities of such series. However, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage, which is less or
more than a majority, in principal amount of the outstanding debt securities of
such series may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding debt securities of
such series. Any resolution passed or decision taken at any meeting of holders
of debt securities of any series duly held in accordance with the indenture will
be binding on all holders of debt securities of such series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding debt securities of any series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the holders of not less than a specified percentage, which is less or
more than a majority, in principal amount of the outstanding debt securities of
such series, the persons holding or representing such specified percentage in
principal amount of the outstanding debt securities of such series will
constitute a quorum.
Notwithstanding the provisions described above, the indenture provides
that if any action is to be taken at a meeting of holders of debt securities of
any series with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that the indenture expressly provides
may be made, given or taken by the holders of a specified percentage in
principal amount of all outstanding debt securities of such series affected
thereby:
- there shall be no minimum quorum requirement for such meeting;
and
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- the principal amount of the outstanding debt securities of such
series that are entitled to vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or
other action shall be taken into account in determining whether
such request, demand, authorization, direction, notice, consent,
waiver or other action has been made, given or taken under the
indenture.
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
Legal Defeasance and Covenant Defeasance. Unless we specify otherwise in
the applicable prospectus supplement, the indenture provides that the Operating
Partnership may elect:
- to be discharged from any and all obligations in respect of the
debt securities of any series (except for certain obligations to
register the transfer or exchange of debt securities of such
series, to replace stolen, lost or mutilated debt securities of
such series, and to maintain paying agencies and certain
provisions relating to the treatment of funds held by paying
agents) ("legal deafeasance"); or
- to be released from compliance with the covenants in the
indenture ("covenant defeasance").
The Operating Partnership will be so discharged upon the deposit with
the trustee, in trust, of money and/or Government Obligations that, through the
payment of interest and principal in accordance with their terms, will provide
money in an amount sufficient to pay and discharge each installment of principal
(and premium, if any) and interest on the debt securities of that series on the
scheduled due dates or the applicable redemption date in accordance with the
terms of the indenture and those debt securities.
This trust may only be established if, among other things:
- the Operating Partnership has delivered to the trustee a legal
opinion to the effect that the holders of the debt securities
will not recognize income, gain or loss for United States
federal income tax purposes as a result of such legal defeasance
or covenant defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such legal
defeasance or covenant defeasance had not occurred, and such
legal opinion, in the case of legal defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a
change in applicable United States federal, income tax law
occurring after the date of the indenture;
- if the cash and Government Obligations deposited are sufficient
to pay the outstanding debt securities of such series, provided
such debt securities are redeemed on a particular redemption
date, the Operating Partnership shall have given the trustee
irrevocable instructions to redeem the debt securities of such
series on such date;
- such legal defeasance or covenant defeasance will not result in
a breach or violation of, or constitute a default under, the
indenture or any other material agreement or instrument to which
the Operating Partnership is a party or by which it is bound;
and
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- no event of default or event which with notice or lapse of time
or both would become an event of default with respect to the
debt securities shall have occurred and shall be continuing on
the date of, or, solely in the case of events of default due to
certain events of bankruptcy, insolvency, or reorganization,
during the period ending on the 91st day after the date of, such
deposit into trust.
"Government Obligations" means securities which are:
- direct obligations of the United States of America, for
the payment of which obligations its full faith and
credit is pledged; or
- obligations of a person controlled or supervised by and
acting as an agency or instrumentality of the United
States of America, the payment of which is
unconditionally guaranteed as a full faith and credit
obligation by the United States of America
and which, in either of the above cases, are not callable or redeemable at the
option of the issuer thereof and also includes a depository receipt issued by a
bank or trust company as custodian with respect to any such Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as provided by law) such custodian is not
authorized to make any amount received by the custodian.
Covenant Defeasance and Events of Default. In the event the Operating
Partnership exercises its option to effect covenant defeasance with respect to
any series of debt securities and the debt securities of that series are
declared due and payable because of the occurrence of any event of default, the
amount of money and/or Government Obligations on deposit with the trustee will
be sufficient to pay amounts due on the debt securities of that series at the
time of their stated maturity but may not be sufficient to pay amounts due on
the debt securities of that series at the time of the acceleration resulting
from the event of default. However, the Operating Partnership will remain liable
for those payments.
DESCRIPTION OF COMMON STOCK
Our Charter provides that we are authorized to issue 500,000,000 shares
of common stock, $.01 par value per share. As of November 30, 1998, we had
85,874,513 shares of common stock issued and outstanding. Each outstanding share
of common stock entitles the holder to one vote on all matters presented to
stockholders generally for a vote, including the election of directors. Except
as otherwise required by law and except as provided in any resolution adopted by
the Board of Directors establishing any other class or series of stock, the
holders of common stock possess the exclusive voting power, subject to the
provisions of the Charter regarding the ownership of shares of common stock in
excess of the ownership limit or any other limit specified in the Charter or
otherwise permitted by the Board of Directors. Holders of shares of common stock
do not have any conversion, exchange, sinking fund, redemption or appraisal
rights or any preemptive rights to subscribe for any of our securities or
cumulative voting rights in the election of directors. All shares of common
stock that are issued and outstanding are duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other shares or series
or classes of stock, including the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock (see "-- Preferred Stock"), and
to the provisions of the Charter regarding ownership of shares of common stock
in excess of the ownership limit, or such other limit specified in the Charter
or as otherwise permitted by the Board of Directors, we may pay distributions to
the holders of shares of common stock if and when authorized and declared by the
Board of Directors out
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of funds legally available for distribution. We intend to continue to make
quarterly distributions on outstanding shares of common stock.
Under the Maryland General Corporation Law (the "MGCL"), stockholders
are generally not liable for our debts or obligations. If we liquidate, subject
to the right of any holders of preferred stock, including the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock (see "--
Preferred Stock") to receive preferential distributions, each outstanding share
of common stock will be entitled to participate pro rata in the assets remaining
after payment of, or adequate provision for, all of our known debts and
liabilities, including debts and liabilities arising out of our status as
general partner of the Operating Partnership.
Subject to the provisions of our Charter regarding the ownership of
shares of common stock in excess of the ownership limit, or such other limit
specified in the Charter, or as otherwise permitted by the Board of Directors as
described below, all shares of common stock have equal distribution, liquidation
and voting rights, and have no preference or exchange rights.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend
its charter, merge, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of at least two-thirds of the
votes entitled to be cast on the matter unless a lesser percentage (but not less
than a majority of all of the votes entitled to be cast on the matter) is set
forth in the corporation's charter. Under the MGCL, the term "substantially all
of the Company's assets" is not defined and is, therefore, subject to Maryland
common law and to judicial interpretation and review in the context of the
unique facts and circumstances of any particular transaction. Our Charter does
not provide for a lesser percentage in any of the above situations.
Our Charter authorizes the Board of Directors to reclassify any unissued
shares of common stock into other classes or series of classes of stock and to
establish the number of shares in each class or series and to set the
preferences, conversion and other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
class or series. The transfer agent and registrar for our common stock is
BankBoston, N.A., an affiliate of First National Bank of Boston.
DESCRIPTION OF PREFERRED STOCK
Our Charter provides that we are authorized to issue 100,000,000 shares
of preferred stock, $.01 par value per share, of which 4,600,000 shares are of a
separate class designated as Series A Preferred Stock, 1,300,000 shares are of a
separate class designated as Series B Preferred Stock and 2,200,000 shares are
of a separate class designated as Series C Preferred Stock. The Series B
Preferred Stock is issuable in exchange, on a one for one basis, subject to
adjustment, for the Series B Preferred Units. The Series C Preferred Stock is
issuable in exchange, on a one for one basis, subject to adjustment, for 8 3/4%
Series C Cumulative Redeemable Preferred Units (the "AMB Property II Series C
Preferred Units") of AMB Property II, L.P. ("AMB Property II") that AMB
Property II issued to an institutional investor on November 24, 1998. The
Company owns 100% of the common stock of AMB Property Holding Corporation, which
has an approximate 1% general partnership interest in AMB Property II. The
Operating Partnership has an approximate 99% limited partnership interest in AMB
Property II. As of November 30, 1998, we had 4,000,000 shares of Series A
Preferred Stock issued and outstanding. As of the same date, we had 1,300,000
shares of Series B Preferred Stock and 2,200,000 shares of Series C Preferred
Stock reserved for issuance but not issued or outstanding.
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The following description summarizes certain general terms and
provisions of the preferred stock to which any prospectus supplement may relate.
This summary and the summary included in the relevant prospectus supplement are
not complete. For more detail you should refer to the applicable provisions of
our Charter (including the applicable Articles Supplementary) and Bylaws. Our
Charter and Bylaws have been filed as exhibits to the registration statement of
which this prospectus is a part and the applicable Articles Supplementary will
be filed as an exhibit to this registration statement or incorporated by
reference in this registration statement by a Form 8-K.
GENERAL
We may issue preferred stock from time to time, in one or more classes,
as authorized by the Board of Directors. Prior to the issuance of shares of each
class of preferred stock, subject to the provisions of our Charter regarding the
restrictions on transfer of stock, the Board of Directors is required by the
MGCL and our Charter to fix for each class the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms or conditions of redemption, as permitted by Maryland
law. Because the Board of Directors has the power to establish the preferences,
powers and rights of each class of preferred stock, it may afford the holders of
any class of preferred stock preferences, powers and rights, voting or
otherwise, senior to the rights of holders of shares of common stock. The
issuance of preferred stock could have the effect of delaying or preventing a
change of control of the Company that might involve a premium price for holders
of shares of common stock or otherwise be in their best interest.
Preferred stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. The specific terms of a
particular class of preferred stock will be described in the prospectus
supplement relating to that class, including a prospectus supplement providing
that preferred stock may be issuable upon the exercise of warrants. The
description of preferred stock set forth below and the description of the terms
of a particular class of preferred stock set forth in a prospectus supplement do
not purport to be complete and are qualified in their entirety by reference to
the Articles Supplementary relating to that class.
The preferences and other terms of the preferred stock of each class
will be fixed by the Articles Supplementary relating to the class. A prospectus
supplement relating to each class of preferred stock will specify the following
terms:
- The title and stated value of the preferred stock;
- The number of shares of the preferred stock offered, the
liquidation preference per share and the offering price of the preferred stock;
- The dividend rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to the preferred stock;
- Whether the preferred stock is cumulative or not and, if
cumulative, the date from which dividends on the preferred stock will
accumulate;
- The provision for a sinking fund, if any, for the preferred
stock;
- The provision for redemption, if applicable, of the preferred
stock;
- Any listing of the preferred stock on any securities exchange;
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- The terms and conditions, if applicable, upon which the
preferred stock will be converted into common stock, including the conversion
price (or manner of calculation thereof);
- A discussion of any material federal income tax considerations
applicable to the preferred stock;
- Any limitations on actual and constructive ownership and
restrictions on transfer, in each case as may be appropriate to preserve our
status as a REIT;
- The relative ranking and preferences of the preferred stock as
to dividend rights and rights upon liquidation, dissolution or winding up of our
affairs;
- Any limitations on issuance of any class of preferred stock
ranking senior to or on a parity with such class or series of preferred stock as
to dividend rights and rights upon liquidation, dissolution or winding up of our
affairs;
- Any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock; and
- Any voting rights of the preferred stock.
RANK
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will be, with respect to dividends and upon our voluntary or
involuntary liquidation, dissolution or winding up:
- senior to all classes or series of common stock and to all of
our equity securities the terms of which provide that the equity securities
shall rank junior to the preferred stock;
- junior to all equity securities that we issue which rank senior
to the preferred stock; and
- on a parity with all equity securities that we issued other than
those that are referred to in the bullet points above.
The term "equity securities" does not include convertible debt securities.
DIVIDENDS
Holders of shares of the preferred stock of each class will be entitled
to receive, when, as and if authorized and declared by our Board of Directors,
out of our assets legally available for payment, cash dividends at the rates and
on the dates as we will set forth in the applicable prospectus supplement.
Dividends will be payable to holders of record as they appear on our stock
transfer books on the record dates that the Board of Directors will fix.
Dividends on any class of preferred stock may be cumulative or
noncumulative, as provided in the applicable prospectus supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement. If our Board of Directors fails to authorize a
dividend payable on a dividend payment date on any class of preferred stock for
which dividends are noncumulative, then the holders of the class of preferred
stock will have no right to receive a dividend in respect of the dividend period
ending on the dividend payment date, and we will have no obligation to
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pay the dividend accrued for the period, whether or not dividends on the class
are declared or paid for any future period.
Unless full cumulative dividends on the class of preferred stock have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for all past dividend periods and
the then current dividend period, no dividends (other than in common stock or
any of our other equity securities ranking junior to the series or class of
preferred stock as to dividends and upon our voluntary or involuntary
liquidation, dissolution and winding up) shall be declared or paid or set aside
for payment or other dividend be declared or made upon the common stock or any
of our other equity securities ranking as to distributions or upon our voluntary
or involuntary liquidation, dissolution or winding up junior to or on a parity
with the series or class of preferred stock, nor will any common stock or any of
our other equity securities ranking junior to or on a parity with the class of
preferred stock as to dividends or upon our voluntary or involuntary
liquidation, dissolution or winding up be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made available for a
sinking fund for the redemption of any such securities) by us (except by
conversion into or exchange for our other equity securities ranking junior to
the class of preferred stock as to dividends and upon voluntary or involuntary
liquidation, dissolution and winding up and pursuant to the provisions of our
Charter providing for limitations on ownership and transfer in order to ensure
that we remain qualified as a REIT). When dividends are not paid in full (or a
sum sufficient for full payment is not so set apart) upon the class of preferred
stock and any other equity securities ranking as to dividends on a parity with
the class of preferred stock, all dividends declared upon the series or class of
preferred stock and any of our other equity securities ranking on a parity with
the class of preferred stock as to dividends and upon voluntary or involuntary
liquidation, dissolution or winding up will be declared pro rata so that the
amount of dividends declared per share of the series or class of preferred stock
and each other equity securities will in all cases bear to each other the same
ratio that accumulated dividends per share of the series or class of preferred
stock and the other equity securities (which will not include any accumulation
in respect of unpaid dividends for prior dividend periods if the other equity
securities do not have a cumulative dividend) bear to each other. No interest,
or sum of money in lieu of interest, will be payable in respect of any dividend
payment or payments on any series or class of preferred stock which may be in
arrears.
Any dividend payment that we make on shares of a class of preferred
stock will first be credited against the earliest accrued but unpaid dividend
due with respect to shares of such series or class that remains payable.
REDEMPTION
If we so provide in the applicable prospectus supplement, the shares of
preferred stock will be subject to mandatory redemption or redemption at our
option, as a whole or in part, in each case on the terms, at the times and at
the redemption prices set forth in the prospectus supplement.
The prospectus supplement relating to a series or class of preferred
stock that is subject to mandatory redemption will specify the number of shares
of preferred stock that we will redeem in each year commencing after a date to
be specified, at a redemption price per share to be specified, together with an
amount equal to all accumulated and unpaid dividends thereon (which will not, if
the preferred stock does not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. We may pay the redemption price in cash or other property,
as specified in the applicable prospectus supplement. If the redemption price
for preferred stock of any class is payable only from the net proceeds of the
issuance of our stock, the terms of the
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preferred stock may provide that, if no such preferred stock shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, the preferred stock will
automatically and mandatorily be converted into shares of the applicable stock
pursuant to conversion provisions specified in the applicable prospectus
supplement.
Notwithstanding the foregoing, if the class of preferred stock has a
cumulative dividend, unless full cumulative dividends on all outstanding shares
of the class of preferred stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period, we
may not redeem any shares of the class of preferred stock unless we
simultaneously redeem all outstanding shares of the class of preferred stock;
provided, however, that the foregoing will not prevent the purchase or
acquisition of shares of the series or class of preferred stock pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of the class of preferred stock. In addition, unless full cumulative
dividends on all outstanding shares of the class of preferred stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, we may not purchase or otherwise acquire directly or
indirectly any shares of such class of preferred stock or any of our equity
securities ranking junior to or on a parity with such class of preferred stock
as to dividends or upon voluntary or involuntary liquidation, dissolution or
winding up (except by conversion into or exchange for our equity securities
ranking junior to such class of preferred stock as to dividends and upon
voluntary or involuntary liquidation, dissolution or winding up).
The foregoing provisions will not prevent us from acquiring shares of
preferred stock pursuant to the provisions of the applicable Articles
Supplementary providing for limitations on ownership and transfer in order to
ensure that we remain qualified as a REIT for federal income tax purposes. See
"Restrictions on Ownership and Transfer of Capital Stock."
If we redeem fewer than all of the outstanding shares of a class of
preferred stock, we will select the shares that we will redeem pro rata (as
nearly as may be practicable without creating fractional shares), by lot or by
any other equitable method that we determine. If this redemption is to be by lot
and, as a result of the redemption, any holder of shares of the class of
preferred stock would become a holder of a number of shares of the class of
preferred stock in excess of the ownership limit because we did not redeem the
holder's shares of the class of preferred stock, or we only redeemed those
shares in part, then, except as otherwise provided in our Charter, we will
redeem the requisite number of shares of the series or class of preferred stock
of the holder such that no holder will hold in excess of the ownership limit
subsequent to the redemption. See "Restrictions on Ownership and Transfer of
Capital Stock."
We will give notice of redemption by publication in a newspaper of
general circulation in The City of New York. This publication will be made once
a week for two successive weeks commencing not less than 30 nor more than 60
days' prior to the redemption date. We will mail a similar notice, postage
prepaid, not less than 30 nor more than 60 days' prior to the redemption date,
addressed to the respective holders of record of the preferred stock to be
redeemed at their respective addresses as they appear on our share transfer
records. No failure to give notice or any defect in notice or in the mailing
thereof will affect the validity of the proceedings for the redemption of any
shares of the series or class of preferred stock except as to the holder to whom
notice was defective or not given. Each notice will state the following:
- the redemption date;
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- the redemption price;
- the number of shares of the class of preferred stock to be
redeemed;
- the place or places where the certificates evidencing shares of
the series or class of preferred stock are to be surrendered for payment of the
redemption price; and
- that dividends on the class of preferred stock to be redeemed
will cease to accumulate on the redemption date. If we will redeem fewer than
all the shares of the class of preferred stock held by any holder, the notice
that we mail to the holder will also specify the number of shares of the class
of preferred stock that we will redeem from the holder.
The holders of shares of a class of preferred stock at the close of
business on a dividend record date will be entitled to receive the dividend
payable with respect to the shares of the class of preferred stock held on the
corresponding dividend payment date notwithstanding the redemption of the shares
between the dividend record date and the corresponding dividend payment date or
our default in the payment of the dividend due. Except as provided above, we
will make no payment or allowance for unpaid dividends, whether or not in
arrears, on shares of any class of preferred stock to be redeemed.
Subject to applicable law and the limitation on purchases when dividends
on a class of preferred stock are in arrears, we may, at any time and from time
to time, purchase any shares of the class of preferred stock in the open market,
by tender or by private agreement.
LIQUIDATION PREFERENCE
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of preferred stock will be entitled to receive out of our
assets legally available for distribution to our stockholders remaining after
payment or provision for payment of all of our debts and, liquidating
distributions in the amount of the liquidation preference per share set forth in
the applicable prospectus supplement, plus an amount equal to any accumulated
and unpaid dividends to the date of payment, before any distribution of assets
is made to holders of common stock or any other equity securities that rank
junior to the class of preferred stock as to voluntary or involuntary
liquidation. After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of the class of preferred stock will
have no right or claim to any of our remaining assets. Our consolidation or
merger with or into any other entity, a merger of another entity with or into
us, a statutory share exchange by us or the sale, lease, transfer or conveyance
of all or substantially all of our property or business will not be considered a
liquidation, dissolution or winding up.
If, upon any voluntary or involuntary liquidation, dissolution or
winding up, our assets are insufficient to make full payment to holders of such
class of preferred stock and the corresponding amounts payable on all shares of
other classes of our equity securities ranking on a parity with the class of
preferred stock as to liquidation rights, then the holders of the class of
preferred stock and all other such classes of equity securities will share
ratably in any distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled. In
determining whether a distribution (other than upon voluntary or involuntary
liquidation, dissolution or winding up) by dividend, redemption or other
acquisition of shares of stock or otherwise is permitted under the MGCL, no
effect will be given to amounts that would be needed, if we were to be dissolved
at the time of the distribution, to satisfy the preferential rights upon
dissolution of holders of shares of the class of
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preferred stock, whose preferential rights upon dissolution are superior to
those receiving the distribution.
VOTING RIGHTS
Holders of the preferred stock will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as we
indicate in the applicable prospectus supplement.
Unless provided for otherwise by any class of preferred stock, so long
as any shares of preferred stock of a class remain outstanding, we will not,
without the affirmative vote or consent of at least two-thirds of the votes
entitled to be cast by the holders of such outstanding shares, given in person
or by proxy, either in writing or at a meeting (the class voting separately as a
class) do any of the following:
- authorize or create, or increase the authorized or issued amount
of, any class or series of stock ranking senior to such series or class of
preferred stock with respect to payment of dividends or the distribution of
assets upon voluntary or involuntary liquidation, dissolution or winding up, or
reclassify any of our authorized stock into shares, or create, authorize or
issue any obligation or security convertible into, exchangeable or exercisable
for, or evidencing the right to purchase, any stock; or
- amend, alter or repeal the provisions of our Charter, whether by
merger or consolidation or otherwise, so as to materially and adversely affect
any right, preference, privilege or voting power of the class of preferred stock
or the holders of such class.
So long as shares of the class of preferred stock (or shares issued by a
surviving entity in substitution for the class of preferred stock) remain
outstanding with their terms materially unchanged, taking into account that upon
the occurrence of such an event, we may not be the surviving entity, the
occurrence of an event set forth in the second bullet point above will not be
considered to materially and adversely affect the rights, preferences,
privileges or voting powers of holders of such class of preferred stock.
Additionally, any increase in the amount of the authorized preferred stock or
the creation or issuance of any other class or series of preferred stock, or any
increase in the amount of authorized series or class of preferred stock or any
other class or series of preferred stock, in each case ranking on a parity with
or junior to such series or class of preferred stock with respect to payment of
dividends and the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding up, will not be considered to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
act with respect to which such vote would otherwise be required, we have
redeemed or called for redemption upon proper notice and deposited sufficient
funds in trust.
CONVERSION RIGHTS
We will specify in the applicable prospectus supplement the terms and
conditions upon which any shares of any class or series of preferred stock are
convertible into common stock. The terms will include:
- the number of shares of common stock into which the shares of
preferred stock are convertible;
- the conversion price (or method for calculating the conversion
price);
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- the conversion period;
- provisions regarding whether conversion will be at the option of
the holders of the class of preferred stock or the Operating Partnership;
- the events requiring an adjustment of the conversion price; and
- provisions affecting conversion in the event of the redemption
of the class of preferred stock.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF CAPITAL STOCK
In order for the Company to qualify as a REIT under the Code, the
Company's capital stock is subject to certain restrictions on ownership and
transfer. See "Restrictions on Ownership and Transfer of Capital Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursing agent for our
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
is BankBoston, N.A. We will specify in the applicable prospectus supplement the
transfer agent, registrar and dividend disbursing agent for any other class of
preferred stock.
DESCRIPTION OF SERIES A PREFERRED STOCK
The Series A Preferred Stock ranks, with respect to dividends and in the
event we voluntarily or involuntarily liquidate, dissolve or wind up:
- senior to all classes or series of common stock and to all of
our equity securities that provide that they rank junior to the
Series A Preferred Stock;
- junior to all equity securities issued by us which rank senior
to the Series A Preferred Stock; and
- on a parity with all equity securities issued by us (including
the Series B Preferred Stock and the Series C Preferred Stock)
other than those referred to in the bullet points above. The
term "equity securities" does not include convertible debt
securities.
Holders of the Series A Preferred Stock are entitled to receive, when
and as authorized by the Board of Directors out of funds legally available for
dividends, cumulative preferential cash dividends at the rate of 8 1/2% of the
liquidation preference per annum (equivalent to $2.125 per annum per share of
Series A Preferred Stock). Dividends on the Series A Preferred Stock accumulate
on a daily basis and are payable quarterly in arrears on the 15th day of each
January, April, July and October. Except as provided below, unless full
cumulative dividends on the Series A Preferred Stock have been or at the same
time are declared and paid or declared and a sum sufficient for payment set
apart for payment for all past dividend periods and the then current dividend
period, no dividends (other than in common stock or other equity securities
ranking junior to the Series A Preferred Stock) may be declared or paid or set
aside for payment or other dividend be declared or made upon the common stock or
any other equity securities ranking junior to or on a parity with the Series A
Preferred Stock (including the Series B Preferred Stock and the Series C
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Preferred Stock), nor may any common stock or any other equity securities
ranking junior to or on a parity with the Series A Preferred Stock (including
the Series B Preferred Stock and the Series C Preferred Stock) be redeemed,
purchased or otherwise acquired for any consideration (or any monies be paid to
or made available for a sinking fund for the redemption of any such securities)
by us (except by conversion into or exchange for other equity securities ranking
junior to the Series A Preferred Stock and pursuant to the provisions of our
Charter providing for limitations on ownership and transfer in order to ensure
that we remain qualified as a REIT). When dividends are not paid in full (or a
sum sufficient for such full payment is not so set apart) upon the Series A
Preferred Stock and any other equity securities ranking on a parity with the
Series A Preferred Stock (including the Series B Preferred Stock and the Series
C Preferred Stock), all dividends declared upon the Series A Preferred Stock and
any other equity securities ranking on a parity with the Series A Preferred
Stock (including the Series B Preferred Stock and the Series C Preferred Stock)
will be declared pro rata so that the amount of dividends declared per share of
Series A Preferred Stock and each such other equity securities shall bear to
each other the same ratio that accumulated dividends per share of Series A
Preferred Stock and such other equity securities (which shall not include any
accumulation in respect of unpaid dividends for prior dividend periods if such
other equity securities do not have a cumulative dividend) bear to each other.
Dividends on the Series A Preferred Stock will accumulate whether or not we have
funds legally available for the payment of dividends and whether or not we
declare dividends. If we designate any portion of a dividend as a "capital gain
dividend," a holder's share of the capital gain dividend will be an amount that
bears the same ratio to the total amount of dividends (as determined for federal
income tax purposes) paid to the holder for the year as the aggregate amount
designated as a capital gain dividend bears to the aggregate amount of all
dividends (as determined for federal income tax purposes) paid on all classes of
shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of the Series A Preferred Stock are entitled to receive out
of our assets legally available for distribution to our stockholders remaining
after payment or provision for payment of all of our debts and liabilities, a
liquidation preference, in cash, of $25.00 per share, plus an amount equal to
any accumulated and unpaid dividends to the date of such payment, before any
distribution of assets is made to holders of common stock or any other equity
securities that rank junior to the Series A Preferred Stock. After payment of
the full amount of the liquidating distributions to which they are entitled, the
holders of the Series A Preferred Stock will have no right or claim to any of
our remaining assets. Our consolidation or merger with or into any other entity,
a merger of another entity with or into us, a statutory share exchange or the
sale, lease, transfer or conveyance of all or substantially all of our property
or business do not constitute a liquidation, dissolution or winding up for
purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up and
our assets are insufficient to make full payment to holders of the Series A
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of equity securities ranking on a parity with the Series A
Preferred Stock, then the holders of the Series A Preferred Stock and all other
such classes or series of equity securities will share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be entitled.
The Series A Preferred Stock has no stated maturity and is not subject
to mandatory redemption or any sinking fund. We cannot redeem the Series A
Preferred Stock prior to July 27, 2003. On and after July 27, 2003, we can
redeem the Series A Preferred Stock for cash at our option, in whole or from
time to time in part, at a redemption price of $25.00 per share, plus
accumulated and unpaid dividends, if any, to the redemption date. We must pay
the redemption price (other than the portion of the redemption price consisting
of accumulated and unpaid dividends) solely out of the sale proceeds of other
equity
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securities, which may include other classes or series of preferred stock. In
certain circumstances related to our maintenance of our ability to qualify as a
REIT for federal income tax purposes, we may redeem shares of Series A Preferred
Stock. See "-- Restrictions on Ownership and Transfer of Capital Stock."
Holders of Series A Preferred Stock have no voting rights, except as
described below. If we do not pay dividends on the Series A Preferred Stock for
six or more quarterly periods (whether or not consecutive), holders of the
Series A Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our Board of Directors until we have eliminated all
dividend arrearages with respect to the Series A Preferred Stock. So long as any
shares of Series A Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of outstanding shares of Series A Preferred Stock (the
Series A Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount
of, any class or series of stock ranking senior to the Series A
Preferred Stock;
- reclassify any of our authorized stock into any class or series
of stock ranking senior to the Series A Preferred Stock;
- create, authorize or issue any obligation or security
convertible into, exchangeable or exercisable for, or evidencing
the right to purchase, any class or series of stock ranking
senior to the Series A Preferred Stock; or
- amend, alter or repeal the provisions of our Charter, whether by
merger or consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting
power of the Series A Preferred Stock.
With respect to the occurrence of any of the events set forth in the
fourth bullet point above, so long as shares of Series A Preferred Stock (or
shares issued by a surviving entity in substitution for shares of the Series A
Preferred Stock) remain outstanding with the terms materially unchanged, taking
into account that upon the occurrence of such an event, we may not be the
surviving entity, the occurrence of any such event will not be considered to
materially and adversely affect rights, preferences, privileges or voting powers
of holders of Series A Preferred Stock. Any increase in the amount of the
authorized preferred stock, the creation or issuance of any other class or
series of preferred stock or any increase in the amount of authorized Series A
Preferred Stock or any other class or series of preferred stock, in each case
ranking on a parity with or junior to the Series A Preferred Stock, will not be
considered to materially and adversely affect such rights, preferences,
privileges or voting powers.
In accordance with the terms of the Third Amended and Restated Agreement
of Limited Partnership of the Operating Partnership (the "Partnership
Agreement"), we contributed the net proceeds of the sale of the Series A
Preferred Stock to the Operating Partnership and the Operating Partnership
issued to us Series A Preferred Units that mirror the rights, preferences and
other terms of the Series A Preferred Stock. The Operating Partnership is
required to make all required distributions on the Series A Preferred Units
prior to any distribution of cash or assets to the holders of any other Units or
any other equity interests in the Operating Partnership, except for any other
series of preferred Units ranking on a parity with the Series A Preferred Units
as to dividends or voluntary or involuntary liquidation, dissolution or winding
up of the Operating Partnership. The Operating Partnership has no preferred
Units, other than the Series A Preferred Units and the Series B Preferred Units,
outstanding or any other
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equity interests ranking prior to any other Units or any other equity interests
in the Operating Partnership.
DESCRIPTION OF SERIES B PREFERRED STOCK
We currently have no shares of Series B Preferred Stock issued or
outstanding. The Series B Preferred Stock is issuable upon exchange of the
Series B Preferred Units, as described under "Description of Certain Provisions
of the Partnership Agreement of the Operating Partnership -- Series B Preferred
Units -- Exchange Rights." The Series B Preferred Stock ranks, with respect to
dividends and in the event we voluntarily or involuntarily liquidate, dissolve
or wind up:
- senior to all classes or series of common stock and to all of
our equity securities that provide that they rank junior to the
Series B Preferred Stock;
- junior to all equity securities issued by us which rank senior
to the Series B Preferred Stock; and
- on a parity with all equity securities issued by us (including
the Series A Preferred Stock and the Series C Preferred Stock)
other than those referred to in the bullet points above. The
term "equity securities" does not include convertible debt
securities.
If ever issued, the Series B Preferred Stock will entitle the holders to
receive, when and as authorized by the Board of Directors out of funds legally
available for dividends, cumulative preferential cash dividends at the rate of 8
5/8% of the liquidation preference per annum (equivalent to $4.3125 per annum
per share of Series B Preferred Stock). Dividends on the Series B Preferred
Stock accumulate on a daily basis and are payable quarterly in arrears on the
15th day of each January, April, July and October. Except as provided below,
unless full cumulative dividends on the Series B Preferred Stock have been or at
the same time are declared and paid or declared and a sum sufficient for payment
set apart for payment for all past dividend periods and the then current
dividend period, no distributions (other than in common stock or other equity
securities ranking junior to the Series B Preferred Stock) may be declared or
paid or set aside for payment or other dividend be declared or made upon the
common stock or any other equity securities ranking junior to or on a parity
with the Series B Preferred Stock (including the Series A Preferred Stock and
the Series C Preferred Stock), nor may any common stock or any other equity
securities ranking junior to or on a parity with the Series B Preferred Stock
(including the Series A Preferred Stock and the Series C Preferred Stock) be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any such
securities) by us (except by conversion into or exchange for other equity
securities ranking junior to the Series B Preferred Stock and pursuant to the
provisions of our Charter providing for limitations on ownership and transfer in
order to ensure that we remain qualified as a REIT). When dividends are not paid
in full (or a sum sufficient for such full payment is not so set apart) upon the
Series B Preferred Stock and any other equity securities ranking on a parity
with the Series B Preferred Stock (including the Series A Preferred Stock and
the Series C Preferred Stock), all dividends declared upon the Series B
Preferred Stock and any other equity securities ranking on a parity with the
Series B Preferred Stock (including the Series A Preferred Stock and the Series
C Preferred Stock) will be declared pro rata so that the amount of dividends
declared per share of Series B Preferred Stock and each such other equity
securities shall bear to each other the same ratio that accumulated dividends
per share of Series B Preferred Stock and such other equity securities (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. Dividends on the Series B Preferred Stock will
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accumulate whether or not we have funds legally available for the payment of
dividends and whether or not we declare dividends. If we designate any portion
of a dividend as a "capital gain dividend," a holder's share of the capital gain
dividend will be an amount that bears the same ratio to the total amount of
dividends (as determined for federal income tax purposes) paid to the holder for
the year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends (as determined for federal income tax
purposes) paid on all classes of shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up following the issuance of the Series B Preferred Stock, the holders of
the Series B Preferred Stock will be entitled to receive out of our assets
legally available for distribution to our stockholders remaining after payment
or provision for payment of all of our debts and liabilities, a liquidation
preference, in cash, of $50.00 per share, plus an amount equal to any
accumulated and unpaid dividends to the date of such payment, before any
distribution of assets is made to holders of common stock or any other equity
securities that rank junior to the Series B Preferred Stock. After payment of
the full amount of the liquidating distributions to which they are entitled, the
holders of the Series B Preferred Stock will have no right or claim to any of
our remaining assets. Our consolidation or merger with or into any other entity,
a merger of another entity with or into us, a statutory share exchange or the
sale, lease, transfer or conveyance of all or substantially all of our property
or business do not constitute a liquidation, dissolution or winding up for
purposes of triggering the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up
following the issuance of the Series B Preferred Stock and our assets are
insufficient to make full payment to holders of the Series B Preferred Stock and
the corresponding amounts payable on all shares of other classes or series of
equity securities ranking on a parity with the Series B Preferred Stock as to
liquidation rights (including the Series A Preferred Stock and the Series C
Preferred Stock) then the holders of the Series B Preferred Stock and all other
such classes or series of equity securities will share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be entitled.
The Series B Preferred Stock has no stated maturity and is not subject
to mandatory redemption or any sinking fund. If issued, we cannot redeem the
Series B Preferred Stock prior to November 12, 2003. On and after November 12,
2003, we can redeem the Series B Preferred Stock for cash at our option, in
whole or from time to time in part, at a redemption price of $50.00 per share,
plus accumulated and unpaid dividends, if any, to the redemption date. We must
pay the redemption price (other than the portion of the redemption price
consisting of accumulated and unpaid dividends) solely out of the sale proceeds
of other equity securities, which may include other classes or series of
preferred stock. In certain circumstances related to our maintenance of our
ability to qualify as a REIT for federal income tax purposes, we may redeem
shares of Series B Preferred Stock. See "-- Restrictions on Ownership and
Transfer of Capital Stock."
Holders of Series B Preferred Stock will have no voting rights, except
as described below. If we do not pay dividends on the Series B Preferred Stock
for six or more quarterly periods (whether or not consecutive), holders of the
Series B Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our Board of Directors until we have eliminated all
dividend arrearages with respect to the Series B Preferred Stock. So long as any
shares of Series B Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of the outstanding shares of Series B Preferred Stock (the
Series B Preferred Stock voting separately as a class):
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- authorize or create, or increase the authorized or issued amount
of, any class or series of stock ranking senior to the Series B
Preferred Stock;
- reclassify any of our authorized stock into any class or series
of stock ranking senior to the Series B Preferred Stock;
- designate or create, or increase the authorized or issued amount
of, or reclassify, any authorized shares into, any preferred
stock ranking on a parity with the Series B Preferred Stock or
create, authorize or issue any obligations or securities
convertible into any such shares, but only to the extent such
stock is issued to one of our affiliates; or
- either consolidate, merge into or with, or convey, transfer or
lease our assets substantially as an entirety, to any
corporation or other entity, or amend, alter or repeal the
provisions of our Charter, whether by merger or consolidation or
otherwise, in each case so as to materially and adversely affect
the powers, special rights, preferences, privileges or voting
power of the Series B Preferred Stock.
With respect to the occurrence of any of the events set forth in the
fourth bullet point above, so long as we are either the surviving entity and
shares of Series B Preferred Stock remain outstanding with the terms materially
unchanged or the resulting, surviving or transferee entity is a corporation
organized under the laws of any state and substitutes for the Series B Preferred
Stock other preferred stock having substantially the same terms and rights as
the Series B Preferred Stock, the occurrence of any such event will not be
considered to materially and adversely affect rights, preferences, privileges or
voting powers of holders of Series B Preferred Stock. Any increase in the amount
of authorized preferred stock, the creation or issuance of any other class or
series of preferred stock or any increase in an amount of authorized shares of
each class or series, in each case ranking on a parity with or junior to the
Series B Preferred Stock will not be considered to materially and adversely
affect such rights, preferences, privileges or voting powers.
We have granted certain registration rights with respect to any shares
of Series B Preferred Stock that we may issue upon exchange of the Series B
Preferred Units. See "Description of Certain Provisions of the Partnership
Agreement of the Operating Partnership -- Series B Preferred Units --
Registration Rights."
DESCRIPTION OF SERIES C PREFERRED STOCK
We currently have no shares of Series C Preferred Stock issued or
outstanding. The Series C Preferred Stock is issuable upon exchange of the AMB
Property II Series C Preferred Units. The AMB Property II Series C Preferred
Units are exchangeable in whole at any time on or after November 24, 2008, at
the option of 51% of the holders of all outstanding AMB Property II Series C
Preferred Units, on a one for one basis, subject to adjustment, for shares of
our Series C Preferred Stock. In addition, the AMB Property II Series C
Preferred Units are exchangeable in whole at any time at the option of 51% of
the holders of all outstanding AMB Property II Series C Preferred Units if:
- any AMB Property II Series C Preferred Unit shall not have
received full distributions with respect to six prior quarterly
distribution periods (whether or not consecutive); or
- AMB Property Holding Corporation, the general partner of AMB
Property II, or one of its subsidiaries takes the position, and
a holder or holders of AMB Property II Series C
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Preferred Units receive an opinion of independent counsel that
AMB Property II is, or upon the happening of a certain event
likely will be, a "publicly traded partnership" within the
meaning of the Code.
The AMB Property II Series C Preferred Units are exchangeable in whole
for shares of Series C Preferred Stock at any time after November 24, 2001 and
prior to November 24, 2008 at the option of 51% of the holders of all
outstanding AMB Property II Series C Preferred Units if those holders deliver to
AMB Property Holding Corporation a private letter ruling or an opinion of
independent counsel to the effect that an exchange of the AMB Property II Series
C Preferred Units at that time would not cause the AMB Property II Series C
Preferred Units to be considered "stock and securities" within the meaning of
the Code for purposes of determining whether the holder of AMB Property II
Series C Preferred Units is an "investment company" under the Code.
The AMB Property II Series C Preferred Units are also exchangeable in
whole at any time for shares of Series C Preferred Stock, if initial purchasers
of the AMB Property II Series C Preferred Units holding 51% of all outstanding
AMB Property II Series C Preferred Units determine, (regardless of whether held
by the initial purchasers) if:
- AMB Property II reasonably determines that the assets and income
of AMB Property II for a taxable year after 1998 would not
satisfy the income and assets tests of the Code for such taxable
year if AMB Property II were a REIT; or
- any holder of AMB Property II Series C Preferred Units delivers
to AMB Property II and AMB Property Holding Corporation an
opinion of independent counsel to the effect that (based on the
assets and income of AMB Property II for a taxable year after
1998) AMB Property II would not satisfy the income and assets
tests of the Code for such taxable year if AMB Property II were
a REIT and that such failure would create a meaningful risk that
a holder of AMB Property II Series C Preferred Units would fail
to maintain qualification as a REIT.
In lieu of an exchange for Series C Preferred Stock, AMB Property II may
redeem AMB Property II Series C Preferred Units for cash in an amount equal to
the original capital account balance of the holder of AMB Property II Series C
Preferred Units. A holder of AMB Property II Series C Preferred Units will not
be entitled to exchange the units for Series C Preferred Stock if the exchange
would result in a violation of the ownership limit. See "Description of Capital
Stock -- Restrictions on Ownership and Transfer of Capital Stock."
The Series C Preferred Stock ranks, with respect to dividends and in the
event we voluntarily or involuntarily liquidate, dissolve or wind up:
- senior to all classes or series of common stock and to all of
our equity securities that provide that they rank junior to the
Series C Preferred Stock;
- junior to all equity securities issued by us which rank senior
to the Series C Preferred Stock; and
- on a parity with all equity securities issued by us (including
the Series A Preferred Stock and the Series B Preferred Stock)
other than those referred to in the bullet points above. The
term "equity securities" does not include convertible debt
securities until converted into equity securities.
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If ever issued, the Series C Preferred Stock will entitle the holders to
receive, when and as authorized by the Board of Directors out of funds legally
available for dividends, cumulative preferential cash dividends at the rate of
8.75% of the liquidation preference per annum (equivalent to $4.375 per annum
per share of Series C Preferred Stock). Dividends on the Series C Preferred
Stock accumulate on a daily basis and are payable quarterly in arrears on the
15th day of each January, April, July and October. Except as provided below,
unless full cumulative dividends on the Series C Preferred Stock have been or at
the same time are declared and paid or declared and a sum sufficient for payment
set apart for payment for all past dividend periods and the then current
dividend period, no distributions (other than in common stock or other equity
securities ranking junior to the Series C Preferred Stock) may be declared or
paid or set aside for payment or other dividend be declared or made upon the
common stock or any other equity securities ranking junior to or on a parity
with the Series C Preferred Stock (including the Series A Preferred Stock and
the Series B Preferred Stock), nor may any common stock or any other equity
securities ranking junior to or on a parity with the Series C Preferred Stock
(including the Series A Preferred Stock and the Series B Preferred Stock) be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any such
securities) by us (except by conversion into or exchange for other equity
securities ranking junior to the Series C Preferred Stock and pursuant to the
provisions of our Charter providing for limitations on ownership and transfer in
order to ensure that we remain qualified as a REIT). When dividends are not paid
in full (or a sum sufficient for such full payment is not so set apart) upon the
Series C Preferred Stock and any other equity securities ranking on a parity
with the Series C Preferred Stock (including the Series A Preferred Stock and
the Series B Preferred Stock), all dividends declared upon the Series C
Preferred Stock and any other equity securities ranking on a parity with the
Series C Preferred Stock (including the Series A Preferred Stock and the Series
B Preferred Stock) will be declared pro rata so that the amount of dividends
declared per share of Series C Preferred Stock and each such other equity
securities shall bear to each other the same ratio that accumulated dividends
per share of Series C Preferred Stock and such other equity securities (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. Dividends on the Series C Preferred Stock will
accumulate whether or not we have funds legally available for the payment of
dividends and whether or not we declare dividends. If we designate any portion
of a dividend as a "capital gain dividend," a holder's share of the capital gain
dividend will be an amount that bears the same ratio to the total amount of
dividends (as determined for federal income tax purposes) paid to the holder for
the year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends (as determined for federal income tax
purposes) paid on all classes of shares for the year.
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up following the issuance of Series C Preferred Stock, the holders of the
Series C Preferred Stock will be entitled to receive out of our assets legally
available for distribution to our stockholders remaining after payment or
provision for payment of all of our debts and liabilities, a liquidation
preference, in cash, of $50.00 per share, plus an amount equal to any
accumulated or accrued and unpaid dividends to the date of such payment, before
any distribution of assets is made to holders of common stock or any other
equity securities that rank junior to the Series C Preferred Stock. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of the Series C Preferred Stock will have no right or
claim to any of our remaining assets. Our consolidation or merger with or into
any other entity, a merger of another entity with or into us, a statutory share
exchange or the sale, lease, transfer or
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conveyance of all or substantially all of our property or business do not
constitute a liquidation, dissolution or winding up for purposes of triggering
the liquidation preference.
If we voluntarily or involuntarily liquidate, dissolve or wind up
following the issuance of Series C Preferred Stock and our assets are
insufficient to make full payment to holders of the Series C Preferred Stock and
the corresponding amounts payable on all shares of other classes or series of
equity securities ranking on a parity with the Series C Preferred Stock as to
liquidation rights (including the Series A Preferred Stock and the Series B
Preferred Stock) then the holders of the Series C Preferred Stock and all other
such classes or series of equity securities will share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be entitled.
The Series C Preferred Stock has no stated maturity and is not subject
to mandatory redemption or any sinking fund. If issued, we cannot redeem the
Series C Preferred Stock prior to November 24, 2003. On and after November 24,
2003, we can redeem the Series C Preferred Stock for cash at our option, in
whole or from time to time in part, at a redemption price of $50.00 per share,
plus accumulated and unpaid dividends, if any, to the redemption date. We must
pay the redemption price (other than the portion of the redemption price
consisting of accumulated and unpaid dividends) solely out of the sale proceeds
of other equity securities, which may include other classes or series of
preferred stock. In certain circumstances related to our maintenance of our
ability to qualify as a REIT for federal income tax purposes, we may redeem
shares of Series C Preferred Stock. See "-- Restrictions on Ownership and
Transfer of Capital Stock."
Holders of Series C Preferred Stock will have no voting rights, except
as described below. If we do not pay dividends on the Series C Preferred Stock
for six or more quarterly periods (whether or not consecutive), holders of the
Series C Preferred Stock (voting separately as a class with all other classes or
series of equity securities upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors to serve on our Board of Directors until we have eliminated all
dividend arrearages with respect to the Series C Preferred Stock. So long as any
shares of Series C Preferred Stock remain outstanding, we may not, without the
affirmative vote or consent of at least two-thirds of the votes entitled to be
cast by the holders of the outstanding shares of Series C Preferred Stock (the
Series C Preferred Stock voting separately as a class):
- authorize or create, or increase the authorized or issued amount
of, any class or series of stock ranking senior to the Series C
Preferred Stock;
- reclassify any of our authorized stock into any class or series
of stock ranking senior to the Series C Preferred Stock;
- designate or create, or increase the authorized or issued amount
of, or reclassify, any authorized shares into, any preferred
stock ranking on a parity with the Series C Preferred Stock or
create, authorize or issue any obligations or securities
convertible into any such shares, but only to the extent such
stock is issued to one of our affiliates; or
- either consolidate, merge into or with, or convey, transfer or
lease our assets substantially, as an entirety, to any
corporation or other entity, or amend, alter or repeal the
provisions of our Charter, whether by merger or consolidation or
otherwise, in each case so as to materially and adversely affect
the powers, special rights, preferences, privileges or voting
power of the Series C Preferred Stock.
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With respect to the occurrence of any of the events set forth in the
fourth bullet point above, so long as we are either the surviving entity and
shares of Series C Preferred Stock remain outstanding with the terms materially
unchanged or the resulting, surviving or transferee entity is a corporation,
business trust or like entity organized under the laws of any state and
substitutes for the Series C Preferred Stock other preferred stock or preferred
shares having substantially the same terms and rights as the Series C Preferred
Stock, the occurrence of any such event will not be considered to materially and
adversely affect rights, preferences, privileges or voting powers of holders of
Series C Preferred Stock. Any increase in the amount of authorized preferred
stock, the creation or issuance of any other class or series of preferred stock
or any increase in an amount of authorized shares of each class or series, in
each case ranking on a parity with or junior to the Series C Preferred Stock,
will not be considered to materially and adversely affect such rights,
preferences, privileges or voting powers.
We have agreed to file a registration statement registering the resale
of the shares of Series C Preferred Stock issuable to the holders of AMB
Property II Series C Preferred Units as soon as practicable but not later than
60 days after the date the AMB Property II Series C Preferred Units are
exchanged for shares of Series C Preferred Stock. We have also agreed to use our
best efforts to cause the registration statement to be declared effective within
120 days after the date of the exchange.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
We may issue depositary shares, each of which will represent a
fractional interest of a share of a particular class of preferred stock, as
specified in the applicable prospectus supplement. We will deposit with a
depositary (the "preferred stock depositary") shares of a class of preferred
stock represented by depositary shares pursuant to a separate deposit agreement
among the Company, the preferred stock depositary and the holders from time to
time of the depositary receipts issued by the preferred stock depositary which
will evidence the depositary shares ("depositary receipts"). Subject to the
terms of the deposit agreement, each owner of a depositary receipt will be
entitled, in proportion to the fractional interest of a share of a particular
class of preferred stock represented by the depositary shares evidenced by the
depositary receipt, to all the rights and preferences of the class of the
preferred stock represented by the depositary shares (including dividend,
voting, conversion, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable deposit agreement. Immediately after we issue and
deliver the preferred stock to a preferred stock depositary, we will cause the
preferred stock depositary to issue the depositary receipts on our behalf. You
may obtain copies of the applicable form of deposit agreement and depositary
receipt from us upon request. The statements made in this section relating to
the deposit agreement and the depositary receipt are summaries of certain
anticipated provisions. These summaries are not complete and may be modified by
the applicable prospectus supplement. For more detail you should refer to the
deposit agreement itself, which will be filed as an exhibit to the registration
statement of which this prospectus is a part or incorporated by reference in
this registration statement by a Form 8-K.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or
other cash distributions received in respect of a class or series of preferred
stock to the record holders of depositary receipts evidencing the related
depositary shares in proportion to the number of depositary receipts owned by
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such holders, subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the preferred stock depositary.
In the event of a distribution other than in cash, the preferred stock
depositary will distribute property that it receives to the record holders of
depositary receipts entitled to the property, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the preferred stock depositary, unless the preferred
stock depositary determines that it is not feasible to make the distribution, in
which case the preferred stock depositary may, with our approval, sell the
property and distribute the net proceeds from the sale to the holders.
No distribution will be made in respect of any depositary share to the
extent that it represents any preferred stock converted into shares in excess of
the ownership limit or otherwise converted or exchanged.
WITHDRAWAL OF STOCK
Upon surrender of the depositary receipts at the corporate trust office
of the preferred stock depositary (unless the related depositary shares have
previously been called for redemption or converted, or converted into Excess
Shares (defined under "Restrictions on Ownership and Transfer of Capital Stock")
or otherwise), the holders will be entitled to delivery at the corporate trust
office, or upon each such holder's order, of the number of whole or
fractional shares of the class or series of preferred stock and any money or
other property represented by the depositary shares evidenced by such depositary
receipts. Holders of depositary receipts will be entitled to receive whole or
fractional shares of the related class or series of preferred stock on the basis
of the proportion of preferred stock represented by each depositary share as
specified in the applicable prospectus supplement, but holders of such shares of
preferred stock will not thereafter be entitled to receive depositary shares
therefor. If the depositary receipts delivered by the holder evidence a number
of depositary shares in excess of the number of depositary shares representing
the number of shares of preferred stock to be withdrawn, the preferred stock
depositary will deliver to such holder at the same time a new depositary receipt
evidencing the excess number of depositary shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever we redeem shares of preferred stock held by the preferred stock
depositary, the preferred stock depositary will redeem as of the same redemption
date the number of the depositary shares representing shares of such class or
series of preferred stock so redeemed, provided we shall have paid in full to
the preferred stock depositary the redemption price of the preferred stock to be
redeemed plus an amount equal to any accrued and unpaid dividends on the
preferred stock to the date fixed for redemption. The redemption price per
depositary share will be equal to the corresponding portion of the redemption
price and any other amounts per share payable with respect to such class or
series of preferred stock. If we redeem fewer than all the depositary shares,
the depositary shares we will select the depositary shares that we will redeem
pro rata (as nearly as may be practicable without creating fractional depositary
shares), by lot or by any other equitable method that we determine that will not
result in the issuance of any Excess Shares.
From and after the date fixed for redemption, all dividends in respect
of the shares of a class or series of preferred stock so called for redemption
will cease to accrue, the depositary shares called for redemption will no longer
be deemed to be outstanding and all rights of the holders of the depositary
receipts evidencing the depositary shares so called for redemption will cease,
except the right to receive
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any moneys payable upon redemption and any money or other property to which the
holders of the depositary receipts were entitled upon redemption upon surrender
of the depositary receipts to the preferred stock depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of a class of
preferred stock deposited with the preferred stock depositary are entitled to
vote, the preferred stock depositary will mail the information contained in the
notice of meeting to the record holders of the depositary receipts evidencing
the depositary shares which represent such class of preferred stock. Each record
holder of depositary receipts evidencing depositary shares on the record date
(which will be the same date as the record date for such class of preferred
stock) will be entitled to instruct the preferred stock depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
represented by the holder's depositary shares. The preferred stock depositary
will vote the amount of such class or series of preferred stock represented by
the depositary shares in accordance with such instructions, and we will agree to
take all reasonable action which the preferred stock depositary may deem
necessary in order to enable the preferred stock depositary to do so. The
preferred stock depositary will abstain from voting the amount of preferred
stock represented by the depositary shares to the extent it does not receive
specific instructions from the holders of depositary receipts evidencing the
depositary shares. The preferred stock depositary will not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any such vote made, as long as any such action or non-action is in good faith
and does not result from the preferred stock depositary's negligence or willful
misconduct.
LIQUIDATION PREFERENCE
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of each depositary receipt will be entitled to the fraction
of the liquidation preference accorded each share of preferred stock represented
by the depositary share evidenced by the depositary receipt as set forth in the
applicable prospectus supplement.
CONVERSION OF PREFERRED STOCK
The depositary shares, as such, will not be convertible into common
stock or any other securities or property, except in connection with certain
exchanges in connection with the preservation of our status as a REIT. See
"Restrictions on Ownership and Transfer of Capital Stock." Nevertheless, if
stated in the applicable prospectus supplement relating to an offering of
depositary shares, holders may surrender depositary receipts to the applicable
preferred stock depositary with written instructions to the preferred stock
depositary to instruct us to cause conversion of a class or series of preferred
stock represented by the depositary shares evidenced by the depositary receipts
into whole shares of common stock, other shares of a class or series of
preferred stock (including Excess Shares) or other shares of stock, and we have
agreed that upon receipt of these instructions and any amounts payable, we will
cause the conversion of the shares of preferred stock utilizing the same
procedures as those provided for delivery of preferred stock to effect the
conversion. If we convert only a portion of depositary shares evidenced by a
depositary receipt, we will issue a depositary receipt or receipts for any
depositary shares that we do not covert. We will not issue fractional shares of
common stock upon conversion, and if conversion will result in a fractional
share, we will pay an amount in cash by equal to the value of the fractional
interest based upon the closing price of our common stock on the last business
day prior to the conversion.
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AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
The form of depositary receipt evidencing depositary shares which
represent the preferred stock and any provision of the deposit agreement may at
any time be amended by agreement between us and the preferred stock depositary.
However, any amendment that materially and adversely alters the rights of the
holders of depositary receipts or that would be materially or adversely
inconsistent with the rights granted to the holders of the related preferred
stock will not be effective unless such amendment has been approved by the
existing holders of at least two-thirds of the applicable depositary shares
evidenced by the applicable depositary receipts then outstanding. No amendment
will impair the right, subject to certain anticipated exceptions in the deposit
agreements, of any holder of depositary receipts to surrender any depositary
receipt with instructions to deliver to the holder the related class of
preferred stock and all money and other property, if any, represented by the
depositary receipt, except in order to comply with law. Every holder of an
outstanding depositary receipt at the time any such amendment becomes effective
will be deemed, by continuing to hold such depositary receipt, to consent and
agree to such amendment and to be bound by the applicable deposit agreement as
amended.
We may terminate the deposit agreement upon not less than 30 days' prior
written notice to the preferred stock depositary if such termination is
necessary to preserve our status as a REIT or a majority of each class or series
of preferred stock subject to the deposit agreement consents to termination, at
which time the preferred stock depositary will deliver or make available to each
holder of depositary receipts, upon surrender of the depositary receipts held by
the holder, the number of whole or fractional shares of preferred stock as are
represented by the depositary shares evidenced by the depositary receipts
together with any other property held by the preferred stock depositary with
respect to the depositary receipts. We will agree that if the deposit agreement
is terminated to preserve our status as a REIT, then we will use our best
efforts to list each class or series of preferred stock issued upon surrender of
the related depositary shares. In addition, the deposit agreement will
automatically terminate if:
- we have redeemed all outstanding depositary shares;
- there shall have been a final distribution in respect of each
class or series of preferred stock in connection with our liquidation,
dissolution or winding up and such distribution shall have been distributed to
the holders of the depositary receipts evidencing the depositary shares
representing such class or series of preferred stock; or
- each share of the related preferred stock shall have been
converted into our stock which is not represented by depositary shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of the deposit agreement. In addition, we will
pay the fees and expenses of the preferred stock depositary in connection with
the performance of our duties under the deposit agreement. However, holders of
depositary receipts will pay the fees and expenses of the preferred stock
depositary for any duties requested by the holders to be performed which are
outside of those expressly provided for in the deposit agreement.
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RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by delivering to
us notice of its election to do so, and we may at any time remove the preferred
stock depositary, any such resignation or removal to take effect upon the
appointment of a successor preferred stock depositary. A successor preferred
stock depositary must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company with its principal
office in the United States and a combined capital and surplus of at least
$50,000,000.
MISCELLANEOUS
The preferred stock depositary will forward to holders of depositary
receipts any reports and communications from us which are received by the
preferred stock depositary with respect to the related preferred stock.
We will not be liable, and the preferred stock depositary will not be
liable, if we are prevented or it is prevented from or delayed in, by law or any
circumstances beyond its or our control, performing the obligations under the
deposit agreement. Our obligations and the obligations of the preferred stock
depositary under the deposit agreement will be limited to performing our duties
in good faith and without negligence (in the case of any action or inaction in
the voting of a class or series of preferred stock represented by the depositary
shares), gross negligence or willful misconduct. We will not be obligated, and
the preferred stock depositary will not be obligated, to prosecute or defend any
legal proceeding in respect of any depositary receipts, depositary shares or
shares of a class or series of preferred stock represented thereby unless
satisfactory indemnity is furnished. We may rely on, and the preferred stock
depositary may rely on, written advice of counsel or accountants, or information
provided by persons presenting shares of preferred stock represented thereby for
deposit, holders of depositary receipts or other persons that we believe in good
faith to be competent to give such information, and on documents that we believe
in good faith to be genuine and signed by a proper party.
If a preferred stock depositary receives conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and from
us, on the other hand, the preferred stock depositary will be entitled to act on
such claims, requests or instructions received by us.
DESCRIPTION OF WARRANTS
We currently have no warrants outstanding (other than options issued
under our Stock Option and Incentive Plan). We may issue warrants for the
purchase of common stock or preferred stock. We may issue warrants independently
or together with any other securities offered pursuant to any prospectus
supplement and warrants may be attached to or separate from such securities. We
will issue each series of warrants under a separate warrant agreement that we
will enter into with a warrant agent specified in the applicable prospectus
supplement. The warrant agent will act solely as our agent in connection with
the warrants of such series and will not assume any obligation or relationship
of agency or trust for or with any provisions of the warrants. We will set forth
additional terms of the warrants and the applicable warrant agreements in the
applicable prospectus supplement.
The applicable prospectus supplement will describe the terms of the
warrants in respect of which we are delivering this prospectus, including, where
applicable, the following:
- the title of the warrants;
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- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the designation, terms and number of shares of preferred stock
or common stock purchasable upon exercise of the warrants;
- the designation and terms of any securities with which the
warrants are issued and the number of any warrants issued with each such
security;
- the date, if any, on and after which the warrants and the
related preferred stock or common stock will be separately transferable,
including any limitations on ownership and transfer of the warrants as may be
appropriate to preserve our status as a REIT;
- the price at which each share of preferred stock or common stock
purchasable upon exercise of the warrants may be purchased;
- the date on which the right to exercise the warrants will
commence and the date on which the right will expire;
- the minimum or maximum amount of the warrants which may be
exercised at any one time;
- information with respect to book-entry procedures, if any;
- a discussion of certain federal income tax considerations; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF CAPITAL STOCK
In order for us to qualify as a REIT under the Code, no more than 50% in
value of all classes of our outstanding shares of capital stock may be owned,
actually or constructively, by five or fewer individuals (as defined in the Code
to include certain entities) during the last half of a taxable year (other than
the first year for which we have made an election to be treated as a REIT). In
addition, if we, or an owner of 10% or more of our capital stock, actually or
constructively own 10% or more of one of our tenants (or a tenant of any
partnership or limited liability company in which we are a partner or member),
the rent received by us (either directly or through the partnership or limited
liability company) from the tenant will not be qualifying income for purposes of
the gross income tests for REITs contained in the Code. A REIT's stock also must
be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter taxable
year (other than the first year for which an election to be treated as a REIT
has been made).
Because our Board of Directors believes it is desirable for us to
qualify as a REIT, our Charter, subject to certain exceptions as discussed
below, provides that no person may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.8% (by value or number of
shares, whichever is more restrictive) of either our issued and outstanding
common stock or our issued and outstanding Series A Preferred Stock. We will
also prohibit the ownership, actually or constructively, of any shares of our
Series B Preferred Stock and any shares of our Series C Preferred Stock by any
single person so that no such person, taking into account all of our stock so
owned by such person, may own in
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excess of 9.8% of our issued and outstanding capital stock. The constructive
ownership rules under the Code are complex and may cause stock owned actually or
constructively by a group of related individuals and/or entities to be owned
constructively by one individual or entity. As a result, the acquisition of less
than 9.8% of our common stock, Series A Preferred Stock or capital stock (or the
acquisition of an interest in an entity that owns, actually or constructively,
common stock, Series A Preferred Stock or capital stock) by an individual or
entity, could, nevertheless cause that individual or entity, or another
individual or entity, to own constructively in excess of 9.8% of our outstanding
common stock, Series A Preferred Stock or capital stock, as the case may be, and
thereby subject the common stock, Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock to the applicable ownership limit. The Board
of Directors may, but in no event will be required to, waive the applicable
ownership limit with respect to a particular stockholder if it determines that
such ownership will not jeopardize our status as a REIT and the Board of
Directors otherwise decides such action would be in our best interest. As a
condition of such waiver, the Board of Directors may require an opinion of
counsel satisfactory to it and/or undertakings or representations from the
applicant with respect to preserving our REIT status. The Board of Directors has
waived the ownership limit applicable to our common stock with respect to
Ameritech Pension Trust, allowing it to own up to 14.9% of our common stock and,
under some circumstances, allowing it to own up to 19.6%. However, we
conditioned this waiver upon the receipt of undertakings and representations
from Ameritech Pension Trust which we believed were reasonably necessary in
order for us to conclude that the waiver would not cause us to fail to qualify
as a REIT.
Our Charter also provides that:
- no person may actually or constructively own common stock,
Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock that would result in us being "closely held"
under Section 856(h) of the Code or otherwise cause us to fail
to qualify as a REIT;
- no person may transfer common stock, Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock if a
transfer would result in shares of our capital stock being owned
by fewer than 100 persons; and
- any person who acquires or attempts or intends to acquire actual
or constructive ownership of common stock, Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock that
will or may violate any of the foregoing restrictions on
transferability and ownership is required to notify us
immediately and provide us with such other information as we may
request in order to determine the effect of the transfer on our
status as a REIT. The foregoing restrictions on transferability
and ownership will not apply if our Board of Directors
determines that it is no longer in our best interest to attempt
to qualify, or to continue to qualify, as a REIT. Except as
otherwise described above, any change in the applicable
ownership limit would require an amendment to our Charter, which
requires the affirmative vote of holders owning at least
two-thirds of the shares of our outstanding capital stock
entitled to vote on the amendment.
Under our Charter, if any attempted transfer of shares of stock or any
other event would otherwise result in any person violating an ownership limit,
any other limit imposed by our Board of Directors or the other restrictions in
the Charter, then any such attempted transfer will be void and of no force or
effect with respect to the purported transferee (the "Prohibited Transferee") as
to that number of shares that exceeds the applicable ownership limit or such
other limit (referred to as "Excess Shares").
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Under those circumstances, the Prohibited Transferee will acquire no right or
interest (or, in the case of any event other than an attempted transfer, the
person or entity holding record title to any shares in excess of the applicable
ownership limit (the "Prohibited Owner") will cease to own any right or
interest) in the Excess Shares. Any Excess Shares described above will be
transferred automatically, by operation of law, to a trust, the beneficiary of
which will be a qualified charitable organization selected by us (the
"Beneficiary"). This automatic transfer will be considered to be effective as of
the close of business on the business day prior to the date of the violating
transfer or event. Within 20 days of receiving notice from us of the transfer of
shares to the trust, the trustee of the trust will be required to sell the
Excess Shares to a person or entity who could own the shares without violating
the applicable ownership limit, or any other limit imposed by our Board of
Directors, and distribute to the Prohibited Transferee an amount equal to the
lesser of the price paid by the Prohibited Transferee for the Excess Shares or
the sales proceeds received by the trust for the Excess Shares. In the case of
any Excess Shares resulting from any event other than a transfer, or from a
transfer for no consideration (such as a gift), the trustee will be required to
sell Excess Shares to a qualified person or entity and distribute to the
Prohibited Owner an amount equal to the lesser of the applicable market price of
the Excess Shares as of the date of the event or the sales proceeds received by
the trust for the Excess Shares. In either case, any proceeds in excess of the
amount distributable to the Prohibited Transferee or Prohibited Owner will be
distributed to the Beneficiary. Prior to a sale of any Excess Shares by the
trust, the trustee will be entitled to receive, in trust for the Beneficiary,
all dividends and other distributions paid by us with respect to the Excess
Shares, and also will be entitled to exercise all voting rights with respect to
the Excess Shares. Subject to Maryland law, effective as of the date that the
shares have been transferred to the trust, the trustee will have the authority
(at the trustee's sole discretion) to rescind as void any vote cast by a
Prohibited Transferee or Prohibited Owner prior to the time that we discover
that the shares have been automatically transferred to the trust and to recast
the vote in accordance with the desires of the trustee acting for the benefit of
the Beneficiary. However, if we have already taken irreversible corporate
action, then the trustee will not have the authority to rescind and recast the
vote. If we pay the Prohibited Transferee or Prohibited Owner any dividend or
other distribution before we discover that the shares were transferred to the
trust, the Purported Transferee or Prohibited Owner will be required to repay
the trustee upon demand for distribution to the Beneficiary. If the transfer to
the trust is not automatically effective (for any reason), to prevent violation
of the applicable ownership limit or any other limit provided in our Charter or
imposed by the Board of Directors, then our Charter provides that the transfer
of the Excess Shares will be void ab initio.
In addition, shares of stock held in the trust will be considered to
have been offered for sale to us, or our designee, at a price per share equal to
the lesser of (1) the price per share in the transaction that resulted in the
transfer to the trust (or, in the case of a devise or gift, the market price at
the time of such devise or gift) and (2) the applicable market price on the date
that we, or our designee, accept the offer. We have the right to accept the
offer until the trustee has sold the shares held in the trust. Upon that sale to
us, the interest of the Beneficiary in the shares sold will terminate and the
trustee will distribute the net proceeds of the sale to the Prohibited
Transferee or Prohibited Owner.
If any attempted transfer of shares would cause us to be beneficially
owned by fewer than 100 persons, our Charter provides that the transfer will be
null and void in its entirety and the intended transferee will acquire no rights
to the stock.
All certificates representing shares will bear a legend referring to the
restrictions described above. The ownership limitations described above could
delay, defer or prevent a transaction or a change in control that might involve
a premium price for the shares or otherwise be in the best interest of
stockholders.
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Under our Charter, owners of outstanding shares must, upon our demand,
provide us with a completed questionnaire containing information regarding
ownership of the shares, as set forth in the treasury regulations. In addition,
each stockholder must upon demand disclose to us in writing such information
that we may request in order to determine the effect, if any, of the
stockholder's actual and constructive ownership of shares of common stock,
Series A Preferred Stock, Series B Preferred Stock and/or Series C Preferred
Stock on our status as a REIT and to ensure compliance with each ownership
limit, or any other limit specified in the Charter or required by the Board of
Directors.
CERTAIN PROVISIONS OF MARYLAND LAW AND
OF OUR CHARTER AND BYLAWS
We have summarized certain terms and provisions of the MGCL and our
Charter and Bylaws. This summary is not complete and is qualified by the
provisions of our Charter and Bylaws, and the MGCL. For more detail, you should
refer to our Charter and Bylaws, which we have filed as exhibits to the
registration statement of which this prospectus is a part.
See "Where You Can Find More Information."
BOARD OF DIRECTORS
The Charter provides that the number of our directors shall be
established by the Bylaws, but cannot be less than the minimum number required
by the MGCL, which in the case of the Company is three. Our Bylaws currently
provide that the Board of Directors consists of not fewer than five nor more
than 13 members who are elected to a one-year term at each annual meeting of our
stockholders. A majority of the entire Board of Directors may fill any vacancy
(except for a vacancy caused by removal). Our Bylaws provide that a majority of
the Board of Directors must be "Independent Directors." An "Independent
Director" is a director who is not:
- an employee, officer or affiliate of us or one of our
subsidiaries or divisions,
- a relative of a principal executive officer, or
- an individual member of an organization acting as advisor,
consultant or legal counsel, receiving compensation on a
continuing basis from us in addition to director's fees.
REMOVAL OF DIRECTORS
While our Charter and the MGCL empower our stockholders to fill
vacancies in the Board of Directors that are caused by the removal of a
director, our Charter precludes stockholders from removing incumbent directors
except upon a substantial affirmative vote. Specifically, our Charter provides
that stockholders may remove a director only for cause and only by the
affirmative vote of at least two-thirds of the votes entitled to be cast in the
election of directors, subject to the rights of the holders of shares of Series
A Preferred Stock and any holders of shares of our preferred stock to elect and
remove directors elected by such holders under certain circumstances. The MGCL
does not define the term "cause." As a result, removal for "cause" is subject to
Maryland common law and to judicial interpretation and review in the context of
the unique facts and circumstances of any particular situation. This provision,
when coupled with the provision in our Bylaws authorizing the Board of Directors
to fill vacant directorships, precludes stockholders from removing incumbent
directors except upon a substantial affirmative vote and filling the vacancies
created by removal with their own nominees.
OPT OUT OF BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITION STATUTES
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We have elected in our Bylaws not to be governed by the "control share
acquisition" provisions of the MGCL (Sections 3-701 through 3-709), and the
Board of Directors has determined, by irrevocable resolution, that we will not
be governed by the "business combination" provision of the MGCL (Section 3-602),
each of which could have the effect of delaying or preventing a change of
control. Our Bylaws provide that we cannot at a future date determine to be
governed by either provision without the approval of a majority of the
outstanding shares entitled to vote. In addition, the irrevocable resolution
adopted by the Board of Directors may only be changed by the approval of a
majority of the outstanding shares entitled to vote.
AMENDMENT TO OUR CHARTER AND BYLAWS
Our Charter may not be amended without the affirmative vote of at least
two-thirds of the shares of capital stock outstanding and entitled to vote on
the amendment, voting together as a single class. Our Bylaws may be amended by
the vote of a majority of the Board of Directors or by a vote of a majority of
the shares of our capital stock entitled to vote on the amendment, except with
respect to the following Bylaw provisions (each of which requires the approval
of a majority of the shares of capital stock entitled to vote on the amendment):
- provisions opting out of the control share acquisition statute;
- the requirement in our Bylaws that our independent directors
approve transactions involving our executive officers or
directors or any limited partners of the Operating Partnership
and their affiliates; and
- provisions governing amendment of our Bylaws.
MEETINGS OF STOCKHOLDERS
Our Bylaws provide for annual meetings of stockholders to elect the
Board of Directors and transact other business as may properly be brought before
the meeting. The President, the Board of Directors and the Chairman of the Board
may call a special meeting of stockholders. The holders of 50% or more of our
outstanding stock entitled to vote may also make a written request to call a
special meeting of stockholders.
The MGCL provides that stockholders may act by unanimous written consent
without a meeting with respect to any action that they are required or permitted
to take at a meeting, if each stockholder entitled to vote on the matter signs
the consent setting forth the action and each stockholder entitled to notice of
the meeting but not entitled to vote at the meeting signs a written waiver of
any right to dissent.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
Our Bylaws provide that with respect to an annual meeting of
stockholders, nominations of persons for election to the Board of Directors and
the proposal of business to be considered by stockholders may be made only:
- pursuant to the notice of the meeting;
- by or at the direction of the Board of Directors; or
- by a stockholder who is entitled to vote at the meeting and has
complied with the advance notice procedures set forth in our
Bylaws.
Our Bylaws also provide that with respect to special meetings of
stockholders, only the business specified in the notice of meeting may be
brought before the meeting.
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The provisions in our Charter regarding amendments to the Charter and
the advance notice provisions of our Bylaws could have the effect of
discouraging a takeover or other transaction in which holders of some, or a
majority, of the shares of common stock might receive a premium for their shares
over the then prevailing market price or which holders might believe to be
otherwise in their best interests.
DISSOLUTION OF THE COMPANY
Under the MGCL, we may be dissolved by the affirmative vote of a
majority of the entire Board of Directors declaring dissolution to be advisable
and directing that the proposed dissolution be submitted for consideration at
any annual or special meeting of stockholders. We may also be dissolved, upon
proper notice, by the affirmative vote of the holders of two-thirds of the total
number of shares of capital stock outstanding and entitled to vote on the
dissolution, voting as a single class.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
Our officers and directors are indemnified under the MGCL, our Charter
and the Partnership Agreement against certain liabilities. Our Charter and
Bylaws require us to indemnify our directors and officers to the fullest extent
permitted from time to time by the MGCL.
The MGCL permits a corporation to indemnify its directors and officers
and certain other parties against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless:
- the act or omission of the director or officer was material to
the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate dishonesty;
- the director or officer actually received an improper personal
benefit in money, property or services; or
- in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the act or omission was
unlawful.
A corporation may indemnify a director or officer against judgments,
penalties, fines, settlements and reasonable expenses that the director or
officer actually incurs in connection with the proceeding unless the proceeding
is one by or in the right of the corporation and the director or officer has
been adjudged to be liable to the corporation. In addition, a corporation may
not indemnify a director or officer with respect to any proceeding charging
improper personal benefit to the director or officer in which the director or
officer was adjudged to be liable on the basis that personal benefit was
received. The termination of any proceeding by conviction, or upon a plea of
nolo contendere or its equivalent, or an entry of any order of probation prior
to judgment, creates a rebuttable presumption that the director or officer did
not meet the requisite standard of conduct required for indemnification to be
permitted.
The MGCL permits the charter of a Maryland corporation to include a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, subject to specified
restrictions. Our Charter contains this provision. The MGCL does not, however,
permit the liability of directors and officers to the corporation or its
stockholders to be limited to the extent that:
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- it is proved that the person actually received an improper
personal benefit in money, property or services,
- a judgment or other final adjudication is entered in a
proceeding based on a finding that the person's action, or
failure to act, was committed in bad faith or was the result of
active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding or
- in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or failure to act was
unlawful.
This provision does not limit our ability or our stockholders to obtain
other relief, such as an injunction or rescission. The Partnership Agreement
also provides for our indemnification, as general partner, and our officers and
directors to the same extent indemnification is provided to our officers and
directors in our Charter, and limits our liability and the liability of our
officers and directors to the Operating Partnership and the partners of the
Operating Partnership to the same extent liability of our officers and directors
to us and our stockholders is limited under our Charter. See "Description of
Certain Provisions of the Partnership Agreement of the Operating Partnership --
Our Exculpation and Indemnification."
Insofar as the foregoing provisions permit indemnification for liability
arising under the Securities Act of directors, officers or persons controlling
us, we have been informed that in the opinion of the SEC, this indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
DESCRIPTION OF CERTAIN PROVISIONS OF THE
PARTNERSHIP AGREEMENT OF THE OPERATING PARTNERSHIP
Substantially all of our assets are held, and all of our operations are
conducted, by or through the Operating Partnership. We are the sole general
partner of the Operating Partnership and owned, as of November 30, 1998, an
approximate 95.1% interest in the Operating Partnership. As the sole general
partner, we have the exclusive right and power to manage the Operating
Partnership. Our interest in the Operating Partnership is designated as a
general partner interest. Except with respect to distributions of cash and
allocations of income and loss, and except as otherwise noted in this
prospectus, the description in this section of common limited partnership Units
is also applicable to Performance Units, and holders of Performance Units will
be treated as limited partners. We have summarized certain terms and provisions
of the Partnership Agreement. This summary is not complete and is qualified by
the provisions of the Partnership Agreement. For more detail, you should refer
to the Partnership Agreement itself, which we have filed as an exhibit to the
registration statement of which this prospectus is a part. See "Where You Can
Find More Information."
GENERAL
Holders of limited partnership Units hold limited partnership interests
in the Operating Partnership, and all holders of partnership interests
(including us in our capacity as general partner) are entitled to share in cash
distributions from, and in the profits and losses of, the Operating Partnership.
The number of general partnership Units (the "GP Units") held by us is
approximately equal to the total number of outstanding shares of our common
stock and preferred stock. Accordingly, the distributions that we pay per share
of common stock are expected to be equal to the distributions per unit that the
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Operating Partnership pays on the common Units, and the distributions that we
pay per share of Series A Preferred Stock, any Series B Preferred Stock and any
Series C Preferred Stock are expected to be equal to the distributions per unit
that the Operating Partnership pays on the Series A Preferred Units, the Series
B Preferred Units and any Series C Preferred Units, respectively. The Units have
not been registered pursuant to federal or state securities laws, and they will
not be listed on the New York Stock Exchange or any other exchange or quoted on
any national market system. However, the shares of common stock, Series B
Preferred Stock and Series C Preferred Stock that we may issue upon exchange of
the common Units, Series B Preferred Units and AMB Property II Series C
Preferred Units may be sold in registered transactions or transactions exempt
from registration under the Securities Act. The limited partners of the
Operating Partnership have the rights to which limited partners are entitled
under the Partnership Agreement and the Delaware Uniform Limited Partnership Act
(the "Partnership Act"). The Partnership Agreement imposes certain restrictions
on the transfer of Units, as described below.
PURPOSE, BUSINESS AND MANAGEMENT
The Operating Partnership is organized as a Delaware limited partnership
pursuant to the terms of the Partnership Agreement. We are the sole general
partner of the Operating Partnership and conduct substantially all of our
business through the Operating Partnership, except for investment advisory
services (which we conduct through AMB Investment Management, Inc. ("AMB
Investment Management")) and certain other activities that we conduct through
Headlands Realty Corporation. The Operating Partnership owns 100% of the
non-voting preferred stock of AMB Investment Management and Headlands Realty
Corporation (representing approximately 95% of the economic interest in each
entity). Certain of our executive officers and an officer of AMB Investment
Management own all of the outstanding voting common stock of AMB Investment
Management (representing approximately 5% of the economic interest in AMB
Investment Management). Certain of our executive officers and a director of
Headlands Realty Corporation own all of the outstanding voting common stock of
Headlands Realty Corporation (representing approximately 5% of the economic
interest in Headlands Realty Corporation). We refer to AMB Investment Management
and Headlands Realty Corporation as the "Preferred Stock Subsidiaries."
The primary purpose of the Operating Partnership is, in general, to
acquire, purchase, own, operate, manage, develop, redevelop, invest in, finance,
refinance, sell, lease and otherwise deal with industrial and retail properties
and assets related to those properties, and interests in those properties and
assets. The Operating Partnership is authorized to conduct any business that a
limited partnership formed under the Partnership Act may lawfully conduct,
except that the Partnership Agreement requires of the Operating Partnership to
conduct its business in such a manner that will permit the Company to be
classified as a REIT under Section 856 of the Code, unless the Company ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Operating Partnership. Subject to the foregoing limitation, the Operating
Partnership may enter into partnerships, joint ventures or similar arrangements
and may own interests directly or indirectly in any other entity.
As the general partner of the Operating Partnership we have the
exclusive power and authority to conduct the business of the Operating
Partnership, subject to the consent of the limited partners in certain limited
circumstances (as discussed below) and except as expressly limited in the
Partnership Agreement.
We have the right to make all decisions and take all actions with
respect to the Operating Partnership's acquisition and operation of our
properties and all other assets and businesses of or related to the Operating
Partnership. No limited partner may take part in the conduct or control of the
business or affairs of the Operating Partnership by virtue of being a holder of
Units. In particular, each limited partner expressly acknowledged in the
Partnership Agreement that as general partner, we are acting on
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behalf of the Operating Partnership's limited partners and our stockholders,
collectively, and are under no obligation to consider the tax consequences to
limited partners when making decisions for the benefit of the Operating
Partnership. We intend to make decisions in our capacity as general partner of
the Operating Partnership so as to maximize our profitability and the
profitability of the Operating Partnership as a whole, independent of the tax
effects on the limited partners. The Company and the Operating Partnership have
no liability to a limited partner as a result of any liabilities or damages
incurred or suffered by, or benefits not derived by, a limited partner as a
result of an action or inaction of the Company as general partner of the
Operating Partnership as long as the Company acted in good faith. Limited
partners have no right or authority to act for or to bind the Operating
Partnership.
Limited partners of the Operating Partnership have no authority to
transact business for, or participate in the management activities or decisions
of, the Operating Partnership, except as provided in the Partnership Agreement
or as required by applicable law.
ENGAGING IN OTHER BUSINESSES; CONFLICTS OF INTEREST
We may not conduct any business other than in connection with the
ownership, acquisition and disposition of Operating Partnership interests as a
general partner and the management of the business of the Operating Partnership,
its operation as a public reporting company with a class (or classes) of
securities registered under the Exchange Act, as amended, its operation as a
REIT and activities that are incidental to these activities (including ownership
of any interest in AMB Property Holding Corporation, AMB Property Holding II
Corporation, the Preferred Stock Subsidiaries or a title holding, management or
finance subsidiary organized as a partnership, limited liability company or
corporation) without the consent of the holders of a majority of the limited
partnership interests. Unless they otherwise agree in writing, each limited
partner, and its affiliates, is free to engage in any business or activity, even
if the business or activity competes with or is enhanced by the business of the
Operating Partnership. The Partnership Agreement does not prevent another person
or entity that acquires control of the Company in the future from conducting
other businesses or owning other assets, even if it would be in the best
interests of the limited partners for the Operating Partnership to own those
businesses or assets. In the exercise of our power and authority under the
Partnership Agreement, we may contract and otherwise deal with or otherwise
obligate the Operating Partnership to entities in which we or any one or more of
our officers, directors or stockholders may have an ownership or other financial
interest, whether direct or indirect.
OUR REIMBURSEMENT; TRANSACTIONS WITH US AND OUR AFFILIATES
We do not receive any compensation for our services as general partner
of the Operating Partnership. However, as a partner in the Operating
Partnership, we have rights to allocations and distributions as a partner of the
Operating Partnership. In addition, the Operating Partnership reimburses us for
all expenses we incur relating to our activities as general partner, our
continued existence and qualification as a REIT and all other liabilities that
we incur in connection with the pursuit of our business and affairs. We may
retain persons or entities that we select (including ourselves, any entity in
which we have an interest, or any entity with which we are affiliated) to
provide services to or on behalf of the Operating Partnership. The Operating
Partnership will reimburse us for all expenses incurred relating to the ongoing
operation of the Operating Partnership and any issuance of additional
partnership interests in the Operating Partnership. These expenses include those
incurred in connection with the administration and activities of the Operating
Partnership, such as the maintenance of the Operating Partnership's books and
records, management of the Operating Partnership's property and assets, and
preparation of information regarding the Operating Partnership provided to the
partners in the
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preparation of their individual tax returns. Except as expressly permitted by
the Partnership Agreement, however, our affiliates will not engage in any
transactions with the Operating Partnership except on terms that are fair and
reasonable to the Operating Partnership and no less favorable to the Operating
Partnership than it would obtain from an unaffiliated third party.
OUR EXCULPATION AND INDEMNIFICATION
The Partnership Agreement generally provides that we, as general partner
of the Operating Partnership, will incur no liability to the Operating
Partnership or any limited partner for losses sustained, liabilities incurred,
or benefits not derived as a result of errors in judgment or for any mistakes of
fact or law or for anything that we may do or not do in connection with the
business and affairs of the Operating Partnership if we carry out our duties in
good faith. Our liability in any event is limited to our interest in the
Operating Partnership. We have no liability for the loss of any limited
partner's capital. In addition, we are not responsible for any misconduct,
negligent act or omission of any of our consultants, contractors or agents, or
any of the Operating Partnership's consultants, contractors or agents and we
have no obligation other than to use good faith in the selection of all
contractors, consultants and agents. We may consult with counsel, accountants,
appraisers, management consultants, investment bankers, and other consultants
and advisors that we select. An opinion by a consultant on a matter that we
believe is within the consultant's professional or expert competence is
considered to be complete protection as to any action that we take or fail to
take based on the opinion and in good faith.
The Partnership Agreement also requires the Operating Partnership to
indemnify us, our directors and officers, and other persons that we may from
time to time designate against any loss or damage, including reasonable legal
fees and court costs incurred by the person by reason of anything the person may
do or not do for or on behalf of the Operating Partnership or in connection with
its business or affairs unless it is established that:
- the act or omission of the indemnified person was material to
the matter giving rise to the proceeding and either the
indemnified person committed the act or omission in bad faith or
as the result of active and deliberate dishonesty;
- the indemnified person actually received an improper personal
benefit in money, property or services; or
- in the case of any criminal proceeding, the indemnified person
had reasonable cause to believe that the act or omission was
unlawful. Any indemnification claims must be satisfied solely
out of the assets of the Operating Partnership.
SALES OF ASSETS; LIQUIDATION
Under the Partnership Agreement, as general partner we generally have
the exclusive authority to determine whether, when and on what terms, the
Operating Partnership will sell its assets (including our properties, which we
own through the Operating Partnership). However, we have agreed, in connection
with the contribution of properties from taxable investors in our formation
transactions and certain property acquisitions for Units (with an estimated
aggregate value of approximately $253.7 million), not to dispose of certain
assets in a taxable sale or exchange for a mutually agreed upon period and,
thereafter, to use commercially reasonable or best efforts to minimize the
adverse tax consequences of any sale. We may enter into similar or other
agreements in connection with other acquisitions of properties for Units.
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A merger of the Operating Partnership with another entity generally
requires an affirmative vote of the partners (other than the preferred limited
partners) holding a majority of the outstanding percentage interest (including
the interest held directly or indirectly by us) of all partners other than
preferred limited partners, subject to certain consent rights of holders of
Units as described below under "Amendment of the Partnership Agreement." A
dissolution or liquidation of the Operating Partnership, including a sale or
disposition of all or substantially all of the Operating Partnership's assets
and properties, generally requires an affirmative vote of the limited partners
(other than the preferred limited partners) holding a majority of the
outstanding percentage interest of all limited partners other than preferred
limited partners.
CAPITAL CONTRIBUTION
The Partnership Agreement provides that if the Operating Partnership
requires additional funds at any time or from time to time in excess of funds
available to the Operating Partnership from borrowings or capital contributions,
we may borrow funds from a financial institution or other lender or through
public or private debt offerings and lend the funds to the Operating Partnership
on the same terms and conditions as are applicable to our borrowing of the
funds. As an alternative to borrowing funds required by the Operating
Partnership, we may contribute the amount of the required funds as an additional
capital contribution to the Operating Partnership. If we contribute additional
capital to the Operating Partnership, our partnership interest in the Operating
Partnership will be increased on a proportionate basis. Conversely, the
partnership interests of the limited partners will be decreased on a
proportionate basis if we make additional capital contributions.
DISTRIBUTIONS; ALLOCATIONS OF INCOME AND LOSS
The Partnership Agreement generally provides that the Operating
Partnership will make quarterly distributions of Available Cash (as defined
below), as determined in the manner provided in the Partnership Agreement, to
the partners of the Operating Partnership in proportion to their percentage
interests in the Operating Partnership (which for any partner is determined by
the number of Units it owns relative to the total number of Units outstanding).
If any preferred Units are outstanding, the Operating Partnership will pay
distributions to holders of preferred Units in accordance with the rights of
each class of preferred Units (and, within each such class, pro rata in
proportion to the respective percentage interest of each holder), with any
remaining Available Cash distributed in accordance with the previous sentence.
"Available Cash" is generally defined as net cash flow from operations, plus any
reduction in reserves, and minus interest and principal payments on debt,
capital expenditures, any additions to reserves and other adjustments. Other
than as described below, neither the Company nor the limited partners are
currently entitled to any preferential or disproportionate distributions of
Available Cash with respect to the Units.
SERIES A PREFERRED UNITS
In connection with the sale of the Series A Preferred Shares, we
received Series A Preferred Units in the Operating Partnership that mirror the
rights, preferences and other terms of the Series A Preferred Stock. The Series
A Preferred Units rank, with respect to distribution rights and rights upon
liquidation, winding up or dissolution of the Operating Partnership:
- senior to the common Units and to all Units that provide that
they rank junior to the Series A Preferred Units;
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- junior to all Units which rank senior to the Series A Preferred
Units; and
- on a parity with the Series B Preferred Units, any Series C
Preferred Units that the Operating Partnership may issue to us
(see "-- Series C Preferred Units") and all other Units
expressly designated by the Operating Partnership to rank on a
parity with the Series A Preferred Units.
We receive preferred distributions of cash and preferred allocations of
income on the Series A Preferred Units in an amount equal to the dividends
payable by us on the Series A Preferred Stock. If we acquire any Series B
Preferred Units from the holders pursuant to the exercise of their exchange
rights, or if the Operating Partnership issues any Series C Preferred Units to
us, we will receive preferred distributions of cash and preferred allocations of
income on the Series B Preferred Units or Series C Preferred Units in an amount
equal to the dividends payable by us on the Series B Preferred Stock or Series C
Preferred Stock. See "-- Series C Preferred Units."
As a consequence, we will receive distributions from the Operating
Partnership sufficient to pay dividends on the Series A Preferred Stock and any
Series B Preferred Stock and Series C Preferred Stock before any other partner
in the Operating Partnership (other than holders of parity preferred units,
including the Series B Preferred Units) receives a distribution. In addition, if
necessary, income will be specially allocated to us and losses will be allocated
to the other partners of the Operating Partnership in amounts necessary to
ensure that, to the extent possible, the balance in our capital account will at
all times be equal to or in excess of the amount payable by us on the Series A
Preferred Stock and any Series B Preferred Stock and Series C Preferred Stock
upon liquidation or redemption. See "Certain Federal Income Tax Considerations
- -- Tax Aspects of the Operating Partnership and the Joint Ventures --
Allocations of Operating Partnership Income, Gain, Loss and Deduction."
SERIES B PREFERRED UNITS
General. The Series B Preferred Units rank, with respect to distribution
rights and rights upon liquidation, winding up or dissolution of the Operating
Partnership:
- senior to the common Units and to all Units that provide that
they rank junior to the Series B Preferred Units;
- junior to all Units which rank senior to the Series B Preferred
Units; and
- on a parity with the Series A Preferred Units, any Series C
Preferred Units and all other Units expressly designated by the
Operating Partnership to rank on a parity with the Series B
Preferred Units.
Subject to the rights of holders of parity preferred Units (including
the Series A Preferred Units and any Series C Preferred Units), holders of the
Series B Preferred Units are entitled to receive, when, as and if declared by
the Operating Partnership, acting through us as general partner, cumulative
preferential cash distributions in an amount equal to 8 5/8% per annum on an
amount equal to $50.00 per Series B Preferred Unit then outstanding (equivalent
to $4.3125 per annum). These distributions are payable on the 15th day of
January, April, July and October of each year.
Exchange Rights. The Series B Preferred Units are exchangeable in whole
at any time on or after November 12, 2008, at the option of 51% of the holders
of all outstanding Series B Preferred Units,
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on a one for one basis, subject to adjustment, for shares of our Series B
Preferred Stock. In addition, the Series B Preferred Units are exchangeable in
whole at any time at the option of 51% of the holders of all outstanding Series
B Preferred Units if:
- any Series B Preferred Unit shall not have received full
distributions with respect to six prior quarterly distribution
periods (whether or not consecutive); or
- we or one of our subsidiaries take the position, and a holder or
holders of Series B Preferred Units receive an opinion of
independent counsel that the Operating Partnership is, or upon
the happening of a certain event likely will be, a "publicly
traded partnership" within the meaning of the Code.
The Series B Preferred Units are exchangeable in whole for shares of
Series B Preferred Stock at any time after November 12, 2001 and prior to
November 12, 2008 at the option of 51% of the holders of all outstanding Series
B Preferred Units if those holders deliver to us as general partner a private
letter ruling or an opinion of independent counsel to the effect that an
exchange of the Series B Preferred Units at that time would not cause the Series
B Preferred Units to be considered "stock and securities" within the meaning of
the Code for purposes of determining whether the holder of Series B Preferred
Units is an "investment company" under the Code.
With certain limitations, the Series B Preferred Units are also
exchangeable in whole at any time for shares of Series B Preferred Stock
(regardless of whether held by the initial purchaser) if:
- the initial purchaser of the Series B Preferred Units reasonably
concludes that there exists an imminent and substantial risk
that the initial purchaser's interest in the Operating
Partnership represents or will represent more than 19.5% of the
total profits or capital interests in the Operating Partnership
for a taxable year;
- the initial purchaser of the Series B Preferred Units delivers
to us an opinion to the effect that there is a substantial risk
that the initial purchaser's interest in the Operating
Partnership represents or will represent more than 19.5% of the
total profits or capital interests in the Operating Partnership
for a taxable year; and
- we, as the general partner, agree with the conclusions in the
bullet points above; provided, that we may not unreasonably
withhold our agreement.
In lieu of an exchange for Series B Preferred Stock, we may elect to
cause the Operating Partnership to redeem Series B Preferred Units for cash in
an amount equal to the original capital account balance of the Series B
Preferred Units plus all accrued and unpaid distributions to the date of
redemption. A holder of Series B Preferred Units will not be entitled to
exchange the Units for Series B Preferred Stock if the exchange would result in
a violation of the ownership limit. See "Description of Capital Stock --
Restrictions on Ownership and Transfer."
Redemption. On or after November 12, 2003, the Operating Partnership has
the right to redeem the Series B Preferred Units, in whole or in part from time
to time, at a redemption price payable in cash equal to the capital account
balance of the holder, provided that the amount shall not be less than $50.00
per Series B Preferred Unit. The Operating Partnership must pay the redemption
price solely out of the sale proceeds of our capital stock or interests in the
Operating Partnership and from no other source. The Operating Partnership may
not redeem fewer than all of the Series B Preferred Units unless the
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Operating Partnership has paid all accumulated and unpaid distributions on all
Series B Preferred Units for all quarterly distribution periods terminating on
or prior to the date of redemption.
Limited Approval Rights. For so long as any Series B Preferred Units are
outstanding, without the affirmative vote of the holders of at least two-thirds
of the Series B Preferred Units outstanding at the time, the Operating
Partnership may not:
- authorize, create or increase the authorized or issued amount
of, or reclassify, any class or series of partnership interests,
or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any
partnership interests, ranking prior to the Series B Preferred
Units;
- authorize, create or increase the authorized or issued amount
of, or reclassify, any class or series of partnership interests,
or create, authorize or issue any obligations or security
convertible into or evidencing a right to purchase any
partnership interests, ranking equal to the Series B Preferred
Units, but only to the extent that such securities are issued to
an affiliate of the Operating Partnership, other than us to the
extent that the issuance is to allow us to issue corresponding
shares of Series B Preferred Stock to persons who are not
affiliates of the Operating Partnership; or
- either consolidate, merge into or with, or convey, transfer or
lease its assets substantially as an entirety to, any
corporation or other entity or amend, alter or repeal the
provisions of the Partnership Agreement, in a manner that would
materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series B
Preferred Units. So long as the Operating Partnership is the
surviving entity and the Series B Preferred Units remain
outstanding on the same terms, or the resulting, surviving or
transferee entity is a partnership, limited liability company or
other pass-through entity and substitutes the Series B Preferred
Units for other interests in such entity, with substantially the
same terms and rights, then the occurrence of any of the events
listed above in this bullet point will not be considered to
materially and adversely affect such rights, privileges or
voting powers.
Other than as discussed above or elsewhere in this prospectus, the
holders of Series B Preferred Units have no voting rights other than with
respect to certain matters that would adversely affect them or as otherwise
provided by applicable law.
Liquidation Preference. The distribution and income allocation
provisions of the Partnership Agreement have the effect of providing each Series
B Preferred Unit with a liquidation preference to each holder of such Units
equal to the holder's capital contributions, plus any accrued but unpaid
distributions, in preference to any other class or series of partnership
interest of the Operating Partnership, other than any Series A Preferred Units
and any Series C Preferred Units.
Registration Rights. We have agreed to file a registration statement
registering the resale of the shares of Series B Preferred Stock issuable to the
holders of Series B Preferred Units as soon as practicable but not later than 60
days after the date the Series B Preferred Units are exchanged for shares of
Series B Preferred Stock. We have also agreed to use our best efforts to cause
the registration statement to be declared effective within 120 days after the
date of the exchange.
SERIES C PREFERRED UNITS
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As described under "Description of Capital Stock -- Preferred Stock --
Series C Preferred Stock," holders of AMB Property II Series C Preferred Units
may exchange their units for shares of our Series C Preferred Stock. If we issue
Series C Preferred Stock, we will:
- contribute 99% of the AMB Property II Series C Preferred Units
to the Operating Partnership in exchange for Series C
Preferred Units in the Operating Partnership that mirror the
rights, preferences and other terms of the Series C Preferred
Stock; and
- contribute 1% of the AMB Property II Series C Preferred Units to
AMB Property Holding Corporation.
Any Series C Preferred Units will rank on a parity with the Series A
Preferred Units and Series B Preferred Units. As a consequence, we would receive
distributions from the Operating Partnership that we would use to pay dividends
on any Series C Preferred Stock and the Series A Preferred Stock before any
other partner in the Operating Partnership (other than holders of parity
preferred units, including the Series B Preferred Units).
COMMON LIMITED PARTNERSHIP UNITS
Redemption/Exchange Rights
Holders of common Units have the right, commencing generally on or
before the first anniversary of the holder becoming a limited partner of the
Operating Partnership (or such other date agreed to by the Operating Partnership
and the applicable Unit holders), to require the Operating Partnership to redeem
part or all of their common Units for cash (based upon the fair market value of
an equivalent number of shares of common stock at the time of redemption) or we
may, in our sole and absolute discretion (subject to the limits on ownership and
transfer of common stock set forth in our Charter) elect to exchange those
common Units for shares of common stock (on a one-for-one basis, subject to
adjustment in the event of stock splits, stock dividends, issuance of certain
rights, certain extraordinary distributions and similar events). See
"Redemption/Exchange of Common Units for Common Stock." We presently anticipate
that we will elect to issue shares of common stock in exchange for common Units
in connection with each redemption request, rather than having the Operating
Partnership pay cash. With each redemption or exchange, our percentage ownership
interest in the Operating Partnership will increase. Common limited partners may
exercise this redemption/exchange right from time to time, in whole or in part,
subject to the limitations that limited partners may not exercise the right if
exercise would result in any person actually or constructively owning shares of
common stock in excess of the ownership limit or any other amount specified by
the Board of Directors, assuming common stock was issued in the exchange.
Holders of Performance Units also have limited redemption/exchange rights, as
discussed under the caption "-- Performance Units" below.
Registration Rights
We have granted to common limited partners certain registration rights
with respect to the shares of stock issuable upon exchange of common Units or
otherwise. We have agreed to file and generally keep continuously effective
generally beginning on or as soon as practicable after one year after issuance
of common Units a registration statement covering the issuance of shares of
common stock upon exchange of the Units and the resale of the shares. In
addition, we have agreed to file a registration
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statement covering shares of common stock issuable upon exchange of Performance
Units. We may also agree to provide registration rights to any other person who
may become an owner of Units, provided the person provides us with satisfactory
undertakings. See "Risk Factors -- Ownership of Common Stock -- The Large Number
of Shares Available for Future Sale Could Adversely Affect the Market Price of
Our Common Stock." We will bear expenses incident to our registration
obligations upon exercise of registration rights, including the payment of
federal securities law and state Blue Sky registration fees, except that we will
not bear any underwriting discounts or commissions or transfer taxes relating to
registration of the shares.
PERFORMANCE UNITS
Notwithstanding the foregoing discussion of distributions and
allocations of income or loss of the Operating Partnership, depending on the
trading price of our common stock after November 26, 1998 (the first anniversary
of our initial public offering), certain of our officers, in their capacity as
limited partners of the Operating Partnership, may receive performance units
("Performance Units") as of each of February 26, May 26, August 26 and November
26, 1999. The Performance Units are similar to common Units in many respects,
including the right to share in operating distributions, and allocations of
operating income and loss, of the Operating Partnership on a pro rata basis with
common Units, and certain redemption and exchange rights, including limited
rights to cause the Operating Partnership to redeem the Performance Units for
cash or, at the Company's option, to exchange the Performance Units for shares
of common stock. Any redemption rights with respect to Performance Units,
however, will be dependent upon an increase in the value of the assets of the
Operating Partnership (in some cases measured by reference to the trading price
of the shares of common stock) after the issuance of the Performance Units. If
there is no increase, the holders of Performance Units will not be entitled to
receive any proceeds upon the liquidation of the Operating Partnership or the
redemption of their Performance Units.
Immediately prior to our initial public offering, certain investors
owned assets that were subject to advisory agreements with AMB Institutional
Realty Advisors, Inc. containing an incentive fee provision or a "catch up
adjustment." We refer to these investors as "Performance Investors." If officers
receive Performance Units, an equal number of GP Units allocable to the Company
and Units allocable to Performance Investors who are limited partners in the
Operating Partnership will be transferred to the Operating Partnership. If any
of our GP Units are transferred to the Operating Partnership as a result of the
issuance of Performance Units, an equal number of shares of common stock (the
"Performance Shares") will be transferred to us by the applicable Performance
Investors. Accordingly, no Company stockholder or limited partner in the
Operating Partnership (other than Performance Investors, to the extent of their
obligations to transfer Performance Shares to the Company or the Operating
Partnership, as applicable) will be diluted as a result of the issuance of
Performance Units.
REMOVAL OF THE GENERAL PARTNER; TRANSFERABILITY OF OUR INTERESTS; TREATMENT OF
LIMITED PARTNERSHIP UNITS IN SIGNIFICANT TRANSACTIONS
The limited partners may not remove us as general partner, with or
without cause, other than with our consent. The Partnership Agreement provides
that we may not withdraw from the Operating Partnership (whether by sale,
statutory merger, consolidation, liquidation or otherwise) without the consent
of a majority in interest of the limited partners other than the preferred
limited partners. However, except as set forth below, we may transfer or assign
our general partner interest in connection with a merger, consolidation or sale
of substantially all of our assets without limited partner consent.
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Neither the Company nor the Operating Partnership may engage in any
merger, consolidation or other combination with or into another person, or
effect any reclassification, recapitalization or change of its outstanding
equity interests, and the Company may not sell all or substantially all of its
assets (each a "Termination Transaction") unless in connection with the
Termination Transaction all holders of limited partnership Units other than
preferred Units either will receive, or will have the right to elect to receive,
for each Unit an amount of cash, securities or other property equal to the
product of the number of shares of common stock into which each Unit is then
exchangeable and the greatest amount of cash, securities or other property paid
to the holder of one share in consideration of one share pursuant to the
Termination Transaction. If, in connection with the Termination Transaction, a
purchase, tender or exchange offer shall have been made to and accepted by the
holders of the outstanding shares of common stock, each holder of limited
partnership Units other than preferred Units will receive, or will have the
right to elect to receive, the greatest amount of cash, securities or other
property that the holder would have received had it exercised its right to
redemption and received shares of common stock in exchange for its Units
immediately prior to the expiration of the purchase, tender or exchange offer
and had accepted the purchase, tender or exchange offer. Any Performance Units
issued will also have the benefit of these provisions, irrespective of the
capital account then applicable to the Performance Units.
A Termination Transaction may also occur if the following conditions are
met:
- substantially all of the assets directly or indirectly owned by
the surviving entity are held directly or indirectly by the
Operating Partnership or another limited partnership or limited
liability company which is the survivor of a merger,
consolidation or combination of assets with the Operating
Partnership;
- the holders of common Units, including the holders of any
Performance Units issued, own a percentage interest of the
surviving partnership based on the relative fair market value of
the net assets of the Operating Partnership and the other net
assets of the surviving partnership immediately prior to the
consummation of the transaction;
- the rights, preferences and privileges of the holders in the
surviving partnership, including the holders of Performance
Units issued or to be issued, are at least as favorable as those
in effect immediately prior to the consummation of such
transaction and as those applicable to any other limited
partners or non-managing members of the surviving partnership
(except, as to Performance Units, for such differences with
Units regarding liquidation, redemption or exchange as are
described in this prospectus); and
- such rights of the common limited partners, including the
holders of Performance Units issued or to be issued, include at
least one of the following:
- the right to redeem their interests in the surviving
partnership for the consideration available to them
pursuant to the preceding paragraph; or
- the right to redeem their Units for cash on terms
equivalent to those in effect immediately prior to the
consummation of the transaction, or, if the ultimate
controlling person of the surviving partnership has
publicly traded common equity securities, the common
equity securities, with an exchange ratio based on the
relative fair market value of the securities and the
common stock.
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Our Board of Directors will reasonably determine fair market values and
rights, preferences and privileges of the common limited partners as of the time
of the Termination Transaction and, to the extent applicable, the values will be
no less favorable to the holders of common Units than the relative values
reflected in the terms of the Termination Transaction.
In addition, in the event of a Termination Transaction, the arrangements
with respect to Performance Units and Performance Shares (as defined under "--
Performance Units") will be equitably adjusted to reflect the terms of the
transaction, including, to the extent that the shares are exchanged for
consideration other than publicly traded common equity, the transfer or release
of remaining Performance Shares, and resulting issuance of any Performance
Units, as of the consummation of the Termination Transaction.
DUTIES AND CONFLICTS
Except as otherwise provided by our conflicts of interest policies with
respect to directors and officers and as provided in the non-competition
agreements described under "Risk Factors -- Conflicts of Interest -- Some of Our
Executive Officers are Involved in Other Real Estate Activities and
Investments," any limited partner of the Operating Partnership may engage in
other business activities outside the Operating Partnership, including business
activities that directly compete with the Operating Partnership.
MEETINGS; VOTING
As general partner, we may call meetings of the limited partners of the
Operating Partnership, on our own motion, or upon written request of limited
partners owning at least 25% of the then outstanding Units. Limited partners may
vote either in person or by proxy at meetings. Limited partners may take any
action that they are required or permitted to take either at a meeting of the
limited partners or without a meeting if consents in writing setting forth the
action taken are signed by limited partners owning not less than the minimum
number of Units that would be necessary to authorize or take the action at a
meeting of the limited partners at which all limited partners entitled to vote
on the action were present. On matters for which limited partners are entitled
to vote, each limited partner has a vote equal to the number of Units the
limited partner holds. A transferee of Units who has not been admitted as a
substituted limited partner with respect to the Units will have no voting rights
with respect to the Units, even if the transferee holds other Units as to which
it has been admitted as a limited partner. The Partnership Agreement does not
provide for, and we do not anticipate calling, annual meetings of the limited
partners.
AMENDMENT OF THE PARTNERSHIP AGREEMENT
Amendments to the Partnership Agreement may be proposed by the Company
or by limited partners owning at least 25% of the then outstanding Units
entitled to vote. Generally, the Partnership Agreement may be amended with our
approval, as general partner, and partners (including us, but not including the
preferred limited partners) holding a majority of the percentage interest of all
partners other than the preferred limited partners. Certain provisions
regarding, among other things, our rights and duties as general partner (e.g.,
restrictions on our power to conduct businesses other than as denoted herein) or
the dissolution of the Operating Partnership, may not be amended without the
approval of limited partners (other than preferred limited partners) holding a
majority of the percentage interests of the limited partners other than
preferred limited partners. As general partner, we have the power,
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without the consent of the limited partners, to amend the Partnership Agreement
as may be required to, among other things:
- add to our obligations as general partner or surrender any right
or power granted to us as general partner;
- reflect the admission, substitution, termination or withdrawal
of partners in accordance with the terms of the Partnership
Agreement;
- establish the rights, powers, duties and preferences of any
additional partnership interests issued in accordance with the
terms of the Partnership Agreement;
- reflect a change of an inconsequential nature that does not
materially adversely affect any limited partner, or cure any
ambiguity, correct or supplement any provisions of the
Partnership Agreement not inconsistent with law or with other
provisions of the Partnership Agreement, or make other changes
concerning matters under the Partnership Agreement that are not
otherwise inconsistent with the Partnership Agreement or
applicable law; or
- satisfy any requirements of federal, state or local law.
We must approve, and each limited partner that would be adversely
affected must approve, certain amendments to the Partnership Agreement,
including amendments effected directly or indirectly through a merger or sale of
assets of the Operating Partnership or otherwise, that would, among other
things,
- convert a limited partner's interest into a general partner's
interest;
- modify the limited liability of a limited partner;
- alter the interest of a partner in profits or losses, or the
rights to receive any distributions (except as permitted under
the Partnership Agreement with respect to the admission of new
partners or the issuance of additional Units, either of which
actions will have the effect of changing the percentage
interests of the partners and thereby altering their interests
in profits, losses and distributions); or
- alter the limited partner's redemption right.
These protections apply to both holders of common Units and holders of
Performance Units. In addition, no amendment may be effected, directly or
indirectly, through a merger or sale of assets of the Operating Partnership or
otherwise, which would adversely affect the rights of former stockholders of AMB
Institutional Realty Advisors to receive Performance Units.
BOOKS AND REPORTS
The Operating Partnership's books and records are maintained at the
principal office of the Operating Partnership, which is located at 505
Montgomery Street, San Francisco, California 94111. All elections and options
available to the Operating Partnership for federal or state income tax purposes
may be taken or rejected by the Operating Partnership in our sole discretion as
general partner. The limited partners have the right, subject to certain
limitations, to receive copies of the most recent SEC filings by
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us and the Operating Partnership, the Operating Partnership's federal, state and
local income tax returns, a list of limited partners, the Partnership Agreement,
the partnership certificate and all amendments and certain information about the
capital contributions of the partners. We may keep confidential from the limited
partners any information that we believe to be in the nature of trade secrets or
other information the disclosure of which we in good faith believe is not in the
best interests of the Operating Partnership or which the Operating Partnership
is required by law or by agreements with unaffiliated third parties to keep
confidential.
We will use reasonable efforts to furnish to each limited partner,
within 90 days after the close of each taxable year, the tax information
reasonably required by the limited partners for federal and state income tax
reporting purposes.
TERM
The Operating Partnership will continue in full force and effect for
approximately 99 years or until sooner dissolved pursuant to the terms of the
Partnership Agreement.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations
regarding the Company is based on current law, is for general information only
and is not tax advice. The information set forth below, to the extent that it
constitutes matters of law, summaries of legal matters or legal conclusions, is
the opinion of Latham & Watkins. The tax treatment of a holder of any of the
securities will vary depending upon the terms of the specific securities
acquired by such holder, as well as his or her particular situation, and this
discussion does not attempt to address any aspects of federal income taxation
relating to holders of securities. We will provide certain federal income tax
considerations relevant to holders of the securities in the prospectus
supplement relating to those securities.
The information in this section is based on the Code, current, temporary
and proposed Treasury Regulations promulgated under the Code, the legislative
history of the Code, current administrative interpretations and practices of the
Internal Revenue Service (the "IRS") (including its practices and policies as
expressed in certain private letter rulings which are not binding on the IRS
except with respect to the particular taxpayers who requested and received such
rulings), and court decisions, all as of the date of this prospectus. Future
legislation, Treasury Regulations, administrative interpretations and practices
and/or court decisions may adversely affect, perhaps retroactively, the tax
considerations described herein. We have not requested, and do not plan to
request, any rulings from the IRS concerning our tax treatment and the
statements in this prospectus are not binding on the IRS or a court. Thus, we
can provide no assurance that these statements will not be challenged by the IRS
or sustained by a court if challenged by the IRS.
YOU ARE ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT, AS WELL
AS YOUR TAX ADVISOR, REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE
ACQUISITION, OWNERSHIP AND SALE OF OUR SECURITIES, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND
SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
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General. We elected to be taxed as a REIT under Sections 856 through 860
of the Code, commencing with our taxable year ended December 31, 1997. We
believe we have been organized and have operated in a manner which allows us to
qualify for taxation as a REIT under the Code commencing with our taxable year
ended December 31, 1997. We intend to continue to operate in this manner.
However, our qualification and taxation as a REIT depends upon our ability to
meet (through actual annual operating results, asset diversification,
distribution levels and diversity of stock ownership) the various qualification
tests imposed under the Code. Accordingly, there is no assurance that we have
operated or will continue to operate in a manner so as to qualify or remain
qualified as a REIT. See "--Failure to Qualify."
The sections of the Code that relate to the qualification and operation
as a REIT are highly technical and complex. The following sets forth the
material aspects of the sections of the Code that govern the federal income tax
treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Code provisions, relevant rules and regulations
promulgated under the Code, and administrative and judicial interpretations of
the Code, and these rules and these regulations. Latham & Watkins has acted as
tax counsel to the Company in connection with the IPO, subsequent offerings of
Common Stock, and the Company's election to be taxed as a REIT.
Unless we specify otherwise in the applicable prospectus supplement, as
a condition to the closing of each offering of equity securities by the Company,
our tax counsel will render an opinion to the underwriters of the offering to
the effect that, commencing with our taxable year ended December 31, 1997, we
have been organized and operated in conformity with the requirements for
qualification as a REIT, and our proposed method of operation will enable us to
continue to meet the requirements for qualification and taxation as a REIT under
the Code. It must be emphasized that each such opinion will be based on various
factual assumptions relating to our organization and operation, including
matters relating to the Operating Partnership and the Preferred Stock
Subsidiaries, and will be conditioned upon certain representations to be made by
us as to factual matters. Our tax counsel has no obligation to update any such
opinion subsequent to its date. In addition, such opinions will be based upon
our factual representations as set forth in this prospectus and any applicable
prospectus supplement or supplements, and assume that the actions described in
this prospectus and any such supplement or supplements will be completed by us
in a timely fashion. Moreover, such qualification and taxation as a REIT depends
upon the our ability to meet (through actual annual operating results, asset
diversification, distribution levels and diversity of stock ownership) the
various qualification tests imposed under the Code and discussed below, the
results of which have not been and will not be reviewed by our tax counsel.
Accordingly, we cannot assure you that the actual results of our operation
during any particular taxable year will satisfy such requirements. See
"--Failure to Qualify." Further, the anticipated income tax treatment described
in the prospectus or in any prospectus supplement or supplements may be changed,
perhaps retroactively, by legislation, administrative or judicial action at any
time.
If we qualify for taxation as a REIT, we generally will not be subject
to federal corporate income taxes on our net income that is currently
distributed to our stockholders. This treatment substantially eliminates the
"double taxation" (once at the corporate level when earned and once again at the
stockholder level when distributed) that generally results from investment in a
corporation. However, the Company will be subject to federal income tax as
follows:
First, we will be taxed at regular corporate rates on any undistributed
REIT taxable income, including undistributed net capital gains.
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Second, we may be subject to the "alternative minimum tax" on our items
of tax preference under certain circumstances.
Third, if we have (a) net income from the sale or other disposition of
"foreclosure property" (defined generally as property we acquired through
foreclosure or after a default on a loan secured by the property or a lease of
the property) which is held primarily for sale to customers in the ordinary
course of business or (b) other nonqualifying income from foreclosure property,
we will be subject to tax at the highest corporate rate on this income.
Fourth, we will be subject to a 100% tax on any net income from
prohibited transactions (which are, in general, certain sales or other
dispositions of property held primarily for sale to customers in the ordinary
course of business other than foreclosure property).
Fifth, we will be subject to a 100% tax on an amount equal to (a) the
gross income attributable to the greater of the amount by which we fail the 75%
or 95% gross income test multiplied by (b) a fraction intended to reflect our
profitability, if we fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), but have maintained our qualification as a
REIT because we satisfied certain other requirements.
Sixth, we would be subject to a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we fail to
distribute during each calendar year at least the sum of (i) 85% of our REIT
ordinary income for the year, (ii) 95% of our REIT capital gain net income for
the year, and (iii) any undistributed taxable income from prior periods.
Seventh, if we acquire any asset (a "Built-In Gain Asset") from a
corporation which is or has been a C corporation (i.e., generally a corporation
subject to full corporate-level tax) in a transaction in which the basis of the
Built-In Gain Asset in our hands is determined by reference to the basis of the
asset in the hands of the C corporation, and we subsequently recognize gain on
the disposition of the asset during the ten-year period (the "Recognition
Period") beginning on the date on which we acquired the asset, then we will be
subject to tax at the highest regular corporate tax rate on this gain to the
extent of the Built-In Gain (i.e., the excess of (a) the fair market value of
the asset over (b) our adjusted basis in the asset, in each case determined as
of the beginning of the Recognition Period). The results described in this
paragraph with respect to the recognition of Built-In Gain assume that we will
make an election pursuant to IRS Notice 88-19.
Requirements for Qualification as a REIT. The Code defines a REIT as a
corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable
certificates to evidence its beneficial ownership;
(3) that would be taxable as a domestic corporation, but for
Sections 856 through 859 of the Code;
(4) that is not a financial institution or an insurance
company within the meaning of certain provisions of the
Code;
(5) that is beneficially owned by 100 or more persons;
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(6) not more than 50% in value of the outstanding stock of
which is owned, actually or constructively, by five or
fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable
year; and
(7) that meets certain other tests, described below,
regarding the nature of its income and assets and the
amount of its distributions.
The Code provides that conditions (1) to (4), inclusive, must be met
during the entire taxable year and that condition (5) must be met during at
least 335 days of a taxable year of twelve months, or during a proportionate
part of a taxable year of less than twelve months. Conditions (5) and (6) do not
apply until after the first taxable year for which an election is made to be
taxed as a REIT. For purposes of condition (6), pension funds and certain other
tax-exempt entities are treated as individuals, subject to a "look-through"
exception with respect to pension funds.
We believe that we have satisfied each of the above conditions. In
addition, our charter provides for restrictions regarding ownership and transfer
of shares. These restrictions are intended to assist us in continuing to satisfy
the share ownership requirements described in (5) and (6) above. These ownership
and transfer restrictions are described in "Description of Capital
Stock--Restrictions on Ownership and Transfer of Capital Stock." These
restrictions, however, may not ensure that we will, in all cases, be able to
satisfy the share ownership requirements described in (5) and (6) above. If we
fail to satisfy these share ownership requirements, our status as a REIT will
terminate. However, if we comply with the rules contained in applicable Treasury
Regulations that require us to ascertain the actual ownership of our shares and
we do not know, or would not have known through the exercise of reasonable
diligence, that we failed to meet the requirement described in condition (6)
above, we will be treated as having met this requirement. See "--Failure to
Qualify."
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. We have and will continue to have a calendar
taxable year.
Termination of S Status. Prior to its merger into the Company in
connection with our formation transactions, AMB Institutional Realty Advisors,
Inc. believed that it validly elected to be taxed as an S corporation and that
such election had not been revoked or otherwise terminated (except as provided
below). In order to allow us to become a REIT, AMB Institutional Realty
Advisors, Inc. revoked its S election shortly before its merger into the
Company. If AMB Institutional Realty Advisors, Inc. was not an S corporation in
1997 (the calendar year in which our formation transactions occurred), we likely
would not qualify as a REIT for our taxable year ended December 31, 1997 and
perhaps subsequent years. See "--Failure to Qualify." In connection with our
initial public offering, Latham & Watkins rendered an opinion regarding AMB
Institutional Realty Advisors, Inc.'s federal income tax status as an S
corporation, which opinion was based upon certain representations made by AMB
Institutional Realty Advisors, Inc. as to factual matters and upon the opinion
of counsel for certain shareholders of AMB Institutional Realty Advisors, Inc.,
with respect to matters relating to the tax status of such shareholders.
Ownership of Interests in Partnerships and Qualified REIT Subsidiaries.
In the case of a REIT which is a partner in a partnership, IRS regulations
provide that the REIT will be deemed to own its proportionate share of the
assets of the partnership. Also, the REIT will be deemed to be entitled to the
income of the partnership attributable to its proportionate share. The character
of the assets and gross income of the partnership retains the same character in
the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and the asset tests. Thus, our proportionate
share of the assets and items of income of the Operating Partnership (including
the Operating
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Partnership's share of these items for any partnership in which it owns an
interest) are treated as our assets and items of income for purposes of applying
the requirements described in this prospectus (including the income and asset
tests described below). We have included a brief summary of the rules governing
the federal income taxation of partnerships and their partners below in "--Tax
Aspects of the Operating Partnerships and the Joint Ventures." We have direct
control of the Operating Partnership and will continue to operate it consistent
with the requirements for qualification as a REIT. However, we are a limited
partner or non-managing member in certain of our joint ventures. If a joint
venture takes or expects to take actions which could jeopardize our status as a
REIT or subject us to tax, we may be forced to dispose of our interest in such
joint venture. In addition, it is possible that a joint venture could take an
action which could cause us to fail a REIT income or asset test, and that we
would not become aware of such action in a time frame which would allow us to
dispose of our interest in the joint venture or take other corrective action on
a timely basis. In such a case, we could fail to qualify as a REIT. The Company
owns 100% of the stock of two subsidiaries that are qualified REIT subsidiaries
(each, a "QRS") and may acquire stock of one or more new subsidiaries. A
corporation will qualify as a QRS if 100% of its stock is held by the Company. A
QRS will not be treated as a separate corporation, and all assets, liabilities
and items of income, deduction and credit of a QRS will be treated as assets,
liabilities and such items (as the case may be) of the Company for all purposes
of the Code, including the REIT qualification tests. For this reason, references
under "Certain Federal Income Tax Considerations" to our income and assets shall
include the income and assets of any QRS. A QRS will not be subject to federal
income tax, and our ownership of the voting stock of a QRS will not violate the
restrictions against ownership of securities of any one issuer which constitute
more than 10% of such issuer's voting securities or more than 5% of the value of
our total assets, as described below under "-- Asset Tests."
Income Tests. We must satisfy two gross income requirements annually to
maintain our qualification as a REIT. First, in each taxable year we must derive
directly or indirectly at least 75% of our gross income (excluding gross income
from prohibited transactions) from investments relating to real property or
mortgages on real property (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary investments. Second,
each taxable year we must derive at least 95% of our gross income (excluding
gross income from prohibited transactions) from these real property investments,
dividends, interest and gain from the sale or disposition of stock or securities
(or from any combination of the foregoing). The term "interest" generally does
not include any amount received or accrued (directly or indirectly) if the
determination of the amount depends in whole or in part on the income or profits
of any person. However, an amount received or accrued generally will not be
excluded from the term "interest" solely by reason of being based on a fixed
percentage or percentages of receipts or sales.
Rents we receive will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if the
following conditions are met:
- the amount of rent must not be based in whole or in part
on the income or profits of any person. However, an
amount received or accrued generally will not be
excluded from the term "rents from real property" solely
by reason of being based on a fixed percentage or
percentages of receipts or sales;
- the Code provides that rents received from a tenant will
not qualify as "rents from real property" in satisfying
the gross income tests if the REIT, or an actual or
constructive owner of 10% or more of the REIT, actually
or constructively owns 10% or more of the interests in
such tenant (a "Related Party Tenant");
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- if rent attributable to personal property, leased in
connection with a lease of real property, is greater
than 15% of the total rent received under the lease,
then the portion of rent attributable to personal
property will not qualify as "rents from real property";
and
- for rents received to qualify as "rents from real
property," the REIT generally must not operate or manage
the property or furnish or render services to the
tenants of the property (subject to a 1% de minimis
exception), other than through an independent contractor
from whom the REIT derives no revenue. The REIT may,
however, directly perform certain services that are
"usually or customarily rendered" in connection with the
rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property.
We do not and will not, and as general partner of the Operating
Partnership, will not permit the Operating Partnership to:
- charge rent for any property that is based in whole or
in part on the income or profits of any person (except
by reason of being based on a percentage of receipts or
sales, as described above);
- rent any property to a Related Party Tenant;
- derive rental income attributable to personal property
(other than personal property leased in connection with
the lease of real property, the amount of which is less
than 15% of the total rent received under the lease); or
- perform services considered to be rendered to the
occupant of the property, other than through an
independent contractor from whom we derive no revenue.
NOTWITHSTANDING THE FOREGOING, WE MAY HAVE TAKEN AND MAY CONTINUE TO
TAKE CERTAIN OF THE ACTIONS SET FORTH ABOVE TO THE EXTENT THESE ACTIONS WILL
NOT, BASED ON THE ADVICE OF OUR TAX COUNSEL, JEOPARDIZE OUR STATUS AS A REIT.
AMB Investment Management is the sole general partner of, and conducts
its operations through, AMB Investment Management Limited Partnership (the
"Investment Management Partnership.") The Investment Management Partnership
conducts the asset management business and receives fees (including incentive
fees) in exchange for the provision of certain services to asset management
clients. In addition, Headlands Realty Corporation may provide certain services
in exchange for a fee or derive other income which would not qualify under the
REIT gross income tests. Such fees and other income do not accrue to us, but we
derive our allocable share of dividend income from the Preferred Stock
Subsidiaries through our interest in the Operating Partnership. Such dividend
income qualifies under the 95%, but not the 75%, REIT gross income test. The
Operating Partnership may provide certain management or administrative services
to the Investment Management Partnership and Headlands Realty Corporation. The
fees derived by the Operating Partnership as a result of the provision of such
services will be nonqualifying income to us under both the 95% and 75% REIT
income tests. The amount of such dividend and fee income will depend on a number
of factors which cannot be determined with certainty, including the level of
services provided by the Investment Management Partnership, Headlands Realty
Corporation and the Operating Partnership. We will monitor the amount of the
dividend income from the Preferred Stock Subsidiaries and the fee income
described above, and
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will take actions intended to keep this income (and any other nonqualifying
income) within the limitations of the REIT income tests. However, there can be
no assurance that such actions will in all cases prevent us from violating a
REIT income test.
If we fail to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, we may nevertheless qualify as a REIT for the year if we
are entitled to relief under certain provisions of the Code. Generally, we may
avail ourselves of the relief provisions if:
- our failure to meet these tests was due to reasonable
cause and not due to willful neglect;
- we attach a schedule of the sources of our income to our
federal income tax return; and
- any incorrect information on the schedule was not due to
fraud with intent to evade tax.
IT IS NOT POSSIBLE, HOWEVER, TO STATE WHETHER IN ALL CIRCUMSTANCES WE
WOULD BE ENTITLED TO THE BENEFIT OF THESE RELIEF PROVISIONS. FOR EXAMPLE, IF WE
FAIL TO SATISFY THE GROSS INCOME TESTS BECAUSE NONQUALIFYING INCOME THAT WE
INTENTIONALLY INCUR EXCEEDS THE LIMITS ON NONQUALIFYING INCOME, THE IRS COULD
CONCLUDE THAT OUR FAILURE TO SATISFY THE TESTS WAS NOT DUE TO REASONABLE CAUSE.
IF THESE RELIEF PROVISIONS DO NOT APPLY TO A PARTICULAR SET OF CIRCUMSTANCES, WE
WILL NOT QUALIFY AS A REIT. AS DISCUSSED ABOVE IN "--TAXATION OF THE
COMPANY--GENERAL," EVEN IF THESE RELIEF PROVISIONS APPLY, AND WE RETAIN OUR
STATUS AS A REIT, A TAX WOULD BE IMPOSED WITH RESPECT TO OUR EXCESS NET INCOME.
WE MAY NOT ALWAYS BE ABLE TO MAINTAIN COMPLIANCE WITH THE GROSS INCOME TESTS FOR
REIT QUALIFICATION DESPITE OUR PERIODIC MONITORING OF OUR INCOME.
Prohibited Transaction Income. Any gain realized by us on the sale of
any property held as inventory or other property held primarily for sale to
customers in the ordinary course of business (including our share of any such
gain realized by the Operating Partnership) will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. This prohibited
transaction income may also adversely affect our ability to satisfy the income
tests for qualification as a REIT. Under existing law, whether property is held
as inventory or primarily for sale to customers in the ordinary course of a
trade or business is a question of fact that depends on all the facts and
circumstances surrounding the particular transaction. The Operating Partnership
intends to hold its properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing and owning its
properties and to make occasional sales of the properties as are consistent with
the Operating Partnership's investment objectives. However, the IRS may contend
that that one or more of these sales is subject to the 100% penalty tax.
Asset Tests. At the close of each quarter of our taxable year, we also
must satisfy three tests relating to the nature and diversification of our
assets. First, at least 75% of the value of our total assets must be represented
by real estate assets, cash, cash items and government securities. For purposes
of this test, real estate assets include stock or debt instruments that are
purchased with the proceeds of a stock offering or a long-term (at least five
years) public debt offering, but only for the one-year period beginning on the
date we receive such proceeds. Second, not more than 25% of our total assets may
be represented by securities, other than those securities includable in the 75%
asset test. Third, of the investments included in the 25% asset class, the value
of any one issuer's securities may not exceed 5%
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of the value of our total assets and we may not own more than 10% of any one
issuer's outstanding voting securities.
The Operating Partnership owns 100% of the non-voting preferred stock of
each of the Preferred Stock Subsidiaries, and by virtue of its ownership of
interests in the Operating Partnership, the Company is considered to own its pro
rata share of such stock. See "Structure of the Company." The stock of each of
the Preferred Stock Subsidiaries held by us is not a qualifying real estate
asset. The Operating Partnership does not and will not own any of the voting
securities of either of the Preferred Stock Subsidiaries, and therefore we will
not be considered to own more than 10% of the voting securities of either of the
Preferred Stock Subsidiaries. In addition, we believe that the value of our pro
rata share of the securities of each of the Preferred Stock Subsidiaries held by
the Operating Partnership does not, in either case, exceed 5% of the total value
of our assets, and will not exceed such amount in the future. No independent
appraisals have been obtained to support this conclusion. There can be no
assurance that the IRS will not contend that the value of the securities of one
or both of the Preferred Stock Subsidiaries held by us exceeds the 5% value
limitation. The 5% value test must be satisfied not only on the date that we
(directly or through the Operating Partnership) acquire securities in the
applicable Preferred Stock Subsidiary, but also each time we increase our
ownership of securities of such Preferred Stock Subsidiary, including as a
result of increasing our interest in the Operating Partnership. For example, our
indirect ownership of securities of each Preferred Stock Subsidiary will
increase as a result of our capital contributions to the Operating Partnership
or as limited partners exercise their redemption/exchange rights. Although we
believe that we presently satisfy the 5% value test and plan to take steps to
ensure that we satisfy such test for any quarter with respect to which retesting
is to occur, there can be no assurance that such steps will always be
successful, or will not require a reduction in the Operating Partnership's
overall interest in either or both of the Preferred Stock Subsidiaries.
After initially meeting the asset tests at the close of any quarter, we
will not lose our status as a REIT for failure to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset values. If we fail
to satisfy the asset tests because we acquire securities or other property
during a quarter (including an increase in our interests in the Operating
Partnership), we can cure this failure by disposing of sufficient nonqualifying
assets within 30 days after the close of that quarter. We believe we have
maintained and intend to continue to maintain adequate records of the value of
our assets to ensure compliance with the asset tests and to take such other
actions within the 30 days after the close of any quarter as may be required to
cure any noncompliance. If we fail to cure noncompliance with the asset tests
within this time period, we would cease to qualify as a REIT.
Annual Distribution Requirements. To maintain our qualification as a
REIT, we are required to distribute dividends (other than capital gain
dividends) to our stockholders in an amount at least equal to the sum of 95% of
our "REIT taxable income" (computed without regard to the dividends paid
deduction and our net capital gain) and 95% of our net income (after tax), if
any, from foreclosure property, minus the excess of the sum of certain items of
noncash income (i.e., income attributable to leveled stepped rents, original
issue discount on purchase money debt, or a like-kind exchange that is later
determined to be taxable) over 5% of "REIT taxable income" as described above.
These distributions must be paid in the taxable year to which they
relate, or in the following taxable year if they are declared before we timely
file our tax return for such year and if paid on or before the first regular
dividend payment after such declaration. Except as provided below, these
distributions are taxable to our stockholders (other than tax-exempt entities,
as discussed below) in the year in which paid. This is so even though these
distributions relate to the prior year for purposes of our 95% distribution
requirement. The amount distributed must not be preferential - e.g., every
stockholder
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of the class of stock to which a distribution is made must be treated the same
as every other stockholder of that class, and no class of stock may be treated
otherwise than in accordance with its dividend rights as a class. To the extent
that we do not distribute all of our net capital gain or distribute at least
95%, but less than 100%, of our "REIT taxable income," as adjusted, we will be
subject to tax thereon at regular ordinary and capital gain corporate tax rates.
We believe we have made and intend to continue to make timely distributions
sufficient to satisfy these annual distribution requirements. In this regard,
the Partnership Agreement authorizes us, as general partner of the Operating
Partnership, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit us to
meet these distribution requirements.
We expect that our REIT taxable income will be less than our cash flow
due to the allowance of depreciation and other non-cash charges in computing
REIT taxable income. Accordingly, we anticipate that we will generally have
sufficient cash or liquid assets to enable us to satisfy the distribution
requirements described above. However, from time to time, we may not have
sufficient cash or other liquid assets to meet these distribution requirements
due to timing differences between the actual receipt of income and actual
payment of deductible expenses, and the inclusion of income and deduction of
expenses in arriving at our taxable income. If these timing differences occur,
in order to meet the distribution requirements, we may need to arrange for
short-term, or possibly long-term, borrowings or need to pay dividends in the
form of taxable stock dividends.
Under certain circumstances, we may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. However, we will be required to
pay interest based upon the amount of any deduction taken for deficiency
dividends.
Furthermore, we would be subject to a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we should fail to
distribute during each calendar year (or in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of January immediately following such year) at least the sum of
85% of our REIT ordinary income for such year, 95% of our REIT capital gain
income for the year and any undistributed taxable income from prior periods. Any
REIT taxable income and net capital gain on which this excise tax is imposed for
any year is treated as an amount distributed during that year for purposes of
calculating such tax.
Earnings and Profits Distribution Requirement. In order to qualify as a
REIT, we cannot have at the end of any taxable year any undistributed "earnings
and profits" that are attributable to a "C corporation" taxable year (i.e., a
year in which a corporation is neither a REIT nor an S corporation). In
connection with our formation transactions, we succeeded to various tax
attributes of AMB Institutional Realty Advisors, Inc., AMB Current Income Fund,
Inc. ("CIF") and AMB Value Added Fund, Inc. ("VAF") (if the mergers of CIF and
VAF into AMB Institutional Realty Advisors, Inc. (the "Private REIT Mergers")
were treated as tax-free reorganizations under the Code), including any
undistributed C corporation earnings and profits of such corporations. If AMB
Institutional Realty Advisors, Inc. qualified as an S corporation for each year
in which its activities would have created earnings and profits, and each of CIF
and VAF qualified as a REIT during its existence and its merger into us was
treated as a tax-free reorganization under the Code, then those corporations
would not have any undistributed C corporation earnings and profits. If,
however, either CIF or VAF failed to qualify as a REIT throughout the duration
of its existence, or AMB Institutional Realty Advisors, Inc. failed to qualify
as an S corporation for any year in which its activities would have created
earnings and profits, then we would
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have acquired undistributed C corporation earnings and profits that, if not
distributed by us prior to the end of its first taxable year, would prevent us
from qualifying as a REIT.
We believe that each of CIF and VAF qualified as a REIT throughout the
duration of its existence and that, in any event, neither CIF nor VAF had any
undistributed C corporation earnings and profits at the time of the applicable
Private REIT Merger. We believe that AMB Institutional Realty Advisors, Inc.
qualified as an S corporation since its 1989 taxable year and that its
activities prior to such year did not create any earnings and profits. In
addition, in connection with our initial public offering, counsel to CIF and VAF
rendered opinions with respect to the qualification of those corporations as
REITs for federal income tax purposes, and Latham & Watkins rendered an opinion
with respect to AMB Institutional Realty Advisors, Inc.'s status as an S
corporation for federal income tax purposes. Those opinions were based on
certain representations and assumptions. However, the IRS may contend otherwise
on a subsequent audit of AMB Institutional Realty Advisors, Inc., CIF or VAF.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, we will be subject to tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate
rates. Distributions to stockholders in any year in which we fail to qualify
will not be deductible by us and we will not be required to distribute any
amounts to our stockholders. As a result, our failure to qualify as a REIT would
reduce the cash available for distribution by us to our stockholders. In
addition, if we fail to qualify as a REIT, all distributions to stockholders
will be taxable as ordinary income to the extent of our current and accumulated
earnings and profits, and subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, we will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which we lost our qualification. It is not possible to state whether
in all circumstances we would be entitled to this statutory relief.
TAX ASPECTS OF THE OPERATING PARTNERSHIP AND THE JOINT VENTURES
General. Substantially all of our investments will be held indirectly
through the Operating Partnership. In addition, the Operating Partnership holds
certain of its investments indirectly through joint ventures. In general,
partnerships are "pass-through" entities which are not subject to federal income
tax. Rather, partners are allocated their proportionate shares of the items of
income, gain, loss, deduction and credit of a partnership, and are potentially
subject to tax thereon, without regard to whether the partners receive a
distribution from the partnership. We will include in our income our
proportionate share of the foregoing partnership items for purposes of the
various REIT income tests and in the computation of our REIT taxable income.
Moreover, for purposes of the REIT asset tests, we will include our
proportionate share of assets held by the Operating Partnership and joint
ventures. See "--Taxation of the Company."
Entity Classification. Our interests in the Operating Partnership and
the joint ventures involve special tax considerations, including the possibility
of a challenge by the IRS of the status of the Operating Partnership or a
partnership as a partnership (as opposed to an association taxable as a
corporation) for federal income tax purposes. If the Operating Partnership or a
partnership were treated as an association, it would be taxable as a corporation
and therefore be subject to an entity-level tax on its income. In such a
situation, the character of our assets and items of gross income would change
and preclude us from satisfying the asset tests and possibly the income tests
(see "--Taxation of the Company--Asset Tests" and "--Income Tests"). This, in
turn, would prevent us from qualifying as a
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REIT. See "--Failure to Qualify" for a discussion of the effect of our failure
to meet these tests for a taxable year. In addition, a change in the Operating
Partnership's or a partnership's status for tax purposes might be treated as a
taxable event. If so, we might incur a tax liability without any related cash
distributions.
Treasury Regulations that apply for tax periods beginning on or after
January 1, 1997 provide that a domestic business entity not otherwise classified
as a corporation and which has at least two members (an "Eligible Entity") may
elect to be taxed as a partnership for federal income tax purposes. Unless it
elects otherwise, an Eligible Entity in existence prior to January 1, 1997 will
have the same classification for federal income tax purposes that it claimed
under the entity classification Treasury Regulations in effect prior to this
date. In addition, an Eligible Entity which did not exist, or did not claim a
classification, prior to January 1, 1997, will be classified as a partnership
for federal income tax purposes unless it elects otherwise. The Operating
Partnership and each of our joint ventures intend to claim classification as a
partnership under the Final Regulations, and, as a result, we believe such
partnerships will be classified as partnerships for federal income tax purposes.
Allocations of Operating Partnership Income, Gain, Loss and Deduction.
The Partnership Agreement provides for preferred distributions of cash and
preferred allocations of income to the Company with respect to its Series A
Preferred Units and to the holders of Series B Preferred Units. In addition, to
the extent the Company issues Series C Preferred Stock in exchange for AMB
Property II Series C Preferred Units, the Operating Partnership will issue
Series C Preferred Units to the Company, and the Partnership Agreement will be
amended to provide for similar preferred distributions of cash and preferred
allocations of income to the Company with respect to its Series C Preferred
Units. As a consequence, the Company will receive distributions from the
Operating Partnership and attributable to its other assets that we would use to
pay dividends on shares of Series A Preferred Stock and any shares of Series B
Preferred Stock or Series C Preferred Stock issued by the Company before any
other partner in the Operating Partnership (other than a holder of Series B
Preferred Units, if such units are not then held by the Company) receives a
distribution. In addition, if necessary, income will be specially allocated to
the Company, and losses will be allocated to the other partners of the Operating
Partnership, in amounts necessary to ensure that the balance in the capital
account of the Company will at all times be equal to or in excess of the amount
payable by the Company on the Series A Preferred Stock and any Series B
Preferred Stock or Series C Preferred Stock then issued by the Company upon
liquidation or redemption. As long as the Company does not hold the Series B
Preferred Units, similar preferred distributions and allocations will be made
for the benefit of the holders of such units. All remaining items of operating
income and loss will be allocated to the holders of common Units in proportion
to the number of Units or Performance Units held by each such unitholder. All
remaining items of gain or loss relating to the disposition of the Operating
Partnership's assets upon liquidation will be allocated first to the partners in
the amounts necessary, in general, to equalize the Company's and the limited
partners' per unit capital accounts, with any special allocation of gain to the
holders of Performance Units being offset by a reduction in the gain allocation
to the Company and unitholders which were Performance Investors. Certain limited
partners have agreed to guarantee debt of the Operating Partnership, either
directly or indirectly through an agreement to make capital contributions to the
Operating Partnership under limited circumstances. As a result of these
guarantees or contribution agreements, and notwithstanding the foregoing
discussion of allocations of income and loss of the Operating Partnership to
holders of common Units, such limited partners could under limited circumstances
be allocated a disproportionate amount of net loss upon a liquidation of the
Operating Partnership, which net loss would have otherwise been allocable to the
Company.
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If an allocation is not recognized for federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership. This reallocation will be determined by
taking into account all of the facts and circumstances relating to the economic
arrangement of the partners with respect to such item. The Operating
Partnership's allocations of taxable income and loss are intended to comply with
the requirements of Section 704(b) of the Code and the Treasury Regulations
promulgated under this section of the Code.
Tax Allocations with Respect to the Properties. Under Section 704(c) of
the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership, must be allocated in a manner so that the
contributing partner is charged with the unrealized gain or benefits from the
unrealized loss associated with the property at the time of the contribution.
The amount of the unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of contributed property at the time of
contribution and the adjusted tax basis of the property at the time of
contribution (a "Book-Tax Difference"). These allocations are solely for federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. The Operating Partnership was
formed by way of contributions of appreciated property. Moreover, subsequent to
the formation of the Operating Partnership, additional appreciated property has
been contributed to the Operating Partnership in exchange for interests in the
Operating Partnership. The Partnership Agreement requires that these allocations
be made in a manner consistent with Section 704(c) of the Code.
In general, the partners of the Operating Partnership (including the
Company) which contributed assets having an adjusted tax basis less than their
fair market value at the time of contribution will be allocated depreciation
deductions for tax purposes which are lower than such deductions would have been
if determined on a pro rata basis. In addition, in the event of the disposition
of any of the contributed assets which have such a Book-Tax Difference, all
income attributable to such Book-Tax Difference generally will be allocated to
such contributing partners. These allocations will tend to eliminate the
Book-Tax Difference over the life of the Operating Partnership. However, the
special allocation rules of Section 704(c) do not always entirely eliminate the
Book-Tax Difference on an annual basis or with respect to a specific taxable
transaction such as a sale. Thus, the carryover basis of the contributed assets
in the hands of the Operating Partnership may cause the Company or other
partners to be allocated lower depreciation and other deductions, and possibly
an amount of taxable income in the event of a sale of such contributed assets in
excess of the economic or book income allocated to the Company or other partners
as a result of such sale. Such an allocation might cause the Company or other
partners to recognize taxable income in excess of cash proceeds, which might
adversely affect the Company's ability to comply with the REIT distribution
requirements. See "-- Taxation of the Company -- Requirements for Qualification"
and "-- Annual Distribution Requirements."
Treasury Regulations issued under Section 704(c) of the Code provide
partnerships with a choice of several methods of accounting for Book-Tax
Differences, including retention of the "traditional method" or the election of
certain methods which would permit any distortions caused by a Book-Tax
Difference to be entirely rectified on an annual basis or with respect to a
specific taxable transaction such as a sale. We and the Operating Partnership
have determined to use the "traditional method" for accounting for Book-Tax
Differences for the properties initially contributed to the Operating
Partnership and for certain assets contributed subsequently. We and the
Operating Partnership have not yet decided what method will be used to account
for Book-Tax Differences for properties acquired by the Operating Partnership in
the future.
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<PAGE> 80
Any property acquired by the Operating Partnership in a taxable
transaction will initially have a tax basis equal to its fair market value, and
Section 704(c) of the Code will not apply.
OTHER TAX CONSEQUENCES
We may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business. Our state and
local tax treatment may not conform to the federal income tax consequences
discussed above.
PLAN OF DISTRIBUTION
We may sell securities offered pursuant to any applicable prospectus
supplement directly to one or more purchasers or though agents or underwriters.
We may sell securities offered pursuant to any applicable prospectus supplement
in at-the-market equity offerings or on a negotiated or competitive bid basis
through underwriters or dealers or directly to other purchasers or through
agents. Such underwriters or agents may include Morgan Stanley & Co.
Incorporated. We will name any underwriter or agent involved in the offer and
sale of the securities in the applicable prospectus supplement. The amount of
voting stock registered pursuant to this prospectus that we may sell in
at-the-market equity offerings will not exceed an aggregate offering price of
$203,645,123, which represents 10% of the aggregate market value of the
Company's outstanding voting stock held by non-affiliates of the Company
calculated as of October 14, 1998.
We may distribute the securities from time to time in one or more
transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to prevailing market prices; or
- at negotiated prices.
In connection with the sale of the securities, underwriters may be
deemed to have received compensation from us in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
securities for whom they may act as agent. Underwriters may sell the securities
to or through dealers, and dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
We will describe in the applicable prospectus supplement any
underwriting compensation we pay to underwriters or agents in connection with
the offering of the securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers. Dealers and agents
participating in the distribution of the securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting
discounts and commissions. We may enter into agreements to indemnify
underwriters, dealers and agents against certain civil liabilities, including
liabilities under the Securities
77
<PAGE> 81
Act, and to reimburse these persons for certain expenses. We will describe any
indemnification agreements in the applicable prospectus supplement.
Unless we specify otherwise in the related prospectus supplement, each
series of securities offered will be a new issue with no established trading
market, other than the common stock which is listed on the New York Stock
Exchange. Any shares of common stock sold pursuant to a prospectus supplement
may be listed on the exchange, subject to official notice of issuance. We may
elect to list any series of preferred stock and any series of debt securities,
depository shares or warrants on any exchange, but we are not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of offered securities, but will not be obligated to do so and may discontinue
any market making at any time without notice. Therefore, no assurance can be
given as to the liquidity of the trading market for the securities.
If indicated in the applicable prospectus supplement, we may authorize
dealers acting as our agents to solicit offers by certain institutions to
purchase the securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on the date or dates stated in the prospectus supplement.
We may make delayed delivery with various institutions, including commercial and
savings banks, insurance companies, pension funds, investment companies and
educational and charitable institutions. Delayed delivery contracts will not be
subject to any conditions except:
- the purchase by an institution of the securities covered by its
delayed delivery contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United
States to which the institution is subject; and
- if the securities are sold to underwriters, we shall have sold
to the underwriters the total principal amount of the offered
securities less the principal amount covered by the delayed
delivery contracts.
To facilitate the offering of the securities, certain persons
participating in the offering may engage in transactions that stabilize,
maintain, or otherwise affect the price of the securities. This may include
over-allotments or short sales of the securities, which involves the sale by
persons participating in the offering of more securities than we sold to them.
In these circumstances, these persons would cover the over-allotments or short
positions by making purchases in the open market or by exercising their
over-allotment option. In addition, these persons may stabilize or maintain the
price of the debt securities by bidding for or purchasing debt securities in the
open market or by imposing penalty bids, whereby selling concessions allowed to
dealers participating in the offering may be reclaimed if securities sold by
them are repurchased in connection with stabilization transactions. The effect
of these transactions may be to stabilize or maintain the market price of the
securities at a level above that which might otherwise prevail in the open
market. These transactions may be discontinued at any time.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for, us in the ordinary course
of business.
LEGAL MATTERS
The validity of the debt securities, depositary shares and warrants will
be passed upon for us by Latham & Watkins, San Francisco, and the validity of
the common stock and preferred stock will be passed upon for us by Ballard Spahr
Andrews & Ingersoll, LLP, Baltimore, Maryland.
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<PAGE> 82
In addition, the description of federal income tax consequences
contained in this prospectus under the heading "Certain Federal Income Tax
Considerations" is based upon the opinion of Latham & Watkins. Latham & Watkins
will rely upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP, as to
certain matters of Maryland law.
EXPERTS
The audited financial statements and schedules incorporated by reference
in this prospectus and elsewhere in the registration statement to the extent and
for the periods indicated in their reports have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
79
<PAGE> 83
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and registration of the securities being registered
hereunder. All amounts shown are estimates except the Securities and Exchange
Commission registration fee.
<TABLE>
<S> <C>
SEC Registration Fee.................................... $ 278,000
NYSE Listing Fee........................................ $ 25,000
Printing and Engraving Expenses......................... $ 300,000
Legal Fees and Expenses (other than Blue Sky)........... $ 300,000
Accounting Fees and Expenses............................ $ 75,000
Blue Sky Fees and Expenses.............................. $ 5,000
Trustee/Issuing and Paying Agent Fees and Expenses...... $ 15,000
Fees of Rating Agencies................................. $ 300,000
Miscellaneous Expenses.................................. $ 2,000
----------
Total................................................... $1,300,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2-418 of the Maryland General Corporation Law permits a
corporation to indemnify its directors and officers and certain other parties
against judgments, penalties, fines, settlements, and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service in those or other capacities unless it
is established that (i) the act or omission of the director or officer was
material to the matter giving rise to the proceeding and (a) was committed in
bad faith or (b) was the result of active and deliberate dishonesty; (ii) the
director or officer actually received an improper personal benefit in money,
property or services; or (iii) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by the director or officer
in connection with the proceeding; provided, however, that if the proceeding is
one by or in the right of the corporation, indemnification may not be made with
respect to any proceeding in which the director or officer has been adjudged to
be liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal benefit to
the director or officer, whether or not involving action in the director's or
officer's official capacity, in which the director or officer was adjudged to be
liable on the basis that personal benefit was received. The termination of any
proceeding by conviction, or upon a plea of nolo contendere or its equivalent,
or an entry of any order of probation prior to judgment, creates a rebuttable
presumption that the director or officer did not meet the requisite standard of
conduct required for indemnification to be permitted.
In addition, Section 2-418 of the Maryland General Corporation Law
requires that, unless prohibited by its Charter, a corporation indemnify any
director or officer who is made a party to any proceeding by reason of service
in that capacity against reasonable expenses incurred by the director or officer
in connection with the proceeding, in the event that the director or officer is
successful, on the merits or otherwise, in the defense of the proceeding.
The Company's Charter and Bylaws provide in effect for the
indemnification by the Company of the directors and officers of the Company to
the fullest extent permitted by applicable law. The
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<PAGE> 84
Company has purchased directors' and officers' liability insurance for the
benefit of its directors and officers.
The Company has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require, among
other matters, that the Company indemnify its executive officers and directors
to the fullest extent permitted by law and reimburse the executive officers and
directors for all related expenses as incurred, subject to return if it is
subsequently determined that indemnification is not permitted.
The Partnership Agreement of the Operating Partnership requires the
Operating Partnership to indemnify the Company, the directors and officers of
the Company, and such other persons as the Company may from time to time
designated against any loss or damage, including reasonable legal fees and court
costs incurred by such person by reason of anything it may do or refrain from
doing for or on behalf of the Operating Partnership or in connection with its
business or affairs unless it is established that: (i) the act or omission of
the indemnified person was material to the matter giving rise to the proceeding
and either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the indemnified person actually received an improper personal
benefit in money, property or services; or (iii) in the case of any criminal
proceeding, the indemnified person had reasonable cause to believe that the act
or omission was unlawful.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement between the Company and the
Representatives.
4.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Registration
Statement on Form S-11 (No. 333-35915)).
4.2 Articles Supplementary establishing and fixing the rights and
preferences of the 8 1/2% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.4(4) of
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998).
4.3 Articles Supplementary establishing and fixing the rights and
preferences of the 8 5/8% Series B Cumulative Redeemable
Preferred Stock.
4.4 Articles Supplementary establishing and fixing the rights and
preferences of the 8.75% Series C Cumulative Redeemable
Preferred Stock.
4.5 Bylaws of the Registrant (incorporated by reference to Exhibit
3.2 of the Registrant's Registration Statement on Form S-11 (No.
333-35915)).
4.6 Specimen Common Stock certificate (incorporated by reference to
Exhibit 3.3 of the Registrant's Registration Statement on Form
S-11 (No. 333-35915)).
4.7* Form of Preferred Stock Certificate.
4.8* Form of Warrant Agreement.
4.9* Form of Deposit Agreement.
4.10 Indenture by and among the Operating Partnership, the Company
and State Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
</TABLE>
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<PAGE> 85
<TABLE>
<S> <C>
4.11 First Supplemental Indenture, by and among the Operating
Partnership, the Company and State Street Bank and Trust Company
of California, N.A., as trustee (incorporated by reference to
Exhibit 4.2 to the Company's Registration Statement on Form S-11
(No. 333-49163)).
4.12 Second Supplemental Indenture, by and among the Operating
Partnership, the Company and State Street Bank and Trust Company
of California, N.A., as trustee (incorporated by reference to
Exhibit 4.3 to the Company's Registration Statement on Form S-11
(No. 333-49163)).
4.13 Third Supplemental Indenture, by and among the Operating
Partnership, the Company and State Street Bank and Trust Company
of California, N.A., as trustee (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-11
(No. 333-49163)).
4.14 Specimen of 7.10% Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit 4.2
to the Company's Registration Statement on Form S-11 (No.
333-49163)).
4.15 Specimen of 7.50% Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit 4.3
to the Company's Registration Statement on Form S-11 (No.
333-49163)).
4.16 Specimen of 6.90% Reset Put Securities due 2015 (included in the
Third Supplemental Indenture incorporated by reference as
Exhibit 4.4 to the Company's Registration Statement on Form S-11
(No. 333-49163)).
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding the
validity of the securities being registered.
5.2 Opinion of Latham & Watkins regarding the validity of the
securities being registered.
8.1 Opinion of Latham & Watkins regarding certain federal income tax
matters.
12.1 Calculation of Ratio of Earnings to Fixed Charges for AMB
Property Corporation.
12.2 Calculation of Ratio of Earnings to Fixed Charges for AMB
Property, L.P.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in
Exhibit 5.1).
23.3 Consent of Latham & Watkins (contained in Exhibit 5.2 and
Exhibit 8.1).
24.1 Power of Attorney (included on signature page to the
Registration Statement).
25.1 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of State Street Bank and Trust
Company of California, N.A., as Trustee (incorporated by
reference to Exhibit 25.1 of the Registrants' Registration
Statement on Form S-11 (No. 333-49163)).
</TABLE>
- ------------------
*To be filed by amendment or incorporated by reference in connection with the
offering of the applicable securities.
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<PAGE> 86
ITEM 17. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
Provided, however, that subparagraphs (i) and (ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrants hereby further undertake that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrants' annual reports pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrants hereby further undertake to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<PAGE> 87
The undersigned Registrants hereby further undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance under Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
AMB Property, L.P., an undersigned Registrant, hereby further undertakes
to file an application for the purpose of determining the eligibility of the
Trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrants certify that they have reasonable grounds to believe that they meets
all of the requirements for filing on Form S-3 and have duly caused this
Registration Statement to be signed on their behalf by the undersigned thereunto
duly authorized in the City of San Francisco, State of California, on the 30th
day of November, 1998.
AMB PROPERTY CORPORATION
By: /s/ HAMID R. MOGHADAM
--------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
AMB PROPERTY, L.P.
By: AMB Property Corporation
Its: General Partner
/s/ HAMID R. MOGHADAM
-----------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Hamid R. Moghadam,
David S. Fries, John T. Roberts, Jr., and Michael A. Coke and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post effective amendments), and to sign any registration statement
for the same offering covered by this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) promulgated under the Securities
Act of 1933, and all post-effective amendments thereto, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ T. ROBERT BURKE Chairman of the Board and Director November 30, 1998
- ---------------------------------
T. Robert Burke
/s/ HAMID R. MOGHADAM President, Chief Executive Officer
- --------------------------------- and Director (Principal Executive
Hamid R. Moghadam Officer) November 30, 1998
</TABLE>
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<PAGE> 89
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ DOUGLAS D. ABBEY Chairman of Investment Committee November 30, 1998
- --------------------------------- and Director
Douglas D. Abbey
/s/ S. DAVIS CARNIGLIA Chief Financial Officer (Principal November 30, 1998
- --------------------------------- Financial Officer)
S. Davis Carniglia
/s/ MICHAEL A. COKE Vice President and Director of November 30, 1998
- --------------------------------- Financial Management Reporting
Michael A. Coke (Principal Accounting Officer)
/s/ DANIEL H. CASE, III Director November 30, 1998
- ---------------------------------
Daniel H. Case, III
/s/ ROBERT H. EDELSTEIN, Ph.D. Director November 30, 1998
- ---------------------------------
Robert H. Edelstein, Ph.D.
/s/ LYNN M. SEDWAY Director November 30, 1998
- ---------------------------------
Lynn M. Sedway
/s/ JEFFREY L. SKELTON, Ph.D. Director November 30, 1998
- ---------------------------------
Jeffrey L. Skelton, Ph.D.
/s/ THOMAS W. TUSHER Director November 30, 1998
- ---------------------------------
Thomas W. Tusher
/s/ CARYL B. WELBORN Director
- ---------------------------------
Caryl B. Welborn
</TABLE>
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<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- ------- ----
<S> <C>
1.1* Form of Underwriting Agreement between the Company and the
Representatives.
4.1 Articles of Incorporation of the Registrant (incorporated by reference
to Exhibit 3.1 of the Registrant's Registration Statement on Form S-11
(No. 333-35915)).
4.2 Articles Supplementary establishing and fixing the rights and
preferences of the 8 1/2% Series A Cumulative Redeemable Preferred Stock
(incorporated by reference to Exhibit 3.4(4) of the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1998).
4.3 Articles Supplementary establishing and fixing the rights and
preferences of the 8 5/8% Series B Cumulative Redeemable Preferred
Stock.
4.4 Articles Supplementary establishing and fixing the rights and
preferences of the 8.75% Series C Cumulative Redeemable Preferred Stock.
4.5 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of
the Registrant's Registration Statement on Form S-11 (No. 333-35915)).
4.6 Specimen Common Stock certificate (incorporated by reference to Exhibit
3.3 of the Registrant's Registration Statement on Form S-11 (No.
333-35915)).
4.7* Form of Preferred Stock Certificate.
4.8* Form of Warrant Agreement.
4.9* Form of Deposit Agreement.
4.10 Indenture by and among the Operating Partnership, the Company and State
Street Bank and Trust Company of California, N.A., as trustee
(incorporated by reference to Exhibit 4.1 of the Registrant's
Registration Statement on Form S-11 (No. 333-49163)).
4.11 First Supplemental Indenture, by and among the Operating Partnership,
the Company and State Street Bank and Trust Company of California, N.A.,
as trustee (incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-11 (No. 333-49163)).
4.12 Second Supplemental Indenture, by and among the Operating Partnership,
the Company and State Street Bank and Trust Company of California, N.A.,
as trustee (incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-11 (No. 333-49163)).
4.13 Third Supplemental Indenture, by and among the Operating Partnership,
the Company and State Street Bank and Trust Company of California, N.A.,
as trustee (incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-11 (No. 333-49163)).
4.14 Specimen of 7.10% Notes due 2008 (included in the First Supplemental
Indenture incorporated by reference as Exhibit 4.2 to the Company's
Registration Statement on Form S-11 (No. 333-49163)).
4.15 Specimen of 7.50% Notes due 2018 (included in the Second Supplemental
Indenture incorporated by reference as Exhibit 4.3 to the Company's
Registration Statement on Form S-11 (No. 333-49163)).
</TABLE>
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<PAGE> 91
<TABLE>
<CAPTION>
Exhibit Page
- ------- ----
<S> <C>
4.16 Specimen of 6.90% Reset Put Securities due 2015 (included in the Third
Supplemental Indenture incorporated by reference as Exhibit 4.4 to the
Company's Registration Statement on Form S-11 (No. 333-49163)).
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding the validity
of the securities being registered.
5.2 Opinion of Latham & Watkins regarding the validity of the securities
being registered.
8.1 Opinion of Latham & Watkins regarding certain federal income tax
matters.
12.1 Calculation of Ratio of Earnings to Fixed Charges for AMB Property
Corporation.
12.2 Calculation of Ratio of Earnings to Fixed Charges for AMB Property, L.P.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in Exhibit
5.1).
23.3 Consent of Latham & Watkins (contained in Exhibit 5.2 and Exhibit 8.1).
24.1 Power of Attorney (included on signature page to the Registration
Statement).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of State Street Bank and Trust Company of
California, N.A., as Trustee (incorporated by reference to Exhibit 25.1
of the Registrants' Registration Statement on Form S-11 (No.
333-49163)).
</TABLE>
- --------------------
*To be filed by amendment or incorporated by reference in connection with the
offering of the applicable securities.
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EXHIBIT 4.3
AMB PROPERTY CORPORATION
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF 8 5/8% SERIES B CUMULATIVE
REDEEMABLE PREFERRED STOCK
AMB Property Corporation, a corporation organized and existing under the
laws of the State of Maryland (the "Corporation"), certifies to the State
Department of Assessments and Taxation of Maryland (the "Department") that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation (sometimes referred to herein as the "Board") by
Article IV of the Articles of Incorporation of the Corporation filed with the
Department on November 24, 1997, which comprises, together with the Articles
Supplementary filed by the Corporation on July 23, 1998 establishing a class of
Preferred Stock of the Corporation, par value $0.01 per share (the "Preferred
Stock"), designated as the "8 1/2% Series A Cumulative Redeemable Preferred
Stock" (the "Series A Preferred Stock") and these Articles Supplementary, the
charter (the "Charter") of the Corporation, and Section 2-105 of the Maryland
General Corporation Law (the "MGCL"), the Board of Directors of the Corporation,
on September 3, 1998, adopted resolutions authorizing the Corporation, among
other things, to issue up to a stated maximum number of shares of Preferred
Stock of the Corporation, having a stated maximum aggregate liquidation
preference and dividend rate and certain other stated terms applicable to the
issuance thereof, and appointing, pursuant to the MGCL and the powers contained
in the Bylaws of the Corporation, a committee (the "Committee") of the Board of
Directors comprised of Hamid R. Moghadam and delegating to the Committee, to the
fullest extent permitted by Maryland law and the Charter and Bylaws of the
Corporation, all powers of the Board of Directors with respect to classifying,
authorizing, approving, ratifying and/or confirming the terms of the Preferred
Stock to be issued, including, without limitation, the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends and
other distributions, qualifications and terms and conditions of redemption, and
determining the consideration per share to be received in respect of the
issuance and sale of each share of Preferred Stock to be issued and sold, and
the number of shares of Preferred Stock to be so classified or reclassified and
issued by the Corporation, subject to the limitations set forth in the
resolutions of the Board of Directors adopted on September 3, 1998.
SECOND:Pursuant to the authority conferred upon the Committee as
aforesaid, the Committee has, on November 11, 1998, adopted resolutions
classifying and designating a separate class of Preferred Stock as the 8 5/8%
Series B Cumulative Redeemable Preferred
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Stock, with the preferences, conversions and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption and other terms and
conditions of such 8 5/8% Series B Cumulative Redeemable Preferred Stock (within
the limitations set by the Board of Directors in the resolutions adopted on
September 3, 1998 and referred to in Article First of these Articles
Supplementary) and establishing 1,300,000 as the number of shares to be so
classified and designated, and authorizing the issuance of up to 1,300,000
shares of 8 5/8% Series B Cumulative Redeemable Preferred Stock.
THIRD: The separate class of Preferred Stock of the Corporation created
by the resolutions duly adopted by the Board of Directors of the Corporation and
by the Committee and referred to in Articles First and Second of these Articles
Supplementary shall have the designation, number of shares, preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption and other terms
and conditions as follows (and which, upon any restatement of the Charter, may
be made a part of Article IV thereof, with any necessary or appropriate changes
to the numeration or lettering of the sections or subsections hereof):
(1) DESIGNATION AND NUMBER. A class of Preferred Stock, designated the
"8 5/8% Series B Cumulative Redeemable Preferred Stock" (the "Series B Preferred
Stock"), is hereby established. The number of shares of Series B Preferred Stock
shall be 1,300,000 (the "Series B Preferred Shares").
(2) RANK. The Series B Preferred Shares will rank, with respect to
dividend rights and rights upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, (a) senior to all classes or
series of Common Stock (as defined in the Charter) and to all equity securities
of the Corporation the terms of which provide that such equity securities shall
rank junior to such Series B Preferred Shares; (b) on a parity with all equity
securities issued by the Corporation other than those referred to in clauses (a)
and (c) (including the Series A Preferred Stock); and (c) junior to all equity
securities issued by the Corporation which rank senior to the Series B Preferred
Shares in accordance with Section 6(d) of this Article Third. The term "equity
securities" does not include convertible debt securities.
(3) DIVIDENDS.
(a) Holders of Series B Preferred Shares shall be entitled to receive,
if, when and as authorized by the Board, out of funds legally available for the
payment of dividends, cumulative preferential cash dividends at the rate of 8
5/8% of the $50.00 liquidation preference per annum (equivalent to $4.3125 per
annum per share). Such dividends shall accumulate on a daily basis computed on
the basis of a 360-day year consisting of twelve 30-day months and be
cumulative,
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shall accrue from the original date of issuance and shall be payable quarterly
in equal amounts in arrears on the 15th day of each January, April, July and
October, or, if not a business day, the next succeeding business day (each a
"Dividend Payment Date"). Dividends shall be payable to holders of record as
they appear in the share records of the Corporation at the close of business on
the applicable record date (each, a "Dividend Record Date"), which shall be the
date designated by the Board for the payment of dividends that is not more than
30 nor less than 10 days prior to the applicable payment date therefor. Any
dividend payable on the Series B Preferred Shares for any partial dividend
period shall be prorated and computed on the basis of a 360-day year consisting
of twelve 30-day months. If any date on which distributions are to be made on
the Series B Preferred Stock is not a Business Day (as defined herein), then
payment of the distribution to be made on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. Notwithstanding any provision to the contrary contained herein,
each outstanding share of Series B Preferred Stock shall be entitled to receive,
and shall receive, a dividend with respect to any Dividend Record Date equal to
the dividend paid with respect to each other share of Series B Preferred Stock
which is outstanding on such date. In addition, notwithstanding anything to the
contrary set forth herein, each share of Series B Preferred Stock shall also
continue to accrue all accrued and unpaid distributions up to the exchange date
on any Series B Preferred Unit (as defined in the Third Amended and Restated
Limited Partnership Agreement of AMB Property, L.P. dated as of November 12,
1998, as amended and supplemented from time to time (the "Partnership
Agreement")) validly exchanged into such share of Series B Preferred Stock in
accordance with the provisions of the Partnership Agreement.
(b) No dividend on the Series B Preferred Shares shall be authorized by
the Board or be paid or set apart for payment by the Corporation at such time as
the terms and provisions of any agreement of the Corporation, including any
agreement relating to its indebtedness, prohibits such authorization, payment or
setting apart for payment or provides that such authorization, payment or
setting apart for payment would constitute a breach thereof, or a default
thereunder, or if such authorization or payment shall be restricted or
prohibited by law.
(c) Notwithstanding anything to the contrary contained herein, dividends
on the Series B Preferred Shares shall accumulate whether or not restrictions
exist in respect thereof, whether or not there are funds legally available for
the payment thereof and whether or not such dividends are declared. Accumulated
but unpaid dividends on the Series B Preferred Shares will accumulate as of the
Dividend Payment Date on which they first become payable or on the date of
redemption, as the case may be.
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(d) If any Series B Preferred Shares are outstanding, no full dividends
will be declared or paid or set apart for payment on any other equity securities
of the Corporation of any other class or series ranking, as to distributions or
upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, junior to or on a parity with the Series B Preferred Shares
(including the Series A Preferred Stock) unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series B Preferred
Shares for all dividend periods. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series B
Preferred Shares and any other equity securities ranking as to distributions on
a parity with the Series B Preferred Shares (including the Series A Preferred
Stock), all dividends declared upon the Series B Preferred Shares and any other
equity securities of the Corporation ranking on a parity with the Series B
Preferred Stock as to distributions and upon voluntary or involuntary
liquidation, dissolution or winding up of the Corporation (including the Series
A Preferred Stock) shall be declared pro rata so that the amount of dividends
declared per Series B Preferred Share and each such other equity securities
shall in all cases bear to each other the same ratio that accumulated dividends
per Series B Preferred Share and such other equity securities (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such other equity securities do not have a cumulative dividend) bear
to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Series B Preferred
Shares which may be in arrears.
(e) Except as provided in the immediately preceding paragraph, unless
full cumulative dividends on the Series B Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all dividend periods, no dividends
(other than in Common Stock or other equity securities of the Corporation
ranking junior to the Series B Preferred Shares as to distributions and upon
voluntary or involuntary liquidation, dissolution and winding up of the
Corporation) shall be declared or paid or set aside for payment nor shall any
other dividend be declared or made upon the Common Stock or any other equity
securities of the Corporation ranking as to distributions or upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation junior to
or on a parity with the Series B Preferred Stock (including the Series A
Preferred Stock), nor shall any Common Stock or any other equity securities of
the Corporation ranking junior to or on a parity with the Series B Preferred
Stock as to distributions or upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (including the Series A Preferred
Stock) be redeemed, purchased or otherwise acquired for any consideration (or
any monies be paid to or made available for a sinking fund for the redemption of
any such securities) by the Corporation (except by conversion into or exchange
for other equity securities of the Corporation ranking junior to the Series B
Preferred Stock as to distributions and upon voluntary and involuntary
liquidation, dissolution and winding up of the Corporation, and except
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pursuant to Section 7 of this Article Third to ensure the Corporation's
continued status as a REIT or comparable Charter provisions with respect to
other classes or series of the Corporation's stock).
(f) Accumulated but unpaid dividends on the Series B Preferred Shares
will not bear interest and holders of Series B Preferred Shares shall not be
entitled to any dividend in excess of full cumulative dividends as described
above. Any dividend payment made on the Series B Preferred Shares shall first be
credited against the earliest accumulated but unpaid dividend due with respect
to such shares which remains payable.
(g) If, for any taxable year, the Corporation elects to designate as a
"capital gain dividend" (as defined in Section 857 of the Code), any portion
(the "Capital Gains Amount") of the dividends paid or made available for the
year to holders of any class or series of stock of the Corporation, the portion
of the Capital Gains Amount that shall be allocable to holders of the Series B
Preferred Stock shall be the amount that the total dividends (as determined for
Federal income tax purposes) paid or made available to the holders of the Series
B Preferred Stock for the year bears to the aggregate amount of dividends (as
determined for Federal income tax purposes) paid or made available to the
holders of all classes or series of stock of the Corporation for such year.
(4) LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Series B Preferred
Shares then outstanding shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders remaining
after payment or provision for payment of all debts and liabilities of the
Corporation, a liquidation preference in cash of $50.00 per share, plus an
amount equal to any accumulated and unpaid dividends to the date of such
payment, before any distribution of assets is made to holders of Common Stock or
any other equity securities of the Corporation that rank junior to the Series B
Preferred Shares as to liquidation rights.
(b) If, upon any such voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation are insufficient
to make full payment to holders of Series B Preferred Shares and the
corresponding amounts payable on all shares of other classes or series of equity
securities of the Corporation ranking on a parity with the Series B Preferred
Shares as to liquidation rights (including the Series A Preferred Stock), then
the holders of the Series B Preferred Shares and all other such classes or
series of equity securities shall share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
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(c) Written notice of any such liquidation, dissolution or winding up of
the Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable in such circumstances shall be payable, shall
be given by first class mail, postage pre-paid, not less than 30 nor more than
60 days prior to the payment date stated therein, to each record holder of the
Series B Preferred Shares at the respective addresses of such holders as the
same shall appear on the stock transfer records of the Corporation.
(d) After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Series B Preferred Shares will have no
right or claim to any of the remaining assets of the Corporation.
(e) The consolidation or merger of the Corporation with or into any
other entity, a merger of another entity with or into the Corporation, a
statutory share exchange by the Corporation or a sale, lease, transfer or
conveyance of all or substantially all of the property or business of the
Corporation shall not be deemed to constitute a liquidation, dissolution or
winding up of the Corporation.
(f) In determining whether a distribution (other than upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation) by
dividend, redemption or other acquisition of shares of stock of the Corporation
or otherwise is permitted under the MGCL, no effect shall be given to amounts
that would be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of
the Series B Preferred Shares whose preferential rights upon dissolution are
superior to those receiving the distribution.
(5) OPTIONAL REDEMPTION.
(a) The Series B Preferred Shares are not redeemable prior to November
12, 2003. To ensure that the Corporation remains a qualified real estate
investment trust ("REIT") for federal income tax purposes, however, the Series B
Preferred Shares shall be subject to the provisions of Section 7 of this Article
Third pursuant to which Series B Preferred Shares owned by a stockholder in
excess of the Ownership Limit (as defined in Section 7 of this Article Third) or
certain other limitations shall automatically be transferred to a Trust for the
benefit of a Charitable Beneficiary (as defined in Section 7 of this Article
Third) and the Corporation shall have the right to purchase such shares, as
provided in Section 7 of this Article Third. On and after November 12, 2003, the
Corporation, at its option, upon giving notice as provided below, may redeem the
Series B Preferred Shares, in whole or from time to time in part, for cash, at a
redemption price of $50.00 per share, plus all accumulated and unpaid dividends
on such Series B Preferred Shares to the date fixed for redemption.
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(b) The redemption price of the Series B Preferred Shares (other than
any portion thereof consisting of accumulated and unpaid dividends) is payable
solely from the sale proceeds of other equity securities of the Corporation, and
not from any other source. For purposes of the preceding sentence, "equity
securities" means any equity securities (including Common Stock and Preferred
Stock (as defined in the Charter)), depositary shares in respect of any of the
foregoing, interests, participations or other ownership interests (however
designated) and any rights (other than debt securities convertible into or
exchangeable for equity securities) or options to purchase any of the foregoing.
(c) If fewer than all of the outstanding Series B Preferred Shares are
to be redeemed, the shares to be redeemed shall be selected pro rata (as nearly
as practicable without creating fractional shares) or by lot or by any other
equitable method determined by the Corporation. If such redemption is to be by
lot and, as a result of such redemption, any holder of Series B Preferred Shares
would become a holder of a number of Series B Preferred Shares in excess of the
Ownership Limit (or other limitations set forth in Section 7 of this Article
Third) because such holder's Series B Preferred Shares were not redeemed, or
were only redeemed in part, then, except as otherwise provided in the Charter,
the Corporation will redeem the requisite number of Series B Preferred Shares of
such holder such that no holder will hold in excess of the Ownership Limit (or
such other limits) subsequent to such redemption.
(d) Notwithstanding anything to the contrary contained herein, unless
full cumulative dividends on all Series B Preferred Shares shall have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, no Series B Preferred Shares shall be redeemed unless
all outstanding Series B Preferred Shares are simultaneously redeemed; provided,
however, that the foregoing shall not prevent the purchase by the Corporation of
Series B Preferred Shares pursuant to Section 7 of this Article Third or
otherwise in order to ensure that the Corporation remains qualified as a REIT
for Federal or state income tax purposes or the purchase or acquisition of
Series B Preferred Shares pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding Series B Preferred Shares. In addition,
unless full cumulative dividends on all outstanding Series B Preferred Shares
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all dividend
periods, the Corporation shall not purchase or otherwise acquire directly or
indirectly any Series B Preferred Shares or any equity securities of the
Corporation ranking junior to or on a parity with the Series B Preferred Shares
as to dividends or upon voluntary or involuntary liquidation, dissolution or
winding up of the Corporation (including the Series A Preferred Stock) (except
by conversion into or exchange for equity securities of the Corporation ranking
junior to the Series B Preferred Shares as to dividends and upon voluntary or
involuntary liquidation, dissolution or winding up of the
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Corporation and except pursuant to Section 7 of this Article Third or comparable
Charter provisions with respect to other classes or series of the Corporation's
stock).
(e) The holders of shares of Series B Preferred Stock at the close of
business on a Dividend Record Date will be entitled to receive the dividend
payable with respect to the shares of Series B Preferred Stock held on the
corresponding Dividend Payment Date notwithstanding the redemption thereof
between such Dividend Record Date and the corresponding Dividend Payment Date or
the Corporation's default in the payment of the dividend due. Except as provided
herein, the Corporation will make no payment or allowance for unpaid dividends,
whether or not in arrears, on Series B Preferred Shares to be redeemed.
(f) The following provisions set forth the procedures for Redemption:
(i) Notice of redemption will be given by publication in a
newspaper of general circulation in the City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days prior to the redemption date. A similar notice will be mailed by
the Corporation, postage prepaid, not less than 30 nor more than 60 days prior
to the redemption date, addressed to the respective holders of record of the
Series B Preferred Shares to be redeemed at their respective addresses as they
appear on the share records of the Corporation. No failure to give such notice
or any defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series B Preferred Shares except as to the
holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the
applicable rules of any exchange upon which the Series B Preferred Shares may be
listed or admitted to trading, such notice shall state: (A) the redemption date;
(B) the redemption price; (C) the number of Series B Preferred Shares to be
redeemed; (D) the place or places where the certificates evidencing shares of
Series B Preferred Shares are to be surrendered for payment of the redemption
price; and (E) that dividends on the Series B Preferred Shares to be redeemed
will cease to accumulate on such redemption date. If fewer than all of the
Series B Preferred Shares held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of Series B Preferred Shares
to be redeemed from such holder.
(iii) On or after the redemption date, each holder of Series B
Preferred Shares to be redeemed shall present and surrender the certificates
representing such holder's Series B Preferred Shares to the Corporation at the
place designated in the notice of redemption and shall be entitled to the
redemption price and any accumulated and unpaid dividends payable upon such
redemption upon such surrender and thereupon the redemption price of such shares
(including all accumulated and unpaid dividends up to the redemption date) shall
be paid to or on the order of
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the person whose name appears on such certificate representing Series B
Preferred Shares as the owner thereof and each surrendered certificate shall be
canceled. If fewer than all the shares represented by any such certificate
representing Series B Preferred Shares are to be redeemed, a new certificate
shall be issued representing the unredeemed shares.
(iv) If notice of redemption of any Series B Preferred Shares has
been given and if the funds necessary for such redemption have been set aside by
the Corporation in trust for the benefit of the holders thereof, then from and
after the redemption date all dividends on such Series B Preferred Shares shall
cease to accumulate and any such Series B Preferred Shares will no longer be
deemed outstanding and all rights of the holders thereof will terminate, except
the right to receive the redemption price (including all accumulated and unpaid
dividends up to the redemption date) and such shares shall not thereafter be
transferred (except with the consent of the Corporation) on the Corporation's
stock transfer records. At its election, the Corporation, prior to a redemption
date, may irrevocably deposit the redemption price (including accumulated and
unpaid dividends to the redemption date) of the Series B Preferred Shares so
called for redemption in trust for the holders thereof with a bank or trust
company, in which case the redemption notice to holders of the Series B
Preferred Shares to be redeemed shall (A) state the date of such deposit, (B)
specify the office of such bank or trust company as the place of payment of the
redemption price and (C) require such holders to surrender the certificates
representing such shares at such place on or about the date fixed in such
redemption notice (which may not be later than the redemption date) against
payment of the redemption price (including all accumulated and unpaid dividends
to the redemption date). Any monies so deposited which remain unclaimed by the
holders of the Series B Preferred Shares at the end of two years after the
redemption date shall be returned by such bank or trust company to the
Corporation.
(g) Any Series B Preferred Shares that shall at any time have been
redeemed shall, after such redemption, have the status of authorized but
unissued Preferred Stock, without further designation as to series or class
until such shares are once more designated as part of a particular series or
class by the Board.
(6) VOTING RIGHTS.
(a) Holders of the Series B Preferred Shares will not have any voting
rights, except as set forth below.
(b) Whenever dividends on any Series B Preferred Shares shall remain
unpaid for six or more quarterly periods (whether or not consecutive) (a
"Preferred Dividend Default"), the holders of such Series B Preferred Shares
(voting as a single class with all other equity securities of the Corporation
ranking on a parity with the Series B Preferred Shares as to dividends and
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upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation upon which like voting rights have been conferred and are
exercisable, including the Series A Preferred Stock ("Parity Preferred Stock"))
will be entitled to vote for the election of two additional directors of the
Corporation (the "Preferred Stock Directors"), who will be elected for a
one-year term and until their successors are duly elected and shall qualify (or
until such director's right to hold such office terminates as provided herein,
whichever occurs earlier, subject to such director's earlier death,
disqualification, resignation or removal), at a special meeting called by the
holders of at least 20% of the outstanding Series B Preferred Shares or the
holders of shares of any other class or series of Parity Preferred Stock with
respect to which dividends are so unpaid (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of
stockholders) or, if the request for a special meeting is received by the
Corporation less than 90 days before the date fixed for the next annual or
special meeting of stockholders, at the next annual or special meeting of
stockholders, and at each subsequent annual meeting until all dividends
accumulated on the Series B Preferred Shares for all past dividend periods and
the dividend for the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment in
full.
(c) If and when all accumulated dividends and the dividend for the then
current dividend period on the Series B Preferred Shares shall have been paid in
full or declared by the Corporation and set aside for payment in full, the
holders of Series B Preferred Shares shall be divested of the voting rights set
forth in Section 6(b) of this Article Third (subject to revesting in the event
of each and every Preferred Dividend Default) and, if all accumulated dividends
have been paid in full or declared by the Corporation and set aside for payment
in full on all other classes or series of Parity Preferred Stock upon which like
voting rights have been conferred and are exercisable, the term of office of
each Preferred Stock Director so elected shall forthwith terminate. Any
Preferred Stock Director elected by the holders of Series B Preferred Shares and
any other such Parity Preferred Shares may be removed at any time with or
without cause by the vote of, and shall not be removed otherwise than by the
vote of, the holders of a majority of the outstanding Series B Preferred Shares
when they only have the voting rights set forth, or like those set forth, in
Section 6(b) of this Article Third, and by the majority vote of the Series B
Preferred Shares and all other classes or series of Parity Preferred Stock upon
which like voting rights have been conferred and are exercisable (voting as a
single class) when the Series B Preferred Shares and such Parity Preferred Stock
is entitled to vote thereon. So long as a Preferred Dividend Default shall
continue, any vacancy in the office of a Preferred Stock Director so elected may
be filled by written consent of the Preferred Stock Director so elected
remaining in office or, if none remains in office, by a vote of the holders of a
majority of the outstanding Series B Preferred Shares when they only have the
voting rights set forth, or like those set forth, in Section 6(b) of this
Article Third, and by the majority vote of the Series B Preferred Shares and
other classes or series of Parity Preferred Stock upon which like voting
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rights have been conferred and are exercisable (voting as a single class) when
the Series B Preferred Shares and such Parity Preferred Stock is entitled to
vote thereon.
(d) So long as any Series B Preferred Stock remains outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least
two-thirds of the Series B Preferred Stock outstanding at the time (i) authorize
or create, or increase the authorized or issued amount of, any class or series
of shares ranking senior to the Series B Preferred Stock with respect to payment
of distributions or rights upon liquidation, dissolution or winding-up or
reclassify any authorized shares of the Corporation into any such shares, or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such shares, (ii) designate or create, or
increase the authorized or issued amount of, any Parity Preferred Stock or
reclassify any authorized shares of the Corporation into any such shares, or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such shares, but only to the extent such
Parity Preferred Stock is issued to an affiliate of the Corporation, or (iii)
either (A) consolidate, merge into or with, or convey, transfer or lease its
assets substantially as an entirety, to any corporation or other entity, or (B)
amend, alter or repeal the provisions of the Corporation's Charter (including
these Articles Supplementary) or Bylaws, whether by merger, consolidation or
otherwise, in each case that would materially and adversely affect the powers,
special rights, preferences, privileges or voting power of the Series B
Preferred Stock or the holders thereof; provided, however, that with respect to
the occurrence of any event set forth in (iii) above, so long as (a) the
Corporation is the surviving entity and the Series B Preferred Stock remains
outstanding with the terms thereof unchanged, or (b) the resulting, surviving or
transferee entity is a corporation organized under the laws of any state and
substitutes the Series B Preferred Stock for other preferred stock having
substantially the same terms and same rights as the Series B Preferred Stock,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed materially and adversely affect such rights, privileges or
voting powers of the holders of the Series B Preferred Stock and provided
further that any increase in the amount of authorized Preferred Stock or the
creation or issuance of any other class or series of Preferred Stock, or any
increase in an amount of authorized shares of each class or series, in each case
ranking either (a) junior to the Series B Preferred Stock with respect to
payment of distributions or the distribution of assets upon liquidation,
dissolution or winding-up, or (b) on a parity with the Series B Preferred Stock
with respect to payment of distributions or the distribution of assets upon
liquidation, dissolution or winding-up to the extent such Preferred Stock is not
issued to an affiliate of the Corporation, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding
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Series B Preferred Shares shall have been redeemed or called for redemption upon
proper notice and sufficient funds shall have been deposited in trust to effect
such redemption.
(7) RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX BENEFIT.
(a) Definitions. for the purposes of Section 7 of these Articles
Supplementary, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Series B
Preferred Stock by a Person who is or would be treated as an
owner of such Series B Preferred Stock either actually or
constructively through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficial Owner," "Beneficially Owns" and "Beneficially Owned"
shall have the correlative meanings.
"Charitable Beneficiary" shall mean one or more
beneficiaries of a Trust, as determined pursuant to Section
7(c)(vi) of these Articles Supplementary, each of which shall be
an organization described in Sections 170(b)(1)(A), 170(c)(2)
and 501(c)(3) of the Code.
"Code" shall mean the Internal Revenue Code of 1986, as
amended. All section references to the Code shall include any
successor provisions thereof as may be adopted from time to
time.
"Constructive Ownership" shall mean ownership of Series
B Preferred Stock by a Person who is or would be treated as an
owner of such Series B Preferred Stock either actually or
constructively through the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns" and "Constructively
Owned" shall have the correlative meanings.
"IRS" means the United States Internal Revenue Service.
"Market Price" shall mean the last reported sales price
reported on the New York Stock Exchange of the Series B
Preferred Stock on the trading day immediately preceding the
relevant date, or if the Series B Preferred Stock is not then
traded on the New York Stock Exchange, the last reported sales
price of the Series B Preferred Stock on the trading day
immediately preceding the relevant date as reported on any
exchange or quotation system over which the Series B Preferred
Stock may be traded, or if the Series B Preferred Stock is not
then
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<PAGE> 13
traded over any exchange or quotation system, then the market
price of the Series B Preferred Stock on the relevant date as
determined in good faith by the Board of Directors of the
Corporation.
"MGCL" shall mean the Maryland General Corporation Law,
as amended from time to time, and any successor statute
hereafter enacted.
"Operating Partnership" shall mean AMB Property, L.P., a
Delaware limited partnership.
"Ownership Limit" shall mean 9.8% (by value) of the
outstanding shares of capital stock of the Corporation.
"Partnership Agreement" shall mean the Agreement of
Limited Partnership of the Operating Partnership, as such
agreement may be amended from time to time.
"Person" shall mean an individual, corporation,
partnership, limited liability company, estate, trust (including
a trust qualified under Section 401(a) or 501(c)(17) of the
Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity;
but does not include an underwriter acting in a capacity as such
in a public offering of shares of Series B Preferred Stock
provided that the ownership of such shares of Series B Preferred
Stock by such underwriter would not result in the Corporation
being "closely held" within the meaning of Section 856(h) of the
Code, or otherwise result in the Corporation failing to qualify
as a REIT.
"Purported Beneficial Transferee" shall mean, with
respect to any purported Transfer (or other event) which results
in a transfer to a Trust, as provided in Section 7(b)(ii) of
these Articles Supplementary, the Purported Record Transferee,
unless the Purported Record Transferee would have acquired or
owned shares of Series B Preferred Stock for another Person who
is the beneficial transferee or owner of such shares, in which
case the Purported Beneficial Transferee shall be such Person.
"Purported Record Transferee" shall mean, with respect
to any purported Transfer (or other event) which results in a
transfer to a Trust, as provided in Section 7(b)(ii) of these
Articles Supplementary, the record holder of the Series B
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<PAGE> 14
Preferred Stock if such Transfer had been valid under Section
7(b)(i) of these Articles Supplementary.
"REIT" shall mean a real estate investment trust under
Sections 856 through 860 of the Code and, for purposes of
taxation of the Corporation under applicable state law,
comparable provisions of the law of such state.
"Restriction Termination Date" shall mean the first day
after the date hereof on which the Board of Directors of the
Corporation determines that it is no longer in the best
interests of the Corporation to attempt to, or continue to,
qualify as a REIT.
"Transfer" shall mean any sale, transfer, gift,
assignment, devise or other disposition of Series B Preferred
Stock, (including (i) the granting of any option or entering
into any agreement for the sale, transfer or other disposition
of Series B Preferred Stock or (ii) the sale, transfer,
assignment or other disposition of any securities (or rights
convertible into or exchangeable for Series B Preferred Stock),
whether voluntary or involuntary, whether such transfer has
occurred of record or beneficially or Beneficially or
Constructively (including but not limited to transfers of
interests in other entities which result in changes in
Beneficial or Constructive Ownership of Series B Preferred
Stock), and whether such transfer has occurred by operation of
law or otherwise.
"Trust" shall mean each of the trusts provided for in
Section 7(c) of these Articles Supplementary.
"Trustee" shall mean any Person unaffiliated with the
Corporation, or a Purported Beneficial Transferee, or a
Purported Record Transferee, that is appointed by the
Corporation to serve as trustee of a Trust.
(b) Restriction on Ownership and Transfers.
(i) Prior to the Restriction Termination Date:
(A) except as provided in Section 7(i) of these Articles
Supplementary, no Person shall Beneficially Own Series B
Preferred Stock which, taking into account any other capital
stock of the Corporation Beneficially Owned by such Person,
would cause such ownership to exceed the Ownership Limit;
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<PAGE> 15
(B) except as provided in Section 7(i) of these Articles
Supplementary, no Person shall Constructively Own Series B
Preferred Stock which, taking into account any other capital
stock of the Corporation Constructively Owned by such Person,
would cause such ownership to exceed the Ownership Limit;
(C) no Person shall Beneficially or Constructively Own
Series B Preferred Stock which, taking into account any other
capital stock of the Corporation Beneficially or Constructively
Owned by such Person, would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code,
or otherwise failing to qualify as a REIT (including but not
limited to Beneficial or Constructive Ownership that would
result in the Corporation owning (actually or Constructively) an
interest in a tenant that is described in Section 856(d)(2)(B)
of the Code if the income derived by the Corporation (either
directly or indirectly through one or more partnerships or
limited liability companies) from such tenant would cause the
Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code or comparable
provisions of state law).
(ii) If, prior to the Restriction Termination Date, any Transfer
or other event occurs that, if effective, would result in any Person
Beneficially or Constructively Owning Series B Preferred Stock in violation of
Section 7(b)(i) of these Articles Supplementary, (1) then that number of shares
of Series B Preferred Stock that otherwise would cause such Person to violate
Section 7(b)(i) of these Articles Supplementary (rounded up to the nearest whole
share) shall be automatically transferred to a Trust for the benefit of a
Charitable Beneficiary, as described in Section 7(c), effective as of the close
of business on the business day prior to the date of such Transfer or other
event, and such Purported Beneficial Transferee shall thereafter have no rights
in such shares or (2) if, for any reason, the transfer to the Trust described in
clause (1) of this sentence is not automatically effective as provided therein
to prevent any Person from Beneficially or Constructively Owning Series B
Preferred Stock in violation of Section 7(b)(i) of these Articles Supplementary,
then the Transfer of that number of shares of Series B Preferred Stock that
otherwise would cause any Person to violate Section 7(b)(i) shall be void ab
initio, and the Purported Beneficial Transferee shall have no rights in such
shares.
(iii) Subject to Section 7(n) of this Article Third and
notwithstanding any other provisions contained herein, prior to the Restriction
Termination Date, any Transfer of Series B Preferred Stock that, if effective,
would result in the capital stock of the Corporation being beneficially owned by
less than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio, and the intended transferee shall acquire no rights in
such Series B Preferred Stock.
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<PAGE> 16
It is expressly intended that the restrictions on ownership and
Transfer described in this Section 7(b) shall apply to the exchange rights
provided in Section 17.8 of the Partnership Agreement. Notwithstanding any of
the provisions of the Partnership Agreement to the contrary, a partner of the
Operating Partnership shall not be entitled to effect an exchange of an interest
in the Operating Partnership for Series B Preferred Stock if the actual or
beneficial or Beneficial or Constructive Ownership of Series B Preferred Stock
would be prohibited under the provisions of this Section 7.
(c) Transfers of Series B Preferred Stock in Trust.
(i) Upon any purported Transfer or other event described in
Section 7(b)(ii) of these Articles Supplementary, such Series B Preferred Stock
shall be deemed to have been transferred to the Trustee in his capacity as
trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as
of the close of business on the business day prior to the purported Transfer or
other event that results in a transfer to the Trust pursuant to Section
7(b)(ii). The Trustee shall be appointed by the Corporation and shall be a
Person unaffiliated with the Corporation, any Purported Beneficial Transferee,
or any Purported Record Transferee. Each Charitable Beneficiary shall be
designated by the Corporation as provided in Section 7(c)(vi) of these Articles
Supplementary.
(ii) Series B Preferred Stock held by the Trustee shall be
issued and outstanding Series B Preferred Stock of the Corporation. The
Purported Beneficial Transferee or Purported Record Transferee shall have no
rights in the shares of Series B Preferred Stock held by the Trustee. The
Purported Beneficial Transferee or Purported Record Transferee shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares of Series B Preferred Stock held in the Trust.
(iii) The Trustee shall have all voting rights and rights to
dividends with respect to Series B Preferred Stock held in the Trust, which
rights shall be exercised for the exclusive benefit of the Charitable
Beneficiary. Any dividend or distribution paid prior to the discovery by the
Corporation that shares of Series B Preferred Stock have been transferred to the
Trustee shall be paid to the Trustee upon demand, and any dividend or
distribution declared but unpaid shall be paid when due to the Trustee with
respect to such Series B Preferred Stock. Any dividends or distributions so paid
over to the Trustee shall be held in trust for the Charitable Beneficiary.
The Purported Record Transferee and Purported Beneficial
Transferee shall have no voting rights with respect to the Series B Preferred
Stock held in the Trust and, subject to
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<PAGE> 17
Maryland law, effective as of the date the Series B Preferred Stock has been
transferred to the Trustee, the Trustee shall have the authority (at the
Trustee's sole discretion) (i) to rescind as void any vote cast by a Purported
Record Transferee with respect to such Series B Preferred Stock prior to the
discovery by the Corporation that the Series B Preferred Stock has been
transferred to the Trustee and (ii) to recast such vote in accordance with the
desires of the Trustee acting for the benefit of the Charitable Beneficiary;
provided, however, that if the Corporation has already taken irreversible
corporate action, then the Trustee shall not have the authority to rescind and
recast such vote. Notwithstanding any other provision of these Articles
Supplementary to the contrary, until the Corporation has received notification
that the Series B Preferred Stock has been transferred into a Trust, the
Corporation shall be entitled to rely on its share transfer and other
stockholder records for purposes of preparing lists of stockholders entitled to
vote at meetings, determining the validity and authority of proxies and
otherwise conducting votes of stockholders.
(iv) Within 20 days of receiving notice from the Corporation
that shares of Series B Preferred Stock have been transferred to the Trust, the
Trustee of the Trust shall sell the shares of Series B Preferred Stock held in
the Trust to a Person, designated by the Trustee, whose ownership of the shares
of Series B Preferred Stock will not violate the ownership limitations set forth
in Section 7(b)(i). Upon such sale, the interest of the Charitable Beneficiary
in the shares of Series B Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and to the Charitable Beneficiary as provided in this Section 7(c)(iv). The
Purported Record Transferee shall receive the lesser of (1) the price paid by
the Purported Record Transferee for the shares of Series B Preferred Stock in
the transaction that resulted in such transfer to the Trust (or, if the event
which resulted in the transfer to the Trust did not involve a purchase of such
shares of Series B Preferred Stock at Market Price, the Market Price of such
shares of Series B Preferred Stock on the day of the event which resulted in the
transfer of such shares of Series B Preferred Stock to the Trust) and (2) the
price per share received by the Trustee (net of any commissions and other
expenses of sale) from the sale or other disposition of the shares of Series B
Preferred Stock held in the Trust. Any net sales proceeds in excess of the
amount payable to the Purported Record Transferee shall be immediately paid to
the Charitable Beneficiary together with any dividends or other distributions
thereon. If, prior to the discovery by the Corporation that shares of such
Series B Preferred Stock have been transferred to the Trustee, such shares of
Series B Preferred Stock are sold by a Purported Record Transferee then (i) such
shares of Series B Preferred Stock shall be deemed to have been sold on behalf
of the Trust and (ii) to the extent that the Purported Record Transferee
received an amount for such shares of Series B Preferred Stock that exceeds the
amount that such Purported Record Transferee was entitled to receive pursuant to
this Section 7(c)(iv), such excess shall be paid to the Trustee upon demand.
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<PAGE> 18
(v) Series B Preferred Stock transferred to the Trustee shall be
deemed to have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (i) the price paid by the Purported
Record Transferee for the shares of Series B Preferred Stock in the transaction
that resulted in such transfer to the Trust (or, if the event which resulted in
the transfer to the Trust did not involve a purchase of such shares of Series B
Preferred Stock at Market Price, the Market Price of such shares of Series B
Preferred Stock on the day of the event which resulted in the transfer of such
shares of Series B Preferred Stock to the Trust) and (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer until the Trustee has sold the shares
of Series B Preferred Stock held in the Trust pursuant to Section 7(c)(iv). Upon
such a sale to the Corporation, the interest of the Charitable Beneficiary in
the shares of Series B Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and any dividends or other distributions held by the Trustee with respect to
such Series B Preferred Stock shall thereupon be paid to the Charitable
Beneficiary.
(vi) By written notice to the Trustee, the Corporation shall
designate one or more nonprofit organizations to be the Charitable Beneficiary
of the interest in the Trust such that the Series B Preferred Stock held in the
Trust would not violate the restrictions set forth in Section 7(b)(i) in the
hands of such Charitable Beneficiary.
(d) Remedies For Breach. If the Board of Directors or a committee
thereof or other designees if permitted by the MGCL shall at any time determine
in good faith that a Transfer or other event has taken place in violation of
Section 7(b) of these Articles Supplementary or that a Person intends to
acquire, has attempted to acquire or may acquire beneficial ownership
(determined without reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any shares of Series B Preferred Stock of the
Corporation in violation of Section 7(b) of these Articles Supplementary, the
Board of Directors or a committee thereof or other designees if permitted by the
MGCL shall take such action as it deems advisable to refuse to give effect or to
prevent such Transfer, including, but not limited to, causing the Corporation to
redeem shares of Series B Preferred Stock, refusing to give effect to such
Transfer on the books of the Corporation or instituting proceedings to enjoin
such Transfer; provided, however, that any Transfers (or, in the case of events
other than a Transfer, ownership or Constructive Ownership or Beneficial
Ownership) in violation of Section 7(b)(i) of these Articles Supplementary,
shall automatically result in the transfer to a Trust as described in Section
7(b)(ii) and any Transfer in violation of Section 7(b)(iii) shall automatically
be void ab initio irrespective of any action (or non-action) by the Board of
Directors.
(e) Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire shares of Series B Preferred Stock in violation of Section
7(b) of these Articles Supplementary,
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or any Person who is a Purported Beneficial Transferee such that an automatic
transfer to a Trust results under Section 7(b)(ii) of these Articles
Supplementary, shall immediately give written notice to the Corporation of such
event and shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of such
Transfer or attempted Transfer on the Corporation's status as a REIT.
(f) Owners Required To Provide Information. Prior to the Restriction
Termination Date each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Series B Preferred Stock and each Person (including the
shareholder of record) who is holding Series B Preferred Stock for a beneficial
owner or Beneficial Owner or Constructive Owner shall provide to the Corporation
such information that the Corporation may request, in good faith, in order to
determine the Corporation's status as a REIT.
(g) Remedies Not Limited. Nothing contained in these Articles
Supplementary (but subject to Section 7(n) of these Articles Supplementary)
shall limit the authority of the Board of Directors to take such other action as
it deems necessary or advisable to protect the Corporation and the interests of
its shareholders by preservation of the Corporation's status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any
of the provisions of this Section 7 of these Articles Supplementary, including
any definition contained in Section 7(a), the Board of Directors shall have the
power to determine the application of the provisions of this Section 7 with
respect to any situation based on the facts known to it (subject, however, to
the provisions of Section 7(n) of these Articles Supplementary). In the event
Section 7 requires an action by the Board of Directors and these Articles
Supplementary fail to provide specific guidance with respect to such action, the
Board of Directors shall have the power to determine the action to be taken so
long as such action is not contrary to the provisions of Section 7. Absent a
decision to the contrary by the Board of Directors (which the Board may make in
its sole and absolute discretion), if a Person would have (but for the remedies
set forth in Section 7(b)) acquired Beneficial or Constructive Ownership of
Series B Preferred Stock in violation of Section 7(b)(i), such remedies (as
applicable) shall apply first to the shares of Series B Preferred Stock which,
but for such remedies, would have been actually owned by such Person, and second
to shares of Series B Preferred Stock which, but for such remedies, would have
been Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares of Series B
Preferred Stock based upon the relative number of the shares of Series B
Preferred Stock held by each such Person.
(i) Exceptions.
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(i) Subject to Section 7(b)(i)(C), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning shares of Series B Preferred Stock in violation of Section
7(b)(i)(A) if the Board of Directors obtains any representations and
undertakings from such Person as are reasonably necessary in the opinion of the
Board of Directors to ascertain that no individual's Beneficial Ownership of
such shares of Series B Preferred Stock will violate Section 7(b)(i)(A) or that
any such violation will not cause the Corporation to fail to qualify as a REIT
under the Code, and that any violation of such representations or undertakings
(or other action which is contrary to the restrictions contained in Section 7(b)
of these Articles Supplementary) or attempted violation will result in such
Series B Preferred Stock being transferred to a Trust in accordance with Section
7(b)(ii) of these Articles Supplementary.
(ii) Subject to Section 7(b)(i)(C), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Series B Preferred Stock in violation of Section
7(b)(i)(B), if the Corporation obtains any representations and undertakings from
such Person as are reasonably necessary in the opinion of the Board of Directors
to ascertain that such Person does not and will not own, actually or
Constructively, an interest in a tenant of the Corporation (or a tenant of any
entity owned in whole or in part by the Corporation) that would cause the
Corporation to own, actually or Constructively, more than a 9.8% interest (as
set forth in Section 856(d)(2)(B) of the Code) in such tenant and that any
violation or attempted violation will result in such Series B Preferred Stock
being transferred to a Trust in accordance with Section 7(b)(ii) of these
Articles Supplementary. Notwithstanding the foregoing, the inability of a Person
to make the certification described in this Section 7(i)(ii) shall not prevent
the Board of Directors, in its sole discretion, from exempting such Person from
the limitation on a Person Constructively Owning Series B Preferred Stock in
violation of Section 7(b)(i)(B) if the Board of Directors determines that the
resulting application of Section 856(d)(2)(B) of the Code would affect the
characterization of less than 0.5% of the gross income (as such term is used in
Section 856(c)(2) of the Code) of the Corporation in any taxable year, after
taking into account the effect of this sentence with respect to all other
capital stock of the Corporation to which this sentence applies.
(iii) Prior to granting any exception pursuant to Section
7(i)(i) or (ii) of these Articles Supplementary, the Board of Directors may
require a ruling from the Internal Revenue Service, or an opinion of counsel, in
either case in form and substance satisfactory to the Board of Directors in its
sole discretion, as it may deem necessary or advisable in order to determine or
ensure the Corporation's status as a REIT.
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(j) Legends. Each certificate for Series B Preferred Stock shall
bear substantially the following legends in addition to any legends required to
comply with federal and state securities laws:
CLASS OF STOCK
"THE CORPORATION IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE THAN ONE
CLASS, CONSISTING OF COMMON STOCK AND ONE OR MORE CLASSES OF PREFERRED
STOCK. THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF ANY CLASS OF PREFERRED
STOCK BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF PREFERRED STOCK.
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, TO ANY STOCKHOLDER MAKING
A WRITTEN REQUEST THEREFOR, A COPY OF THE CORPORATION'S CHARTER AND A
WRITTEN STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES,
CONVERSION OR OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS
TO DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND
CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE
CORPORATION HAS THE AUTHORITY TO ISSUE AND, IF THE CORPORATION IS
AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, (i) THE
DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF
EACH SERIES TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF
DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES.
REQUESTS FOR SUCH WRITTEN STATEMENT MAY BE DIRECTED TO THE SECRETARY OF
THE CORPORATION AT ITS PRINCIPAL OFFICE."
RESTRICTION ON OWNERSHIP AND TRANSFER
"THE SHARES OF SERIES B PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND
TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS STATUS
AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"). SUBJECT TO CERTAIN
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FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE ARTICLES
SUPPLEMENTARY FOR THE SERIES B PREFERRED STOCK, (i) NO PERSON MAY
BENEFICIALLY OWN SHARES OF THE CORPORATION'S SERIES B PREFERRED STOCK
WHICH, TAKING INTO ACCOUNT ANY OTHER CAPITAL STOCK OF THE CORPORATION
BENEFICIALLY OWNED BY SUCH PERSON, WOULD CAUSE SUCH OWNERSHIP TO EXCEED
THE OWNERSHIP LIMIT OF 9.8%; (ii) NO PERSON MAY CONSTRUCTIVELY OWN
SHARES OF THE CORPORATION'S SERIES B PREFERRED STOCK WHICH, TAKING INTO
ACCOUNT ANY OTHER CAPITAL STOCK OF THE CORPORATION CONSTRUCTIVELY OWNED
BY SUCH PERSON, WOULD CAUSE SUCH OWNERSHIP TO EXCEED THE OWNERSHIP LIMIT
OF 9.8%; (iii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES
OF THE CORPORATION'S SERIES B PREFERRED STOCK THAT, TAKING INTO ACCOUNT
ANY OTHER CAPITAL STOCK OF THE CORPORATION BENEFICIALLY OR
CONSTRUCTIVELY OWNED BY SUCH PERSON, WOULD RESULT IN THE CORPORATION
BEING "CLOSELY HELD" UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE
THE CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (iv) NO PERSON MAY
TRANSFER SHARES OF SERIES B PREFERRED STOCK IF SUCH TRANSFER WOULD
RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN
100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR
ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SERIES B PREFERRED STOCK
WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY
OWN SERIES B PREFERRED STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST
IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON
TRANSFER OR OWNERSHIP ARE VIOLATED, THE SERIES B PREFERRED STOCK
REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A
TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN
ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND
CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF
THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER
EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON
THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN
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VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL
TERMS IN THIS LEGEND WHICH ARE DEFINED IN THE ARTICLES SUPPLEMENTARY FOR
THE SERIES B PREFERRED STOCK SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN
SUCH ARTICLES SUPPLEMENTARY, AS THE SAME MAY BE AMENDED FROM TIME TO
TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND
OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SERIES B PREFERRED STOCK
ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED
TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE."
(k) Exchange of Series B Preferred Units. So long as the Corporation
remains the general partner of the Operating Partnership, the Board of Directors
of the Corporation is hereby expressly vested with authority (subject to the
restrictions on ownership, transfer and redemption of Series B Preferred Stock
set forth in this Section 7) to issue, and shall issue to the extent provided in
the Partnership Agreement, Series B Preferred Stock in exchange for Series B
Preferred Units (as defined in the Partnership Agreement) (the "Series B
Preferred Units").
(l) Reservation of Shares. Pursuant to the obligations of the
Corporation under the Partnership Agreement to issue Series B Preferred Stock in
exchange for Series B Preferred Units, the Board of Directors is hereby required
to reserve and authorize for issuance a number of authorized but unissued shares
of Series B Preferred Stock not less than the number of Series B Preferred Units
issued to permit the Corporation to issue Series B Preferred Stock in exchange
for Series B Preferred Units that may be exchanged for or converted into Series
B Preferred Stock as provided in the Partnership Agreement.
(m) Severability. If any provision of this Section 7 or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
(n) New York Stock Exchange. Nothing in this Section 7 shall
preclude the settlement of any transaction entered into through the facilities
of the New York Stock Exchange. The shares of Series B Preferred Stock that are
the subject of such transaction shall continue to be subject to the provisions
of this Section 7 after such settlement.
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(o) Applicability of Section 7. The provisions set forth in this
Section 7 shall apply to the Series B Preferred Stock notwithstanding any
contrary provisions of the Series B Preferred Stock provided for elsewhere in
these Articles Supplementary.
(8) CONVERSION. The Series B Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Corporation.
(9) NO SINKING FUND. No sinking fund shall be established for the
retirement or redemption of Series B Preferred Stock.
(10) NO PREEMPTIVE RIGHTS. No holder of the Series B Preferred Stock of
the Corporation shall, as such holder, have any preemptive rights to purchase or
subscribe for additional shares of stock of the Corporation or any other
security of the Corporation which it may issue or sell.
FOURTH: The Series B Preferred Stock has been classified and designated
by the Board under the authority contained in the Charter.
FIFTH: These Articles Supplementary have been approved by the Board in
the manner and by the vote required by law.
SIXTH: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record
SEVENTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the act of the Corporation and, as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
(Signature Page Follows)
24
<PAGE> 25
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Assistant Secretary on this 11th day of
November, 1998.
AMB PROPERTY CORPORATION
BY: /s/ HAMID R. MOGHADAM
--------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
[SEAL]
ATTEST:
/s/ MICHAEL A. COKE
- -----------------------------------
Michael A. Coke
Assistant Secretary
<PAGE> 1
EXHIBIT 4.4
AMB PROPERTY CORPORATION
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF 8.75% SERIES C CUMULATIVE
REDEEMABLE PREFERRED STOCK
AMB Property Corporation, a corporation organized and existing under the
laws of the State of Maryland (the "Corporation"), certifies to the State
Department of Assessments and Taxation of Maryland (the "Department") that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation (sometimes referred to herein as the "Board") by
Article IV of the Articles of Incorporation of the Corporation filed with the
Department on November 24, 1997, which comprises, together with the Articles
Supplementary filed by the Corporation on July 23, 1998 establishing a class of
Preferred Stock of the Corporation, par value $0.01 per share (the "Preferred
Stock"), designated as the "8 1/2% Series A Cumulative Redeemable Preferred
Stock" (the "Series A Preferred Stock"), the Articles Supplementary filed by the
Corporation on November 12, 1998 (the "Series B Articles Supplementary")
establishing a class of Preferred Stock designated as the "8 5/8% Series B
Cumulative Redeemable Preferred Stock" (the "Series B Preferred Stock"), and
these Articles Supplementary, the charter (the "Charter") of the Corporation,
and Section 2-105 of the Maryland General Corporation Law (the "MGCL"), the
Board of Directors of the Corporation, on September 3, 1998, adopted resolutions
authorizing the Corporation, among other things, to issue up to a stated maximum
number of shares of Preferred Stock of the Corporation, having a stated maximum
aggregate liquidation preference and dividend rate and certain other stated
terms applicable to the issuance thereof, and appointing, pursuant to the MGCL
and the powers contained in the Bylaws of the Corporation, a committee (the
"Committee") of the Board of Directors comprised of Hamid R. Moghadam and
delegating to the Committee, to the fullest extent permitted by Maryland law and
the Charter and Bylaws of the Corporation, all powers of the Board of Directors
with respect to classifying, authorizing, approving, ratifying and/or confirming
the terms of the Preferred Stock to be issued, including, without limitation,
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms
and conditions of redemption, and determining the consideration per share to be
received in respect of the issuance and sale of each share of Preferred Stock to
be issued and sold, and the number of shares of Preferred Stock to be so
classified or reclassified and issued by the Corporation, subject to the
limitations set forth in the resolutions of the Board of Directors adopted on
September 3, 1998.
SECOND:Pursuant to the authority conferred upon the Committee as
aforesaid, the Committee has on November 23, 1998, adopted resolutions
classifying and designating as a separate class of Preferred Stock as the 8.75%
Series C Cumulative Redeemable Preferred Stock, with the preferences,
conversions and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption and other terms and conditions of such 8.75% Series C Cumulative
Redeemable Preferred Stock (within the limitations
<PAGE> 2
set by the Board of Directors in the resolutions adopted on September 3, 1998
and referred to in Article First of these Articles Supplementary) and
establishing 2,200,000 as the number of shares to be so classified and
designated, and authorizing the issuance of up to 2,200,000 shares of 8.75%
Series C Cumulative Redeemable Preferred Stock.
THIRD: The separate class of Preferred Stock of the Corporation created
by the resolutions duly adopted by the Board of Directors of the Corporation and
by the Committee and referred to in Articles First and Second of these Articles
Supplementary shall have the designation, number of shares, preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption and other terms
and conditions as follows (and which, upon any restatement of the Charter, may
be made a part of Article IV thereof, with any necessary or appropriate changes
to the numeration or lettering of the sections or subsections hereof):
(1) DESIGNATION AND NUMBER. A class of Preferred Stock, designated the
"8.75% Series C Cumulative Redeemable Preferred Stock" (the "Series C Preferred
Stock"), is hereby established. The number of shares of Series C Preferred Stock
shall be 2,200,000 (the "Series C Preferred Shares").
(2) RANK. The Series C Preferred Shares will rank, with respect to
dividend rights and rights upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, (a) senior to all classes or
series of Common Stock (as defined in the Charter) and to all equity securities
of the Corporation the terms of which provide that such equity securities shall
rank junior to such Series C Preferred Shares; (b) on a parity with the Series A
Preferred Stock and Series B Preferred Stock and all equity securities issued by
the Corporation other than those referred to in clauses (a) and (c) (it being
the intent of the Corporation that the Series C Preferred Stock be on a parity
with the Series A Preferred Stock and the Series B Preferred Stock with respect
to dividend rights and rights upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, notwithstanding any provision
contained in these Articles Supplementary, which, if given effect, would make
the Series C Preferred Stock not in parity with the Series A Preferred Stock and
the Series B Preferred Stock; and any such provision contained in these Articles
Supplementary shall be of no force or effect); and (c) junior to all equity
securities issued by the Corporation which rank senior to the Series C Preferred
Shares in accordance with Section 6(d) of this Article Third. The term "equity
securities" does not include convertible debt securities, until the same are
converted into equity securities.
(3) DIVIDENDS.
(a) Holders of Series C Preferred Shares shall be entitled to receive,
if, when and as authorized by the Board, out of funds legally available for the
payment of dividends, cumulative preferential cash dividends at the rate of
8.75% of the $50.00 liquidation preference per annum (equivalent to $4.375 per
annum per share). Such dividends shall accumulate on a daily basis computed on
the basis of a 360-day year consisting of twelve 30-day months and be
cumulative, shall accrue from the original date of issuance and shall be payable
quarterly (such quarterly periods for purposes of payment and accrual will be
the quarterly periods ending on the dates specified in this sentence and not
calendar year quarters) in equal amounts in arrears on the 15th day of each
January, April, July and October, or, if not a business day, the next succeeding
business day (each a "Dividend Payment Date"). Dividends shall be payable to
holders of
<PAGE> 3
record as they appear in the share records of the Corporation at the close of
business on the applicable record date (each, a "Dividend Record Date"), which
shall be the date designated by the Board for the payment of dividends that is
not more than 30 nor less than 10 days prior to the applicable payment date
therefor. Any dividend payable on the Series C Preferred Shares for any partial
dividend period shall be prorated and computed on the basis of a 360-day year
consisting of twelve 30-day months. If any date on which distributions are to be
made on the Series C Preferred Stock is not a business day, then payment of the
distribution to be made on such date will be made on the next succeeding day
that is a business day (and without any interest or other payment in respect of
any such delay) except that, if such business day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding business
day, in each case with the same force and effect as if made on such date.
Notwithstanding any provision to the contrary contained herein, each outstanding
share of Series C Preferred Stock shall be entitled to receive, and shall
receive, a dividend with respect to any Dividend Record Date equal to the
dividend paid with respect to each other share of Series C Preferred Stock which
is outstanding on such date which shall be equal to the greatest dividend per
share payable on any such share on such date. In addition, notwithstanding
anything to the contrary set forth herein, each share of Series C Preferred
Stock shall also continue to accrue all accrued and unpaid distributions up to
the exchange date on any Series C Preferred Unit (as defined in the Third
Amended and Restated Limited Partnership Agreement of AMB Property II, L.P.
dated as of November 24, 1998, as amended and supplemented from time to time
(the "Subsidiary Partnership Agreement")) validly exchanged into such share of
Series C Preferred Stock in accordance with the provisions of the Subsidiary
Partnership Agreement.
(b) No dividend on the Series C Preferred Shares shall be authorized by
the Board or be paid or set apart for payment by the Corporation at such time as
the terms and provisions of any agreement of the Corporation, including any
agreement relating to its indebtedness, prohibits such authorization, payment or
setting apart for payment or provides that such authorization, payment or
setting apart for payment would constitute a breach thereof, or a default
thereunder, or if such authorization or payment shall be restricted or
prohibited by law.
(c) Notwithstanding anything to the contrary contained herein, dividends
on the Series C Preferred Shares shall accumulate whether or not restrictions
exist in respect thereof, whether or not there are funds legally available for
the payment thereof and whether or not such dividends are declared or
authorized. Accrued but unpaid dividends on the Series C Preferred Shares will
accumulate as of the Dividend Payment Date on which they first become payable or
on the date of redemption, as the case may be.
(d) If any Series C Preferred Shares are outstanding, no full dividends
will be declared or paid or set apart for payment on any other equity securities
of the Corporation of any other class or series ranking, as to distributions or
upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, junior to or on a parity with the Series C Preferred Shares
(including the Series A Preferred Stock and Series B Preferred Stock) unless
full cumulative dividends have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof irrevocably set apart
in trust for such payment on the Series C Preferred Shares for all dividend
periods. When dividends are not paid in full (or a sum
<PAGE> 4
sufficient for such full payment is not so set apart) upon the Series C
Preferred Shares and any other equity securities ranking as to distributions on
a parity with the Series C Preferred Shares (including the Series A Preferred
Stock and Series B Preferred Stock), all dividends declared upon the Series C
Preferred Shares and any other equity securities of the Corporation ranking on a
parity with the Series C Preferred Stock as to distributions and upon voluntary
or involuntary liquidation, dissolution or winding up of the Corporation
(including the Series A Preferred Stock and Series B Preferred Stock) shall be
declared pro rata so that the amount of dividends declared per Series C
Preferred Share and each such other equity securities shall in all cases bear to
each other the same ratio that accumulated dividends per Series C Preferred
Share and such other equity securities (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if such other equity
securities do not have a cumulative dividend) bear to each other. No interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on Series C Preferred Shares which may be in arrears.
(e) Except as provided in the immediately preceding paragraph, unless
full cumulative dividends on the Series C Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is irrevocably set apart in trust for payment for all dividend
periods, no dividends (other than in Common Stock or other equity securities of
the Corporation ranking junior to the Series C Preferred Shares as to
distributions and upon voluntary or involuntary liquidation, dissolution and
winding up of the Corporation) shall be declared or paid or set aside for
payment nor shall any other dividend be declared or made upon the Common Stock
or any other equity securities of the Corporation ranking as to distributions or
upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation junior to or on a parity with the Series C Preferred Stock
(including the Series A Preferred Stock and Series B Preferred Stock), nor shall
any Common Stock or any other equity securities of the Corporation ranking
junior to or on a parity with the Series C Preferred Stock as to distributions
or upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation (including the Series A Preferred Stock and Series B Preferred
Stock) be redeemed, purchased or otherwise acquired for any consideration (or
any monies be paid to or made available for a sinking fund for the redemption of
any such securities) by the Corporation (except by conversion into or exchange
for other equity securities of the Corporation ranking junior to the Series C
Preferred Stock as to distributions and upon voluntary and involuntary
liquidation, dissolution and winding up of the Corporation, and except pursuant
to Section 7 of this Article Third to ensure the Corporation's continued status
as a REIT or comparable Charter provisions with respect to other classes or
series of the Corporation's stock).
(f) Accumulated but unpaid dividends on the Series C Preferred Shares
will not bear interest and holders of Series C Preferred Shares shall not be
entitled to any dividend in excess of full cumulative dividends as described
above. Any dividend payment made on the Series C Preferred Shares shall first be
credited against the earliest accumulated but unpaid dividend due with respect
to such shares which remains payable.
(g) If, for any taxable year, the Corporation elects to designate as a
"capital gain dividend" (as defined in Section 857 of the Code), any portion
(the "Capital Gains Amount") of the dividends paid or made available for the
year to holders of every class or series of stock of
<PAGE> 5
the Corporation, the portion of the Capital Gains Amount that shall be allocable
to holders of the Series C Preferred Stock shall be the amount that the total
dividends (as determined for Federal income tax purposes) paid or made available
to the holders of the Series C Preferred Stock for the year bears to the
aggregate amount of dividends (as determined for Federal income tax purposes)
paid or made available to the holders of all classes or series of stock of the
Corporation for such year.
(4) LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Series C Preferred
Shares then outstanding shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders remaining
after payment or provision for payment of all debts and liabilities of the
Corporation, a liquidation preference in cash of $50.00 per share, plus an
amount equal to any accumulated or accrued and unpaid dividends to the date of
such payment, before any distribution of assets is made to holders of Common
Stock or any other equity securities of the Corporation that rank junior to the
Series C Preferred Shares as to liquidation rights.
(b) If, upon any such voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation are
insufficient to make full payment to holders of Series C Preferred Shares and
the corresponding amounts payable on all shares of other classes or series of
equity securities of the Corporation ranking on a parity with the Series C
Preferred Shares as to liquidation rights (including the Series A Preferred
Stock and Series B Preferred Stock), then the holders of the Series C Preferred
Shares and all other such classes or series of equity securities shall share
ratably in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
(c) Written notice of any such liquidation, dissolution or winding
up of the Corporation, stating the payment date or dates when, and the place or
places where, the amounts distributable in such circumstances shall be payable,
shall be given by first class mail, postage pre-paid, not less than 30 nor more
than 60 days prior to the payment date stated therein, to each record holder of
the Series C Preferred Shares at the respective addresses of such holders as the
same shall appear on the stock transfer records of the Corporation.
(d) After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Series C Preferred
Shares will have no right or claim to any of the remaining assets of the
Corporation.
(e) The consolidation or merger of the Corporation with or into any
other entity, a merger of another entity with or into the Corporation, a
statutory share exchange by the Corporation or a sale, lease, transfer or
conveyance of all or substantially all of the property or business of the
Corporation shall not be deemed to constitute a liquidation, dissolution or
winding up of the Corporation.
(f) In determining whether a distribution (other than upon voluntary
or involuntary liquidation, dissolution or winding up of the Corporation) by
dividend, redemption or other
<PAGE> 6
acquisition of shares of stock of the Corporation or otherwise is permitted
under the MGCL, no effect shall be given to amounts that would be needed, if the
Corporation were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of holders of the Series C Preferred Shares
whose preferential rights upon dissolution are superior to those receiving the
distribution.
(5) OPTIONAL REDEMPTION.
(a) The Series C Preferred Shares are not redeemable prior to
November 24, 2003. To ensure that the Corporation remains a qualified real
estate investment trust ("REIT") for federal income tax purposes, however, the
Series C Preferred Shares shall be subject to the provisions of Section 7 of
this Article Third pursuant to which Series C Preferred Shares owned by a
stockholder in excess of the Ownership Limit (as defined in Section 7 of this
Article Third) or certain other limitations shall automatically be transferred
to a Trust for the benefit of a Charitable Beneficiary (as defined in Section 7
of this Article Third) and the Corporation shall have the right to purchase such
shares, as provided in Section 7 of this Article Third. On and after November
24, 2003, the Corporation, at its option, upon giving notice as provided below,
may redeem the Series C Preferred Shares, in whole or from time to time in part,
for cash, at a redemption price of $50.00 per share, plus all accumulated and
unpaid dividends on such Series C Preferred Shares to the date fixed for
redemption.
(b) The redemption price of the Series C Preferred Shares (other
than any portion thereof consisting of accumulated and unpaid dividends) is
payable solely from the sale proceeds of other equity securities of the
Corporation, and not from any other source. For purposes of the preceding
sentence, "equity securities" means any equity securities (including Common
Stock and Preferred Stock (as defined in the Charter)), depositary shares in
respect of any of the foregoing, interests, participations or other ownership
interests (however designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities) or options to purchase
any of the foregoing.
(c) If fewer than all of the outstanding Series C Preferred Shares
are to be redeemed, the shares to be redeemed shall be selected pro rata (as
nearly as practicable without creating fractional shares).
(d) Notwithstanding anything to the contrary contained herein,
unless full cumulative dividends on all Series C Preferred Shares shall have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for all past dividend periods and
the then current dividend period, no Series C Preferred Shares shall be redeemed
unless all outstanding Series C Preferred Shares are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase by the
Corporation of Series C Preferred Shares pursuant to Section 7 of this Article
Third or otherwise in order to ensure that the Corporation remains qualified as
a REIT for Federal or state income tax purposes or the purchase or acquisition
of Series C Preferred Shares pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding Series C Preferred Shares. In
addition, unless full cumulative dividends on all outstanding Series C Preferred
Shares have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment
<PAGE> 7
thereof irrevocably set apart in trust for payment for all dividend periods, the
Corporation shall not purchase or otherwise acquire directly or indirectly any
Series C Preferred Shares or any equity securities of the Corporation ranking
junior to or on a parity with the Series C Preferred Shares as to dividends or
upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation (including the Series A Preferred Stock and Series B Preferred
Stock) (except by conversion into or exchange for equity securities of the
Corporation ranking junior to the Series C Preferred Shares as to dividends and
upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and except pursuant to Section 7 of this Article Third or comparable
Charter provisions with respect to other classes or series of the Corporation's
stock).
(e) The holders of shares of Series C Preferred Stock at the close
of business on a Dividend Record Date will be entitled to receive the dividend
payable with respect to the shares of Series C Preferred Stock held on the
corresponding Dividend Payment Date notwithstanding the redemption thereof
between such Dividend Record Date and the corresponding Dividend Payment Date or
the Corporation's default in the payment of the dividend due. Except as provided
herein, the Corporation will make no payment or allowance for unpaid dividends,
whether or not in arrears, on Series C Preferred Shares to be redeemed.
(f) The following provisions set forth the procedures for
Redemption:
(i) Notice of redemption will be given by publication in a
newspaper of general circulation in the City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days prior to the redemption date. A similar notice will be (i) faxed
and (ii) mailed by the Corporation, postage prepaid, not less than 30 nor more
than 60 days prior to the redemption date, addressed to the respective holders
of record of the Series C Preferred Shares to be redeemed at their respective
addresses as they appear on the share records of the Corporation. No failure to
give such notice or any defect therein or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any Series C Preferred
Shares except as to the holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the
applicable rules of any exchange upon which the Series C Preferred Shares may be
listed or admitted to trading, such notice shall state: (A) the redemption date;
(B) the redemption price; (C) the number of Series C Preferred Shares to be
redeemed; (D) the place or places where the certificates evidencing shares of
Series C Preferred Shares are to be surrendered for payment of the redemption
price; and (E) that dividends on the Series C Preferred Shares to be redeemed
will cease to accumulate on such redemption date. If fewer than all of the
Series C Preferred Shares held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of Series C Preferred Shares
to be redeemed from such holder.
(iii) On or after the redemption date, each holder of Series C
Preferred Shares to be redeemed shall present and surrender the certificates
representing such holder's Series C Preferred Shares to the Corporation at the
place designated in the notice of redemption and shall be entitled to the
redemption price and any accrued or accumulated and unpaid dividends payable
upon such redemption upon such surrender and thereupon the redemption price of
such shares (including all accumulated and unpaid dividends up to the redemption
date) shall be paid to or on
<PAGE> 8
the order of the person whose name appears on such certificate representing
Series C Preferred Shares as the owner thereof and each surrendered certificate
shall be canceled. If fewer than all the shares represented by any such
certificate representing Series C Preferred Shares are to be redeemed, a new
certificate shall be issued representing the unredeemed shares.
(iv) If notice of redemption of any Series C Preferred Shares
has been given and if the funds necessary for such redemption have been
irrevocably set aside by the Corporation in trust for the benefit of the holders
thereof, then from and after the redemption date all dividends on such Series C
Preferred Shares shall cease to accumulate and any such Series C Preferred
Shares will no longer be deemed outstanding and all rights of the holders
thereof will terminate, except the right to receive the redemption price
(including all accrued or accumulated and unpaid dividends up to the redemption
date) and such shares shall not thereafter be transferred (except with the
consent of the Corporation) on the Corporation's stock transfer records. At its
election, the Corporation, prior to a redemption date, may irrevocably deposit
the redemption price (including accumulated and unpaid dividends to the
redemption date) of the Series C Preferred Shares so called for redemption in
trust for the holders thereof with a bank or trust company, in which case the
redemption notice to holders of the Series C Preferred Shares to be redeemed
shall (A) state the date of such deposit, (B) specify the office of such bank or
trust company as the place of payment of the redemption price and (C) require
such holders to surrender the certificates representing such shares at such
place on or about the date fixed in such redemption notice (which may not be
later than the redemption date) against payment of the redemption price
(including all accrued or accumulated and unpaid dividends to the redemption
date). Any monies so deposited which remain unclaimed by the holders of the
Series C Preferred Shares at the end of two years after the redemption date
shall be returned by such bank or trust company to the Corporation.
(g) Any Series C Preferred Shares that shall at any time have been
redeemed shall, after such redemption, have the status of authorized but
unissued Preferred Stock, without further designation as to series or class
until such shares are once more designated as part of a particular series or
class by the Board.
(6) VOTING RIGHTS.
(a) Holders of the Series C Preferred Shares will not have any
voting rights, except as set forth below.
(b) (i) Whenever dividends on any Series C Preferred Shares shall
remain unpaid for six or more quarterly periods (whether or not consecutive) (a
"Preferred Dividend Default"), the holders of such Series C Preferred Shares
(voting as a single class with all other equity securities of the Corporation
ranking on a parity with the Series C Preferred Shares as to dividends and upon
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation upon which like voting rights have been conferred and are
exercisable, including the Series A Preferred Stock and Series B Preferred Stock
("Parity Preferred Stock")) will be entitled to vote for the election of two
additional directors of the Corporation (the "Preferred Stock Directors"), who
will be elected by a plurality of the votes cast in such election for a one-year
term and until their successors are duly elected and shall qualify (or until
such director's right to hold such
<PAGE> 9
office terminates as provided herein, whichever occurs earlier, subject to such
director's earlier death, disqualification, resignation or removal), at a
special meeting called by the holders of at least 20% of the outstanding Series
C Preferred Shares or the holders of shares of any other class or series of
Parity Preferred Stock with respect to which dividends are so unpaid (unless
such request is received less than 90 days before the date fixed for the next
annual or special meeting of stockholders) or, if the request for a special
meeting is received by the Corporation less than 90 days before the date fixed
for the next annual or special meeting of stockholders, at the next annual or
special meeting of stockholders, and at each subsequent annual meeting until all
dividends accumulated on the Series C Preferred Shares for all past dividend
periods and the dividend for the then current dividend period shall have been
fully paid or declared and a sum sufficient for the payment thereof irrevocably
set aside in trust for payment in full.
(ii) At any time when the voting rights described in Section
6(b)(i) above shall have vested, a proper officer of the Corporation shall call
or cause to be called, a special meeting of the holders of Series C Preferred
Stock and all the series of Parity Preferred Stock upon which like voting rights
have been conferred and are exercisable (collectively, the "Parity Securities")
by mailing or causing to be mailed to such holders a notice of such special
meeting to be held not less than ten and not more than 45 days after the date
such notice is given. The record date for determining holders of the Parity
Securities entitled to notice of and to vote at such special meeting will be the
close of business on the third business day preceding the day on which such
notice is mailed. At any such special meeting, all of the holders of the Parity
Securities, by plurality vote, voting together as a single class without regard
to series will be entitled to elect two directors on the basis of one vote per
$25.00 of liquidation preference to which such Parity Securities are entitled by
their terms (excluding amounts in respect of accumulated and unpaid dividends)
and not cumulatively. Notice of all meetings at which holders of the Series C
Preferred Shares shall be entitled to vote will be given to such holders at
their addresses as they appear in the transfer records. If a Preferred Dividend
Default shall terminate after the notice of a special meeting has been given but
before such special meeting has been held, the Corporation shall, as soon as
practicable after such termination, mail or cause to be mailed notice of such
termination to holders of the Series C Preferred Shares that would have been
entitled to vote at such special meeting.
(c) If and when all accumulated dividends and the dividend for the
then current dividend period on the Series C Preferred Shares shall have been
paid in full or declared by the Corporation and irrevocably set aside in trust
for payment in full, the holders of Series C Preferred Shares shall be divested
of the voting rights set forth in Section 6(b) of this Article Third (subject to
revesting in the event of each and every Preferred Dividend Default) and, if all
accumulated dividends have been paid in full or declared by the Corporation and
irrevocably set aside in trust for payment in full on all other classes or
series of Parity Preferred Stock upon which like voting rights have been
conferred and are exercisable, the term of office of each Preferred Stock
Director so elected shall forthwith terminate. Any Preferred Stock Director
elected by the holders of Series C Preferred Shares and any other such Parity
Preferred Shares may be removed at any time with or without cause by the vote
of, and shall not be removed otherwise than by the vote of, the holders of a
majority of the outstanding Series C Preferred Shares when they have the voting
rights set forth, or like those set forth, in Section 6(b) of this
<PAGE> 10
Article Third, by the majority vote of the Series C Preferred Shares and all
other classes or series of Parity Preferred Stock upon which like voting rights
have been conferred and are exercisable (voting as a single class) when the
Series C Preferred Shares and such Parity Preferred Stock is entitled to vote
thereon. So long as a Preferred Dividend Default shall continue, any vacancy in
the office of a Preferred Stock Director so elected may be filled by written
consent of the Preferred Stock Director so elected remaining in office or, if
none remains in office, by a vote of the holders of a majority of the
outstanding Series C Preferred Shares when they only have the voting rights set
forth, or like those set forth, in Section 6(b) of this Article Third and by the
majority vote of the Series C Preferred Shares and other classes or series of
Parity Preferred Stock upon which like voting rights have been conferred and are
exercisable (voting as a single class) when the Series C Preferred Shares and
such Parity Preferred Stock is entitled to vote thereon.
(d) So long as any Series C Preferred Stock remains outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least
two-thirds of the Series C Preferred Stock outstanding at the time (i) authorize
or create, or increase the authorized or issued amount of, any class or series
of shares ranking senior to the Series C Preferred Stock with respect to payment
of distributions or rights upon liquidation, dissolution or winding-up or
reclassify any authorized shares of the Corporation into any such shares, or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such shares, (ii) designate or create, or
increase the authorized or issued amount of, any Parity Preferred Stock or
reclassify any authorized shares of the Corporation into any such shares, or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such shares, but only to the extent such
Parity Preferred Stock is issued to an affiliate of the Corporation, or (iii)
either (A) consolidate, merge into or with, or convey, transfer or lease its
assets substantially as an entirety, to any corporation or other entity, or (B)
amend, alter or repeal the provisions of the Corporation's Charter (including
these Articles Supplementary) or Bylaws, whether by merger, consolidation or
otherwise, in each case that would materially and adversely affect the powers,
special rights, preferences, privileges or voting power of the Series C
Preferred Stock or the holders thereof; provided, however, that with respect to
the occurrence of any event set forth in (A) above, so long as (a) the
Corporation is the surviving entity and the Series C Preferred stock remains
outstanding with the terms thereof unchanged, or (b) the resulting, surviving or
transferee entity is a corporation, a business trust or like entity organized
under the laws of any state and substitutes for the Series C Preferred Stock
other preferred stock or preferred shares having substantially the same terms
and same rights as the Series C Preferred Stock, including with respect to
distributions, voting rights and rights upon liquidation, dissolution or
winding-up, then the occurrence of any such event shall not be deemed to
materially and adversely affect such rights, privileges or voting powers of the
holders of the Series C Preferred Stock and provided further that any increase
in the amount of authorized Preferred Stock or the creation or issuance of any
other class or series of Preferred Stock, or any increase in an amount of
authorized shares of each class or series, in each case ranking either (a)
junior to the Series C Preferred Stock with respect to payment of distributions
and the distribution of assets upon liquidation, dissolution or winding-up, or
(b) on a parity with the Series C Preferred Stock with respect to payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up to the extent such Preferred Stock is not issued
<PAGE> 11
to an affiliate of the Corporation, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions shall not apply if, at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding Series C Preferred Shares shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
(7) RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX BENEFIT.
(a) Definitions. for the purposes of Section 7 of these Articles
Supplementary, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Series C
Preferred Stock by a Person who is or would be treated as an
owner of such Series C Preferred Stock either actually or
constructively through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficial Owner," "Beneficially Owns" and "Beneficially Owned"
shall have the correlative meanings.
"Charitable Beneficiary" shall mean one or more
beneficiaries of a Trust, as determined pursuant to Section
7(c)(vi) of these Articles Supplementary, each of which shall be
an organization described in Sections 170(b)(1)(A), 170(c)(2)
and 501(c)(3) of the Code.
"Code" shall mean the Internal Revenue Code of 1986, as
amended. All section references to the Code shall include any
successor provisions thereof as may be adopted from time to
time.
"Constructive Ownership" shall mean ownership of Series
C Preferred Stock by a Person who is or would be treated as an
owner of such Series C Preferred Stock either actually or
constructively through the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns" and "Constructively
Owned" shall have the correlative meanings.
"IRS" means the United States Internal Revenue Service.
"Market Price" shall mean the last reported sales price
reported on the New York Stock Exchange of the Series C
Preferred Stock on the trading day immediately preceding the
relevant date, or if the Series C Preferred Stock is not then
traded on the New York Stock Exchange, the last reported sales
price of the Series C Preferred Stock on the trading day
immediately preceding the relevant date as reported on any
exchange or quotation system over which the Series C Preferred
Stock may be traded, or if the Series C Preferred Stock is not
then traded over any exchange or quotation system, then the
market price of the Series
<PAGE> 12
C Preferred Stock on the relevant date as determined in good
faith by the Board of Directors of the Corporation.
"MGCL" shall mean the Maryland General Corporation Law,
as amended from time to time, and any successor statute
hereafter enacted.
"Operating Partnership" shall mean AMB Property, L.P., a
Delaware limited partnership.
"Ownership Limit" shall mean 9.8% (by value) of the
outstanding shares of capital stock of the Corporation.
"Subsidiary Partnership Agreement" shall mean the
Agreement of Limited Partnership of the Subsidiary Operating
Partnership, as such agreement may be amended from time to time.
"Person" shall mean an individual, corporation,
partnership, limited liability company, estate, trust (including
a trust qualified under Section 401(a) or 501(c)(17) of the
Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity;
but does not include an underwriter acting in a capacity as such
in a public offering of shares of Series C Preferred Stock
provided that the ownership of such shares of Series C Preferred
Stock by such underwriter would not result in the Corporation
being "closely held" within the meaning of Section 856(h) of the
Code, or otherwise result in the Corporation failing to qualify
as a REIT.
"Purported Beneficial Transferee" shall mean, with
respect to any purported Transfer (or other event) which results
in a transfer to a Trust, as provided in Section 7(b)(ii) of
these Articles Supplementary, the Purported Record Transferee,
unless the Purported Record Transferee would have acquired or
owned shares of Series C Preferred Stock for another Person who
is the beneficial transferee or owner of such shares, in which
case the Purported Beneficial Transferee shall be such Person.
"Purported Record Transferee" shall mean, with respect
to any purported Transfer (or other event) which results in a
transfer to a Trust, as provided in Section 7(b)(ii) of these
Articles Supplementary, the record holder of the Series C
Preferred Stock if such Transfer had been valid under Section
7(b)(i) of these Articles Supplementary.
"REIT" shall mean a real estate investment trust under
Sections 856 through 860 of the Code and, for purposes of
taxation of the Corporation under applicable state law,
comparable provisions of the law of such state.
<PAGE> 13
"Restriction Termination Date" shall mean the first day
after the date hereof on which the Board of Directors of the
Corporation determines that it is no longer in the best
interests of the Corporation to attempt to, or continue to,
qualify as a REIT.
"Subsidiary Operating Partnership" shall mean AMB
Property II, L.P., a Delaware limited partnership.
"Transfer" shall mean any sale, transfer, gift,
assignment, devise or other disposition of Series C Preferred
Stock, (including (i) the granting of any option or entering
into any agreement for the sale, transfer or other disposition
of Series C Preferred Stock or (ii) the sale, transfer,
assignment or other disposition of any securities (or rights
convertible into or exchangeable for Series C Preferred Stock),
whether voluntary or involuntary, whether such transfer has
occurred of record or beneficially or Beneficially or
Constructively (including but not limited to transfers of
interests in other entities which result in changes in
Beneficial or Constructive Ownership of Series C Preferred
Stock), and whether such transfer has occurred by operation of
law or otherwise.
"Trust" shall mean each of the trusts provided for in
Section 7(c) of these Articles Supplementary.
"Trustee" shall mean any Person unaffiliated with the
Corporation, or a Purported Beneficial Transferee, or a
Purported Record Transferee, that is appointed by the
Corporation to serve as trustee of a Trust.
(b) Restriction on Ownership and Transfers.
(i) Prior to the Restriction Termination Date:
(A) except as provided in Section 7(i) of these Articles
Supplementary, no Person shall Beneficially Own Series C Preferred Stock which,
taking into account any other capital stock of the Corporation Beneficially
Owned by such Person, would cause such ownership to exceed the Ownership Limit;
(B) except as provided in Section 7(i) of these Articles
Supplementary, no Person shall Constructively Own Series C Preferred Stock
which, taking into account any other capital stock of the Corporation
Constructively Owned by such Person, would cause such ownership to exceed the
Ownership Limit;
(C) no Person shall Beneficially or Constructively Own
Series C Preferred Stock which, taking into account any other capital stock of
the Corporation Beneficially or Constructively Owned by such Person, would
result in the Corporation being "closely held" within the meaning of Section
856(h) of the Code, or otherwise failing to qualify as a REIT (including but not
limited to Beneficial or Constructive Ownership that would result in the
Corporation owning (actually or Constructively) an interest in a tenant that is
described in
<PAGE> 14
Section 856(d)(2)(B) of the Code if the income derived by the Corporation
(either directly or indirectly through one or more partnerships or limited
liability companies) from such tenant would cause the Corporation to fail to
satisfy any of the gross income requirements of Section 856(c) of the Code or
comparable provisions of state law).
(ii) If, prior to the Restriction Termination Date, any Transfer
or other event occurs that, if effective, would result in any Person
Beneficially or Constructively Owning Series C Preferred Stock in violation of
Section 7(b)(i) of these Articles Supplementary, (1) then that number of shares
of Series C Preferred Stock that otherwise would cause such Person to violate
Section 7(b)(i) of these Articles Supplementary (rounded up to the nearest whole
share) shall be automatically transferred to a Trust for the benefit of a
Charitable Beneficiary, as described in Section 7(c), effective as of the close
of business on the business day prior to the date of such Transfer or other
event, and such Purported Beneficial Transferee shall thereafter have no rights
in such shares or (2) if, for any reason, the transfer to the Trust described in
clause (1) of this sentence is not automatically effective as provided therein
to prevent any Person from Beneficially or Constructively Owning Series C
Preferred Stock in violation of Section 7(b)(i) of these Articles Supplementary,
then the Transfer of that number of shares of Series C Preferred Stock that
otherwise would cause any Person to violate Section 7(b)(i) shall be void ab
initio, and the Purported Beneficial Transferee shall have no rights in such
shares.
(iii) Subject to Section 7(n) of this Article Third and
notwithstanding any other provisions contained herein, prior to the Restriction
Termination Date, any Transfer of Series C Preferred Stock that, if effective,
would result in the capital stock of the Corporation being beneficially owned by
less than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio, and the intended transferee shall acquire no rights in
such Series C Preferred Stock.
It is expressly intended that the restrictions on ownership and
Transfer described in this Section 7(b) shall apply to the exchange rights
provided in Section 16.8 of the Subsidiary Partnership Agreement.
Notwithstanding any of the provisions of the Subsidiary Partnership Agreement to
the contrary, a partner of the Subsidiary Operating Partnership shall not be
entitled to effect an exchange of an interest in the Subsidiary Operating
Partnership for Series C Preferred Stock if the actual or beneficial or
Beneficial or Constructive Ownership of Series C Preferred Stock would be
prohibited under the provisions of this Section 7.
(c) Transfers of Series C Preferred Stock in Trust.
(i) Upon any purported Transfer or other event described in
Section 7(b)(ii) of these Articles Supplementary, such Series C Preferred Stock
shall be deemed to have been transferred to the Trustee in his capacity as
trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as
of the close of business on the business day prior to the purported Transfer or
other event that results in a transfer to the Trust pursuant to Section
7(b)(ii). The Trustee shall be appointed by the Corporation and shall be a
Person unaffiliated with the Corporation, any Purported Beneficial Transferee,
or any Purported Record Transferee. Each Charitable Beneficiary shall be
designated by the Corporation as provided in Section 7(c)(vi) of these Articles
Supplementary.
<PAGE> 15
(ii) Series C Preferred Stock held by the Trustee shall be
issued and outstanding Series C Preferred Stock of the Corporation. The
Purported Beneficial Transferee or Purported Record Transferee shall have no
rights in the shares of Series C Preferred Stock held by the Trustee. The
Purported Beneficial Transferee or Purported Record Transferee shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares of Series C Preferred Stock held in the Trust.
(iii) The Trustee shall have all voting rights and rights to
dividends with respect to Series C Preferred Stock held in the Trust, which
rights shall be exercised for the exclusive benefit of the Charitable
Beneficiary. Any dividend or distribution paid prior to the discovery by the
Corporation that shares of Series C Preferred Stock have been transferred to the
Trustee shall be paid to the Trustee upon demand, and any dividend or
distribution declared but unpaid shall be paid when due to the Trustee with
respect to such Series C Preferred Stock. Any dividends or distributions so paid
over to the Trustee shall be held in trust for the Charitable Beneficiary.
The Purported Record Transferee and Purported Beneficial
Transferee shall have no voting rights with respect to the Series C Preferred
Stock held in the Trust and, subject to Maryland law, effective as of the date
the Series C Preferred Stock has been transferred to the Trustee, the Trustee
shall have the authority (at the Trustee's sole discretion) (i) to rescind as
void any vote cast by a Purported Record Transferee with respect to such Series
C Preferred Stock prior to the discovery by the Corporation that the Series C
Preferred Stock has been transferred to the Trustee and (ii) to recast such vote
in accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary; provided, however, that if the Corporation has already
taken irreversible corporate action, then the Trustee shall not have the
authority to rescind and recast such vote. Notwithstanding any other provision
of these Articles Supplementary to the contrary, until the Corporation has
received notification that the Series C Preferred Stock has been transferred
into a Trust, the Corporation shall be entitled to rely on its share transfer
and other stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority of proxies
and otherwise conducting votes of stockholders.
(iv) Within 20 days of receiving notice from the Corporation
that shares of Series C Preferred Stock have been transferred to the Trust, the
Trustee of the Trust shall sell the shares of Series C Preferred Stock held in
the Trust to a Person, designated by the Trustee, whose ownership of the shares
of Series C Preferred Stock will not violate the ownership limitations set forth
in Section 7(b)(i). Upon such sale, the interest of the Charitable Beneficiary
in the shares of Series C Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and to the Charitable Beneficiary as provided in this Section 7(c)(iv). The
Purported Record Transferee shall receive the lesser of (1) the price paid by
the Purported Record Transferee for the shares of Series C Preferred Stock in
the transaction that resulted in such transfer to the Trust (or, if the event
which resulted in the transfer to the Trust did not involve a purchase of such
shares of Series C Preferred Stock at Market Price, the Market Price of such
shares of Series C Preferred Stock on the day of the event
<PAGE> 16
which resulted in the transfer of such shares of Series C Preferred Stock to the
Trust) and (2) the price per share received by the Trustee (net of any
commissions and other expenses of sale) from the sale or other disposition of
the shares of Series C Preferred Stock held in the Trust. Any net sales proceeds
in excess of the amount payable to the Purported Record Transferee shall be
immediately paid to the Charitable Beneficiary together with any dividends or
other distributions thereon. If, prior to the discovery by the Corporation that
shares of such Series C Preferred Stock have been transferred to the Trustee,
such shares of Series C Preferred Stock are sold by a Purported Record
Transferee then (i) such shares of Series C Preferred Stock shall be deemed to
have been sold on behalf of the Trust and (ii) to the extent that the Purported
Record Transferee received an amount for such shares of Series C Preferred Stock
that exceeds the amount that such Purported Record Transferee was entitled to
receive pursuant to this Section 7(c)(iv), such excess shall be paid to the
Trustee upon demand.
(v) Series C Preferred Stock transferred to the Trustee shall be
deemed to have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (i) the price paid by the Purported
Record Transferee for the shares of Series C Preferred Stock in the transaction
that resulted in such transfer to the Trust (or, if the event which resulted in
the transfer to the Trust did not involve a purchase of such shares of Series C
Preferred Stock at Market Price, the Market Price of such shares of Series C
Preferred Stock on the day of the event which resulted in the transfer of such
shares of Series C Preferred Stock to the Trust) and (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer until the Trustee has sold the shares
of Series C Preferred Stock held in the Trust pursuant to Section 7(c)(iv). Upon
such a sale to the Corporation, the interest of the Charitable Beneficiary in
the shares of Series C Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and any dividends or other distributions held by the Trustee with respect to
such Series C Preferred Stock shall thereupon be paid to the Charitable
Beneficiary.
(vi) By written notice to the Trustee, the Corporation shall
designate one or more nonprofit organizations to be the Charitable Beneficiary
of the interest in the Trust such that the Series C Preferred Stock held in the
Trust would not violate the restrictions set forth in Section 7(b)(i) in the
hands of such Charitable Beneficiary.
(d) Remedies For Breach. If the Board of Directors or a committee
thereof or other designees if permitted by the MGCL shall at any time determine
in good faith that a Transfer or other event has taken place in violation of
Section 7(b) of these Articles Supplementary or that a Person intends to
acquire, has attempted to acquire or may acquire beneficial ownership
(determined without reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any shares of Series C Preferred Stock of the
Corporation in violation of Section 7(b) of these Articles Supplementary, the
Board of Directors or a committee thereof or other designees if permitted by the
MGCL shall take such action as it deems advisable to refuse to give effect or to
prevent such Transfer, including, but not limited to, causing the Corporation to
redeem shares of Series C Preferred Stock, refusing to give effect to such
Transfer on the books of the Corporation or instituting proceedings to enjoin
such Transfer; provided, however, that any Transfers (or, in the case of events
other than a Transfer, ownership or Constructive Ownership
<PAGE> 17
or Beneficial Ownership) in violation of Section 7(b)(i) of these Articles
Supplementary, shall automatically result in the transfer to a Trust as
described in Section 7(b)(ii) and any Transfer in violation of Section 7(b)(iii)
shall automatically be void ab initio irrespective of any action (or non-action)
by the Board of Directors.
(e) Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire shares of Series C Preferred Stock in violation of Section
7(b) of these Articles Supplementary, or any Person who is a Purported
Beneficial Transferee such that an automatic transfer to a Trust results under
Section 7(b)(ii) of these Articles Supplementary, shall immediately give written
notice to the Corporation of such event and shall provide to the Corporation
such other information as the Corporation may request in order to determine the
effect, if any, of such Transfer or attempted Transfer on the Corporation's
status as a REIT.
(f) Owners Required To Provide Information. Prior to the Restriction
Termination Date each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Series C Preferred Stock and each Person (including the
shareholder of record) who is holding Series C Preferred Stock for a beneficial
owner or Beneficial Owner or Constructive Owner shall provide to the Corporation
such information that the Corporation may request, in good faith, in order to
determine the Corporation's status as a REIT.
(g) Remedies Not Limited. Nothing contained in these Articles
Supplementary (but subject to Section 7(n) of these Articles Supplementary)
shall limit the authority of the Board of Directors to take such other action as
it deems necessary or advisable to protect the Corporation and the interests of
its shareholders by preservation of the Corporation's status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any
of the provisions of this Section 7 of these Articles Supplementary, including
any definition contained in Section 7(a), the Board of Directors shall have the
power to determine the application of the provisions of this Section 7 with
respect to any situation based on the facts known to it (subject, however, to
the provisions of Section 7(n) of these Articles Supplementary). In the event
Section 7 requires an action by the Board of Directors and these Articles
Supplementary fail to provide specific guidance with respect to such action, the
Board of Directors shall have the power to determine the action to be taken so
long as such action is not contrary to the provisions of Section 7. Absent a
decision to the contrary by the Board of Directors (which the Board may make in
its sole and absolute discretion), if a Person would have (but for the remedies
set forth in Section 7(b)) acquired Beneficial or Constructive Ownership of
Series C Preferred Stock in violation of Section 7(b)(i), such remedies (as
applicable) shall apply first to the shares of Series C Preferred Stock which,
but for such remedies, would have been actually owned by such Person, and second
to shares of Series C Preferred Stock which, but for such remedies, would have
been Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares of Series C
Preferred Stock based upon the relative number of the shares of Series C
Preferred Stock held by each such Person.
(i) Exceptions.
<PAGE> 18
(i) Subject to Section 7(b)(i)(C), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning shares of Series C Preferred Stock in violation of Section
7(b)(i)(A) if the Board of Directors obtains any representations and
undertakings from such Person as are reasonably necessary in the opinion of the
Board of Directors to ascertain that no individual's Beneficial Ownership of
such shares of Series C Preferred Stock will violate Section 7(b)(i)(A) or that
any such violation will not cause the Corporation to fail to qualify as a REIT
under the Code, and that any violation of such representations or undertakings
(or other action which is contrary to the restrictions contained in Section 7(b)
of these Articles Supplementary) or attempted violation will result in such
Series C Preferred Stock being transferred to a Trust in accordance with Section
7(b)(ii) of these Articles Supplementary.
(ii) Subject to Section 7(b)(i)(C), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Series C Preferred Stock in violation of Section
7(b)(i)(B), if the Corporation obtains such representations and undertakings
from such Person as are reasonably necessary in the opinion of the Board of
Directors to ascertain that such Person does not and will not own, actually or
Constructively, an interest in a tenant of the Corporation (or a tenant of any
entity owned in whole or in part by the Corporation) that would cause the
Corporation to own, actually or Constructively, more than a 9.8% interest (as
set forth in Section 856(d)(2)(B) of the Code) in such tenant and that any
violation or attempted violation will result in such Series C Preferred Stock
being transferred to a Trust in accordance with Section 7(b)(ii) of these
Articles Supplementary. Notwithstanding the foregoing, the inability of a Person
to make the certification described in this Section 7(i)(ii) shall not prevent
the Board of Directors, in its sole discretion, from exempting such Person from
the limitation on a Person Constructively Owning Series C Preferred Stock in
violation of Section 7(b)(i)(B) if the Board of Directors determines that the
resulting application of Section 856(d)(2)(B) of the Code would affect the
characterization of less than 0.5% of the gross income (as such term is used in
Section 856(c)(2) of the Code) of the Corporation in any taxable year, after
taking into account the effect of this sentence with respect to all other
capital stock of the Corporation to which this sentence applies.
(iii) Prior to granting any exception pursuant to Section
7(i)(i) or (ii) of these Articles Supplementary, the Board of Directors may
require a ruling from the Internal Revenue Service, or an opinion of counsel, in
either case in form and substance satisfactory to the Board of Directors in its
sole discretion, as it may deem necessary or advisable in order to determine or
ensure the Corporation's status as a REIT.
(j) Legends. Each certificate for Series C Preferred Stock shall
bear substantially the following legends in addition to any legends required to
comply with federal and state securities laws:
CLASSES OF STOCK
"THE CORPORATION IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE THAN ONE
CLASS, CONSISTING OF COMMON STOCK AND ONE
<PAGE> 19
OR MORE CLASSES OF PREFERRED STOCK. THE BOARD OF DIRECTORS IS AUTHORIZED
TO DETERMINE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF ANY
CLASS OF PREFERRED STOCK BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF
PREFERRED STOCK. THE CORPORATION WILL FURNISH, WITHOUT CHARGE, TO ANY
STOCKHOLDER MAKING A WRITTEN REQUEST THEREFOR, A COPY OF THE
CORPORATION'S CHARTER AND A WRITTEN STATEMENT OF THE DESIGNATIONS,
RELATIVE RIGHTS, PREFERENCES, CONVERSION OR OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS,
QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS WHICH THE CORPORATION HAS THE AUTHORITY TO ISSUE AND, IF THE
CORPORATION IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN
SERIES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES
BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND (ii) THE
AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES
OF SUBSEQUENT SERIES. REQUESTS FOR SUCH WRITTEN STATEMENT MAY BE
DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE."
RESTRICTION ON OWNERSHIP AND TRANSFER
"THE SHARES OF SERIES C PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND
TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS STATUS
AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS
AND EXCEPT AS EXPRESSLY PROVIDED IN THE ARTICLES SUPPLEMENTARY FOR THE
SERIES C PREFERRED STOCK, (i) NO PERSON MAY BENEFICIALLY OWN SHARES OF
THE CORPORATION'S SERIES C PREFERRED STOCK WHICH, TAKING INTO ACCOUNT
ANY OTHER CAPITAL STOCK OF THE CORPORATION BENEFICIALLY OWNED BY SUCH
PERSON, WOULD CAUSE SUCH OWNERSHIP TO EXCEED THE OWNERSHIP LIMIT OF
9.8%; (ii) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
SERIES C PREFERRED STOCK WHICH, TAKING INTO ACCOUNT ANY OTHER CAPITAL
STOCK OF THE CORPORATION CONSTRUCTIVELY OWNED BY SUCH PERSON, WOULD
CAUSE SUCH
<PAGE> 20
OWNERSHIP TO EXCEED THE OWNERSHIP LIMIT OF 9.8%; (iii) NO PERSON MAY
BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S SERIES C
PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER CAPITAL STOCK OF THE
CORPORATION BENEFICIALLY OR CONSTRUCTIVELY OWNED BY SUCH PERSON, WOULD
RESULT IN THE CORPORATION BEING "CLOSELY HELD" UNDER SECTION 856(h) OF
THE CODE OR OTHERWISE CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A
REIT; AND (iv) NO PERSON MAY TRANSFER SHARES OF SERIES C PREFERRED STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR
CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN
SERIES C PREFERRED STOCK WHICH CAUSES OR WILL CAUSE A PERSON TO
BENEFICIALLY OR CONSTRUCTIVELY OWN SERIES C PREFERRED STOCK IN EXCESS OF
THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF
THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE VIOLATED, THE SERIES C
PREFERRED STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO
THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE
BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE
TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE
DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A
TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE.
FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS
IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO.
ALL TERMS IN THIS LEGEND WHICH ARE DEFINED IN THE ARTICLES SUPPLEMENTARY
FOR THE SERIES C PREFERRED STOCK SHALL HAVE THE MEANINGS ASCRIBED TO
THEM IN SUCH ARTICLES SUPPLEMENTARY, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER
AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SERIES C PREFERRED
STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE
DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE."
(k) Exchange of Series C Preferred Units. The Corporation is hereby
expressly vested with authority (subject to the restrictions on ownership,
transfer and redemption of Series C Preferred Stock set forth in this Section 7)
to issue, and, so long as AMB Property Holding Corporation, a Maryland
corporation, remains the general partner of the Subsidiary Operating
Partnership, and the Operating Partnership remains a limited partner of the
Subsidiary Operating Partnership, the Corporation shall issue to the extent
provided above and in the Subsidiary
<PAGE> 21
Partnership Agreement, Series C Preferred Stock in exchange for Series C
Preferred Units (as defined in the Subsidiary Partnership Agreement) (the
"Series C Preferred Units").
(l) Reservation of Shares. Pursuant to the obligations of the
Corporation under the Subsidiary Partnership Agreement to issue Series C
Preferred Stock in exchange for Series C Preferred Units, the Board of Directors
is hereby required to reserve and authorize for issuance a number of authorized
but unissued shares of Series C Preferred Stock not less than the number of
Series C Preferred Units issued to permit the Corporation to issue Series C
Preferred Stock in exchange for Series C Preferred Units that may be exchanged
for or converted into Series C Preferred Stock as provided in the Subsidiary
Partnership Agreement.
(m) Severability. If any provision of this Section 7 or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
(n) New York Stock Exchange. Nothing in this Section 7 shall
preclude the settlement of any transaction entered into through the facilities
of the New York Stock Exchange. The shares of Series C Preferred Stock that are
the subject of such transaction shall continue to be subject to the provisions
of this Section 7 after such settlement.
(o) Applicability of Section 7. The provisions set forth in this
Section 7 shall apply to the Series C Preferred Stock notwithstanding any
contrary provisions of the Series C Preferred Stock provided for elsewhere in
these Articles Supplementary.
(8) CONVERSION. The Series C Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Corporation.
(9) NO SINKING FUND. No sinking fund shall be established for the
retirement or redemption of Series C Preferred Stock.
(10) NO PREEMPTIVE RIGHTS. No holder of the Series C Preferred Stock of
the Corporation shall, as such holder, have any preemptive rights to purchase or
subscribe for additional shares of stock of the Corporation or any other
security of the Corporation which it may issue or sell.
FOURTH: The Series C Preferred Stock has been classified and designated
by the Board under the authority contained in the Charter.
FIFTH: These Articles Supplementary have been approved by the Board in
the manner and by the vote required by law.
SIXTH: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.
<PAGE> 22
SEVENTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the act of the Corporation and, as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
(Signature Page Follows)
<PAGE> 23
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Secretary on this 23rd day of November, 1998.
AMB PROPERTY CORPORATION
By: /s/ HAMID R. MOGHADAM
--------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer
[SEAL]
ATTEST:
/s/ DAVID S. FRIES
- -----------------------------------
David S. Fries
Secretary
<PAGE> 1
EXHIBIT 5.1
December 3, 1998
AMB Property Corporation
AMB Property, L.P.
505 Montgomery Street
San Francisco, CA 94111
Re: AMB Property Corporation, a Maryland corporation (the
"Company"); AMB Property, L.P., a Delaware limited partnership
(the "Operating Partnership") - Registration Statement on Form
S-3 pertaining to $400,000,000 maximum aggregate initial
offering price of senior or subordinated debt securities of the
Operating Partnership (the "Debt Securities") and guarantees of
the Debt Securities by the Company ("Guarantees"), and
$600,000,000 maximum aggregate initial offering amount of (i)
shares of common stock of the Company, par value $.01 per share
("Common Stock"); (ii) shares of preferred stock of the Company,
par value $.01 per share ("Preferred Stock"); (iii) depositary
shares evidencing shares of Preferred Stock of the Company
("Depositary Shares"); and (iv) warrants to purchase shares of
Common Stock or shares of Preferred Stock ("Warrants")
Ladies and Gentlemen:
In connection with the registration of the Debt Securities, the
Guarantees, shares of Common Stock, shares of Preferred Stock, the Depositary
Shares and Warrants (collectively, the "Securities") under the Securities Act of
1933, as amended (the "Act"), by the Operating Partnership and the Company,
pursuant to a Registration Statement on Form S-3 to be filed with the Securities
and Exchange Commission (the "Commission") on or about December 2, 1998 (the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Registration Statement.
<PAGE> 2
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
AMB Property Corporation
AMB Property, L.P.
December 3, 1998
Page 2
We have acted as special Maryland corporate counsel to the Company in
connection with the matters described herein. With respect to such matters, the
Company acts in its individual capacity and in its capacity as general partner
of the Operating Partnership. In our capacity as special Maryland corporate
counsel to the Company, we have reviewed and are familiar with the charter of
the Company (the "Charter"), consisting of Articles of Incorporation filed with
the Maryland State Department of Assessments and Taxation (the "Department") on
November 24, 1997, and Articles Supplementary filed on July 23, 1998, November
12, 1998 and November 25, 1998; the Bylaws of the Company (the "Bylaws"), which
were duly adopted by the Board of Directors of the Company on November 24, 1997;
and certain resolutions adopted and actions taken by the Board of Directors of
the Company (the "Board of Directors") on or before the date hereof and in full
force and effect on the date hereof including, but not limited to, those certain
resolutions adopted by the Board of Directors on November 18, 1998. We have also
examined the Registration Statement, other documents, corporate and other
records of the Company and certificates of public officials and officers of the
Company including, without limitation, a status certificate of recent date
issued by the Department to the effect that the Company is duly incorporated and
existing under the laws of the State of Maryland, and a Certificate of Officers
of the Company of recent date to the effect that, among other things, the
Charter and Bylaws of the Company and the resolutions and actions by the Board
of Directors which we have examined are true, correct and complete, have not
been rescinded or modified and are in full force and effect on the date of such
certificate. We have also made such further legal and factual examinations as we
have deemed necessary or appropriate to provide a basis for the opinion set
forth below.
In reaching the opinions set forth below, we have assumed the following:
(a) each person executing any instrument, document or agreement on behalf of any
party (other than the Company or the Operating Partnership) is duly authorized
to do so; (b) each natural person executing any instrument, document or
agreement is legally competent to do so; (c) all documents submitted to us as
originals are authentic; all documents submitted to us as certified, facsimile
or photostatic copies conform to the original document; all signatures on all
documents submitted to us for examination are genuine; and all public records
reviewed are accurate and complete; (d) the resolutions adopted and to be
adopted, and the actions taken and to be taken by the Board of Directors
including, but not limited to, the adoption of all resolutions and the taking of
all action necessary to authorize the issuance and sale of the Securities and
the making of the Guarantees in accordance with the procedures set forth in
paragraphs 1, 2, 3 and 4 below, have occurred or will occur at duly called
meetings at which a quorum of the incumbent directors of the Company were or are
present and acting throughout, or by unanimous written consent of all incumbent
directors, all in accordance with the Charter and Bylaws of the Company and
<PAGE> 3
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
AMB Property Corporation
AMB Property, L.P.
December 3, 1998
Page 3
applicable law; (e) the number of shares of Preferred Stock (including without
limitation any shares of Preferred Stock evidenced by Depositary Shares) and the
number of shares of Common Stock to be offered and sold under the Registration
Statement, together with the number of shares of Preferred Stock and the number
of shares of Common Stock issuable upon the conversion or exchange of Preferred
Stock or the exercise of the Warrants, will not, in the aggregate, exceed the
number of shares of Preferred Stock, and the number of shares of Common Stock,
respectively, authorized in the Charter of the Company, less the number of
shares of Preferred Stock and the number of shares of Common Stock,
respectively, authorized and reserved for issuance and/or issued and outstanding
on the date on which the Securities are authorized, the date on which the
Securities are issued and delivered, the date on which the Warrants are
exercised and the date on which shares of Preferred Stock and shares of Common
Stock, respectively, are issued in connection with the issuance of Depositary
Shares or pursuant to the conversion or exchange of Preferred Stock or the
exercise of Warrants; (f) none of the terms of any of the Securities, or any
agreements related thereto, to be established subsequent to the date hereof, nor
the issuance and delivery of any such Securities nor the compliance by the
Company with the terms of any such Securities or agreements will violate any
applicable law or will conflict with, or result in a breach or violation of, the
Charter or Bylaws of the Company, or any instrument or agreement to which the
Company is a party or by which the Company is bound or any order or decree of
any court, administrative or governmental body having jurisdiction over the
Company; (g) the form of certificate or other instrument or document
representing the Securities will conform in all respects to the requirements
applicable under Maryland law; and (h) none of the Securities, and none of the
shares of Preferred Stock or shares of Common Stock issuable upon the conversion
or exchange of Preferred Stock or exercise of the Warrants, or the Depositary
Shares or related Depositary Receipts, will be issued and sold in violation of
the provisions of Article IV, Section E of the Charter of the Company entitled
"Restrictions on Ownership and Transfer to Preserve Tax Benefits."
Based on the foregoing, and subject to the assumptions and qualifications
set forth herein, it is our opinion that:
1. Upon due authorization by the Board of Directors of a designated
number of shares of Common Stock for issuance at a minimum price or value of
consideration to be set by the Board of Directors, all necessary corporate
action on the part of the Company will have been taken to authorize the issuance
and sale of such shares of Common Stock, and when such shares of Common Stock
are issued and delivered against payment of the consideration therefor as set by
the Board of Directors, whether upon original issue or upon exchange or
conversion of duly authorized and validly issued shares of Preferred Stock or
the exercise of duly authorized and
<PAGE> 4
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
AMB Property Corporation
AMB Property, L.P.
December 3, 1998
Page 4
valid Warrants, such shares of Common Stock will be validly issued, fully paid
and non-assessable.
2. Upon (a) designation by the Board of Directors of one or more classes
of Preferred Stock to distinguish each such class from other then outstanding
classes of Preferred Stock; (b) setting by the Board of Directors of the number
of shares of Preferred Stock to be included in each such class; (c)
establishment by the Board of Directors of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of each such class of Preferred Stock;
(d) filing by the Company with the Department of Articles Supplementary setting
forth a description of each such class of Preferred Stock, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set by the Board of Directors and a statement that the Preferred
Stock has been classified by the Board of Directors under the authority
contained in the Charter, and the acceptance for record by the Department of
such Articles Supplementary; and (e) due authorization by the Board of Directors
of a designated number of shares of Preferred Stock for issuance at a minimum
price or value of consideration to be set by the Board of Directors: all
necessary corporate action on the part of the Company will have been taken to
authorize the issuance and sale of such shares of Preferred Stock and when such
shares of Preferred Stock are issued and delivered against payment of the
consideration therefor as set by the Board of Directors, whether upon original
issue or upon exchange or conversion of other shares of duly authorized and
validly issued Preferred Stock or the exercise of duly authorized and valid
Warrants, such shares of Preferred Stock will be validly issued, fully paid and
non-assessable.
3. Upon (a) designation and titling by the Board of Directors of the
Depositary Shares; (b) setting by the Board of Directors of the number of
Depositary Shares to be issued; (c) establishment by the Board of Directors of
the terms, conditions and provisions of the Depositary Shares and any related
agreements; (d) due authorization by the Board of Directors of the execution and
delivery of the Deposit Agreement relating to the Depositary Shares and the
issuance of the Depositary Shares at a minimum price or value of consideration;
and (e) due authorization and issuance by the Corporation of the shares of
Preferred Stock of the Company to be evidenced by the Depositary Shares in
accordance with the procedures set forth in Paragraph 2 above: all necessary
corporate action on the part of the Company will have been taken to authorize
the issuance and sale of the Depositary Shares, and when certificates
representing the shares of Preferred Stock to be represented by the Depositary
Shares are duly executed and delivered to the Depositary by the Company against
payment therefor in accordance with the Deposit Agreement in the manner
contemplated by the Registration Statement and/or the
<PAGE> 5
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
AMB Property Corporation
AMB Property, L.P.
December 3, 1998
Page 5
applicable Prospectus Supplement, such shares of Preferred Stock represented by
the Depositary Shares will be validly issued, fully paid and nonassessable.
4. Upon (a) due authorization by the Board of Directors of the issuance,
execution and delivery by the Corporation in its capacity as general partner of
the Operating Partnership of the Debt Securities and the execution and delivery
by the Corporation in its individual capacity and in its capacity as general
partner of the Operating Partnership and on behalf of the Operating Partnership,
as the case may be, of the Guarantees and/or any necessary and appropriate
supplements, amendments or modifications to the Indenture (inclusive therein of
Guarantees providing for the guaranty by the Company of the obligations of the
Operating Partnership under the Debt Securities) (collectively, the
"Supplements"); and (b) the establishment of the terms, conditions and
provisions of the Debt Securities, the Guarantees and the Supplements by the
Board of Directors or a duly authorized officer of the Corporation, acting on
behalf of the Corporation in its individual capacity or in its capacity as
general partner of the Operating Partnership, as the case may be: the execution,
delivery and performance of the Indenture as supplemented, amended or modified
by the Supplements (inclusive of the Guarantees provided for therein) and the
Guarantees will have been duly authorized by all necessary corporate action on
the part of the Corporation acting in its individual capacity and in its
capacity as general partner of the Operating Partnership, as the case may be,
and the issuance of the Debt Securities will have been duly authorized by all
necessary corporate action on the part of the Corporation acting in its capacity
as general partner of the Operating Partnership.
This opinion is limited to the present corporate laws of the State of
Maryland and we express no opinion with respect to the laws of any other
jurisdiction. Furthermore, the opinions presented in this letter are limited to
the matters specifically set forth herein and no other opinion shall be inferred
beyond the matters expressly set forth herein. Without limiting the generality
of the foregoing, we express no opinion with respect to any securities laws or
with respect to the action required for the Operating Partnership to authorize,
execute or deliver any of the Securities or any other document, instrument or
agreement.
The opinions set forth in this letter are rendered as of the date hereof
and are necessarily limited to laws now in effect and facts and circumstances
presently existing and brought to our attention. We assume no obligation to
supplement this opinion if any applicable law is changed after the date hereof
or if we become aware of any facts or circumstances which now exist or which
occur or arise in the future and may change the opinions expressed herein after
the date hereof.
<PAGE> 6
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
AMB Property Corporation
AMB Property, L.P.
December 3, 1998
Page 6
We consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the filing of this opinion as an
exhibit to applications to the securities commissioners of the various states of
the United States for registration of the Securities. We also consent to the
identification of our firm as Maryland counsel to the Company in the section of
the Prospectus (which is a part of the Registration Statement) entitled "Legal
Matters." In giving these consents, we do not admit that we are within the
category of persons whose consent is required by Section 7 of the Act.
The opinions expressed in this letter are for your use and the use of
your securities counsel, Latham & Watkins, in connection with the filing of the
Registration Statement and the rendering of opinions by Latham & Watkins in
connection therewith, and may not be relied upon by you or Latham & Watkins for
any other purpose, without our prior written consent.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
<PAGE> 1
EXHIBIT 5.2
[LATHAM & WATKINS LETTERHEAD]
December 3, 1998
AMB Property Corporation
AMB Property, L.P.
505 Montgomery Street
San Francisco, California 94111
Re: $400,000,000 Aggregate Offering Price of Debt Securities of AMB
Property, L.P. and $600,000,000 Aggregate Offering Price of
Common Stock, Preferred Stock, Depositary Shares and Warrants
of AMB Property Corporation
Ladies and Gentlemen:
In connection with a registration statement on Form S-3 (the
"Registration Statement") being filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), you have requested our opinion with respect to the matters
set forth below.
You have provided us with a draft prospectus (the "Prospectus") which
is a part of the Registration Statement. The Prospectus provides that it will be
supplemented in the future by one or more supplements to the Prospectus (each, a
"Prospectus Supplement"). The Prospectus as supplemented by various Prospectus
Supplements will provide for the sale (i) by AMB Property, L.P., a Delaware
limited partnership (the "Operating Partnership") of up to $400,000,000
aggregate offering price of debt securities of the Operating Partnership (the
"Debt Securities"), which may be guaranteed (the "Guarantees") by AMB Property
Corporation, a Maryland corporation (the "Company") and (ii) by the Company of
up to $600,000,000 aggregate offering price of (a) shares of common stock of the
Company, par value $.01 per share ("Common Stock"); (ii) shares of preferred
stock of the Company, par value $.01 per share ("Preferred Stock"); (iii)
depositary shares evidencing shares of Preferred Stock of the Company
<PAGE> 2
December 3, 1998
Page 2
("Depositary Shares"); and (iv) warrants to purchase shares of Common Stock or
shares of Preferred Stock ("Warrants"). The Debt Securities, Guarantees, Common
Stock, Preferred Stock, Depositary Shares and Warrants are collectively referred
to herein as the "Securities." The Debt Securities will be issued pursuant to an
Indenture among the Operating Partnership, the Company and State Street Bank and
Trust Company of California, N.A., as trustee (the "Trustee"), dated as of June
30, 1998, as supplemented by the First Supplemental Indenture dated as of June
30, 1998, the Second Supplemental Indenture dated as of June 30, 1998 and the
Third Supplemental Indenture dated as of June 30, 1998 and as may be further
supplemented from time to time (the "Indenture").
In our capacity as your special counsel in connection with the
Registration Statement, we are generally familiar with the proceedings taken and
proposed to be taken by the Operating Partnership and the Company in connection
with the authorization and issuance of the Securities and, for the purposes of
this opinion, have assumed such proceedings will be timely and properly
completed in the manner presently proposed and that the terms of each issuance
will otherwise be in compliance with law.
We have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our satisfaction, of all such documents, corporate records and
instruments as we have deemed necessary or appropriate for purposes of this
opinion. In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
As to facts material to the opinions, statements and assumptions
expressed herein, we have, with your consent, relied upon oral or written
statements and representations of officers and directors and other
representatives of the Operating Partnership and the Company and others. In
addition, we have obtained and relied upon such certificates and assurances from
public officials as we have deemed necessary.
We are opining herein as to the effect on the subject transaction only
of the internal laws of the State of New York and we express no opinion with
respect to the applicability thereto, or the effect thereon, of the laws of any
other jurisdiction or as to any matters of municipal law or the laws of any
other agencies within any state.
Subject to the foregoing and the qualifications set forth herein, it is
our opinion that, as of the date hereof:
1. When (a) the Debt Securities have been duly established in
accordance with the terms of the Indenture (including, without limitation, the
adoption by the Board of Directors of the Company, in its capacity as general
partner of the Operating Partnership, of a resolution duly authorizing the
issuance and delivery of the Debt Securities), duly authenticated
<PAGE> 3
December 3, 1998
Page 3
by the Trustee and duly executed and delivered on behalf of the Operating
Partnership against payment therefor in accordance with the terms and provisions
of the Indenture and as contemplated by the Registration Statement, the
Prospectus and the related Prospectus Supplement(s), and (b) the Registration
Statement and any required post-effective amendments have all become effective
under the Securities Act, and (c) assuming that the terms of the Debt Securities
as executed and delivered are as described in the Registration Statement, the
Prospectus and the related Prospectus Supplement(s), and (d) assuming that the
Debt Securities as executed and delivered do not violate any law applicable to
the Operating Partnership or result in a default under or breach of any
agreement or instrument binding upon the Operating Partnership, and (e) assuming
that the Debt Securities as executed and delivered comply with all requirements
and restrictions, if any, applicable to the Operating Partnership, whether
imposed by any court or governmental or regulatory body having jurisdiction over
the Operating Partnership, and (f) assuming that the Debt Securities are then
issued and sold as contemplated in the Registration Statement, the Prospectus
and the related Prospectus Supplement(s), the Debt Securities will constitute
valid and legally binding obligations of the Operating Partnership, enforceable
against the Operating Partnership in accordance with their terms.
2. When (a) the Guarantees and the related Debt Securities have been
duly established in accordance with the terms of the Indenture (including,
without limitation, the adoption by the Board of Directors of the Company of a
resolution duly authorizing the issuance and delivery of (i) the Guarantees by
the Company and (ii) the related Debt Securities by the Operating Partnership),
and (b) the Guarantees have been duly executed and delivered on behalf of the
Company and the related Debt Securities have been duly authenticated by the
Trustee and duly executed and delivered on behalf of the Operating Partnership
against payment therefor in accordance with the terms and provisions of the
Indenture and as contemplated by the Registration Statement, the Prospectus and
the related Prospectus Supplement(s), and (c) the Registration Statement and any
required post-effective amendments thereto have all become effective under the
Securities Act, and (d) assuming that the terms of the Guarantees as executed
and delivered are as described in the Registration Statement, the Prospectus and
the related Prospectus Supplement(s), and (e) assuming that the Guarantees as
executed and delivered do not violate any law applicable to the Company or
result in a default under or breach of any agreement or instrument binding upon
the Company, and (f) assuming that the Guarantees as executed and delivered
comply with all requirements and restrictions, if any, applicable to the
Company, whether imposed by any court or governmental or regulatory body having
jurisdiction over the Company, and (g) assuming that the Guarantees are then
issued as contemplated in the Registration Statement, the Prospectus and the
related Prospectus Supplement(s), the Guarantees will constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their terms.
3. When (a) the applicable warrant agreement (the "Warrant Agreement")
between the Company and a financial institution identified therein as warrant
agent (each, a "Warrant Agent") has been duly authorized, executed and
delivered, and (b) the Warrants have
<PAGE> 4
December 3, 1998
Page 4
been duly established in accordance with the terms of the Warrant Agreement and
applicable law, and (c) the Warrants have been duly executed and countersigned
in accordance with the Warrant Agreement relating to such Warrants, and issued
and sold in the form and in the manner contemplated in the Registration
Statement, the Prospectus and the related Prospectus Supplement(s), and (d) the
Registration Statement and any required post-effective amendments thereto have
all become effective under the Securities Act, and (e) assuming that the terms
of the Warrants as executed and delivered are as described in the Registration
Statement, the Prospectus and the related Prospectus Supplement(s), and (f)
assuming that the Warrants as executed and delivered do not violate any law
applicable to the Company or result in a default under or breach of any
agreement or instrument binding upon the Company, and (g) assuming that the
Warrants as executed and delivered comply with all requirements and
restrictions, if any, applicable to the Company, whether imposed by any court or
governmental or regulatory body having jurisdiction over the Company, and (h)
assuming that the Warrants are then issued and sold as contemplated in the
Registration Statement, the Prospectus and the related Prospectus Supplement(s),
the Warrants will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms.
4. When (a) the applicable deposit agreement (the "Deposit Agreement")
has been duly authorized, executed and delivered and (b) the terms of a
particular issuance of Depositary Shares have been duly established in
accordance with the Deposit Agreement and applicable law, and (c) the depositary
receipts (the "Depositary Receipts") evidencing Depositary Shares, in the form
contemplated and authorized by the Deposit Agreement, have been issued by a
depositary (the "Depositary") and duly executed on behalf of the Depositary and
delivered to and paid for by the purchasers thereof in the manner contemplated
by the Registration Statement, the Prospectus, the related Prospectus
Supplement(s) and any registration statement required to be filed under the
Securities Act in respect of the issuance of the Depositary Shares by the
Depositary (the "Depositary Registration Statement"), and (d) the Registration
Statement and any required post-effective amendments thereto and the Depositary
Registration Statement and any required post-effective amendments thereto have
all become effective under the Securities Act, and (e) assuming that the terms
of the Depositary Shares as executed and delivered are as described in the
Registration Statement, the Prospectus, the related Prospectus Supplement(s) and
the Depositary Registration Statement, and (f) all corporate action necessary
for the issuance of such Depositary Shares and the underlying Preferred Stock
has been taken, and (g) assuming that the issuance of the Depositary Shares and
the underlying Preferred Stock do not violate any law applicable to the Company
or result in a default under or breach of any agreement or instrument binding
upon the Company, and (h) assuming that the Depositary Shares and the underlying
Preferred Stock comply with all requirements and restrictions, if any,
applicable to the Company, whether imposed by any court or governmental or
regulatory body having jurisdiction over the Company, and (i) assuming that the
Depositary Shares are then issued and sold as contemplated in the Registration
Statement, the Prospectus, the related Prospectus Supplement(s) and the
Depositary Registration Statement, the Depositary Shares will be validly
<PAGE> 5
December 3, 1998
Page 5
issued and will entitle the holders thereof to the rights specified in the
Depositary Receipts and the Deposit Agreement.
In rendering the opinions expressed in paragraphs 3 and 4, we have
assumed that the internal laws of the State of New York govern the Warrant
Agreement, the Warrants, the Deposit Agreement, the Depositary Receipts and the
Depositary Shares. We express no opinion concerning the enforceability of the
choice of law provisions in such documents under any law and have not
independently verified and assume no responsibility for differences which may
exist between New York law and the law of any other jurisdiction which may
govern such documents, or the extent to which any such differences may impact
adversely the validity, binding effect or enforceability of the Warrants or the
valid issuance of the Warrants or the Depositary Shares or the rights of the
holders thereof.
The opinions set forth in paragraphs 1, 2, 3 and 4 above are subject to
the following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors; (ii) the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or at law, and the discretion of the
court before which any proceeding therefor may be brought; (iii) the
unenforceability under certain circumstances under law or court decisions of
provisions providing for the indemnification of, or contribution to, a party
with respect to a liability where such indemnification or contribution is
contrary to public policy; (iv) we express no opinion concerning the
enforceability of any waiver of rights or defenses with respect to stay,
extension or usury laws; and (v) we express no opinion with respect to whether
acceleration of the Debt Securities may affect the collectibility of any portion
of the stated principal amount thereof which might be determined to constitute
unearned interest thereon.
We assume for purposes of this opinion that (i) the Operating
Partnership is a partnership duly formed, validly existing and in good standing
under the laws of the State of Delaware, with full power and authority to issue
and sell the Debt Securities; (ii) the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Maryland, with full power and authority to execute, deliver and perform its
obligations under the Guarantees, the Warrant Agreement, the Warrants, the
Deposit Agreement, the Depositary Receipts and the Depositary Shares; (iii) the
Debt Securities have been duly authorized by all necessary partnership action of
the Operating Partnership and the Guarantees, the Warrants, the Depositary
Shares and the Preferred Stock underlying the Depositary Shares have been duly
authorized by all necessary corporate action by the Company; and (iv) the
Indenture has been duly authorized by all necessary partnership action of the
Operating Partnership and by all necessary corporate action by the Company, has
been duly executed and delivered by the Operating Partnership and the Company
and constitutes the legally valid and binding obligation of the Operating
Partnership and the Company, enforceable against each of them in accordance with
its terms.
<PAGE> 6
December 3, 1998
Page 6
To the extent that the obligations of the Operating Partnership and the
Company under the Indenture may be dependent upon such matters, we assume for
purposes of this opinion that the Trustee is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization; that
the Trustee is duly qualified to engage in the activities contemplated by the
Indenture; that the Indenture has been duly authorized, executed and delivered
by the Trustee and constitutes the legally valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms; that the
Trustee is in compliance, generally and with respect to acting as a trustee
under the Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
To the extent that the obligations of the Company under each Deposit
Agreement may be dependent upon such matters, we assume for purposes of this
opinion that the Depositary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Depositary
is duly qualified to engage in the activities contemplated by the Deposit
Agreement; that the Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes the legally valid and binding
obligation of the Depositary, enforceable against the Depositary in accordance
with its terms; that the Depositary is in compliance, generally and with respect
to acting as a Depositary under the Deposit Agreement, with all applicable laws
and regulations; and that the Depositary has the requisite organizational and
legal power and authority to perform its obligations under the Deposit
Agreement.
To the extent that the obligations of the Company under each Warrant
Agreement may be dependent upon such matters, we assume for purposes of this
opinion that the Warrant Agent is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Warrant
Agent is duly qualified to engage in the activities contemplated by the Warrant
Agreement; that the Warrant Agreement has been duly authorized, executed and
delivered by the Warrant Agent and constitutes the legally valid and binding
obligation of the Warrant Agent, enforceable against the Warrant Agent in
accordance with its terms; that the Warrant Agent is in compliance, generally
and with respect to acting as a Warrant Agent under the Warrant Agreement, with
all applicable laws and regulations; and that the Warrant Agent has the
requisite organizational and legal power and authority to perform its
obligations under the Warrant Agreement.
<PAGE> 7
December 3, 1998
Page 7
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ Latham & Watkins
<PAGE> 1
EXHIBIT 8.1
[Letterhead of Latham & Watkins]
December 3, 1998
AMB Property Corporation
505 Montgomery Street
San Francisco, California 94111
Re: AMB Property Corporation
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to AMB Property Corporation, a Maryland
corporation (the "Company"), in connection with the registration statement on
Form S-3 being filed on the date hereof by the Company and AMB Property, L.P., a
Delaware limited partnership of which the Company is the sole general partner,
with the Securities and Exchange Commission in connection with the "shelf
registration," under the Securities Act of 1933, as amended, of a maximum
aggregate offering price of (i) $600,000,000 of shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), shares of the Company's
preferred stock, par value $.01 per share (the "Preferred Stock"), depositary
shares representing the Company's Preferred Stock, and warrants to purchase
shares of the Company's Common Stock and (ii) $400,000,000 of debt securities of
AMB Property, L.P. (together with all exhibits thereto and documents
incorporated by reference therein, the "Registration Statement").
In our capacity as such counsel, we have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments, as we have deemed necessary or
appropriate for purposes of this opinion. In our examination, we have assumed
the authenticity of all documents submitted to us as originals, the genuineness
of all signatures thereon,
<PAGE> 2
AMB Property Corporation
December 3, 1998
Page 2
the legal capacity of natural persons executing such documents and the
conformity to authentic original documents of all documents submitted to us as
copies.
We are opining herein as to the effect on the subject transaction
only of the federal income tax laws of the United States and we express no
opinion with respect to the applicability thereto, or the effect thereon, of
other federal laws, the laws of any state or other jurisdiction or as to any
matters of municipal law or the laws of any other local agencies with any state.
Based upon certain representations from the Company, including
the facts set forth in the Registration Statement, it is our opinion that the
information in the Registration Statement set forth under the caption "Certain
Federal Income Tax Considerations," to the extent that it constitutes matters of
law, summaries of legal matters, documents or proceedings, or legal conclusions,
has been reviewed by us and is correct in all material respects.
No opinion is expressed as to any matter not discussed herein.
This opinion is only being rendered to you as of the date of this
letter, and we undertake no obligation to update this opinion subsequent to the
date hereof. This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusions stated herein.
This opinion is rendered to you and is solely for your benefit in
connection with the Registration Statement. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement. This opinion may not
be relied upon by you for any other purpose, or furnished to, quoted to or
relied upon by any other person, firm or corporation for any purpose, without
our prior written consent.
Very truly yours,
/s/ LATHAM & WATKINS
<PAGE> 1
EXHIBIT 12.1
AMB PROPERTY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1997
1993 1994 1995 1996 HISTORICAL(1)
---- ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from operations
before minority interests... $798 $2,925 $3,296 $7,140 $18,885
Interest expense.............. -- -- 4 -- 3,528
---- ------ ------ ------ -------
Total earnings.......... $798 $2,925 $3,300 $7,140 $22,413
==== ====== ====== ====== =======
Fixed charges:
Interest expense(4)........... $ -- $ -- $ 4 $ -- $ 3,528
Capitalized interest(5)....... -- -- -- -- 448
---- ------ ------ ------ -------
Total fixed charges..... $ -- $ -- $ 4 $ -- $ 3,976
==== ====== ====== ====== =======
Ratio of earnings to fixed
charges....................... N/A N/A 825x N/A 5.6x
==== ====== ====== ====== =======
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1998
HISTORICAL HISTORICAL
---------- ----------
<S> <C> <C>
Earnings:
Income (loss) from operations
before minority interests... $8,982 $ 91,372
Interest expense.............. -- 47,105
------ --------
Total earnings.......... $8,982 $138,477
====== ========
Fixed charges:
Interest expense(2)........... $ -- $ 47,105
Capitalized interest(3)....... -- 4,974
------ --------
Total fixed charges..... $ -- $ 52,079
====== ========
Preferred Stock dividends....... -- 1,514
------ --------
Total fixed charges and
preferred dividends... $ -- $ 53,593
====== ========
Ratio of earnings to fixed
charges....................... N/A 2.7x
====== ========
Ratio of earnings to fixed
charges and preferred
dividends..................... N/A 2.6x
====== ========
</TABLE>
- ---------------
(1) Historical ratio of earnings to fixed charges includes the results of the
Predecessor for the period from January 1, 1997 through November 25, 1997,
and the results of the Company subsequent to November 25, 1997, the date of
acquisition by the Company.
(2) Includes amortization of debt premiums and deferred financing fees.
(3) Historical capitalized interest represents construction interest incurred
subsequent to November 25, 1997, the date of acquisition by the Company.
<PAGE> 1
EXHIBIT 12.2
AMB PROPERTY, L.P.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DISTRIBUTIONS
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1997
1993 1994 1995 1996 HISTORICAL(1)
---- ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from operations
before minority interests... $798 $2,925 $3,296 $7,140 $ 8,646
Interest expense.............. -- -- 4 -- 3,528
---- ------ ------ ------ -------
Total earnings.......... $798 $2,925 $3,300 $7,140 $12,174
==== ====== ====== ====== =======
Fixed charges:
Interest expense(4)........... $ -- $ -- $ 4 $ -- $ 3,528
Capitalized interest(5)....... -- -- -- -- 448
---- ------ ------ ------ -------
Total fixed charges..... $ -- $ -- $ 4 $ -- $ 3,976
==== ====== ====== ====== =======
Ratio of earnings to fixed
charges....................... N/A N/A 825x N/A 3.1x
==== ====== ====== ====== =======
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1998
HISTORICAL HISTORICAL
---------- ----------
<S> <C> <C>
Earnings:
Income (loss) from operations
before minority interests... $8,982 $ 91,372
Interest expense.............. -- 47,105
------ --------
Total earnings.......... $8,982 $138,477
====== ========
Fixed charges:
Interest expense(2)........... $ -- $ 47,105
Capitalized interest(3)....... -- 4,974
------ --------
Total fixed charges..... $ -- $ 52,079
====== ========
Preferred distributions......... -- 1,514
------ --------
Total fixed charges
and preferred
distributions......... $ -- $ 53,593
====== ========
Ratio of earnings to fixed
charges....................... N/A 2.7x
====== ========
Ratio of earnings to fixed
charges and preferred
distributions................. N/A 2.6x
====== ========
</TABLE>
- ---------------
(1) Historical ratio of earnings to fixed charges includes the results of the
Predecessor for the period from January 1, 1997 through November 25, 1997,
and the results of the Company subsequent to November 25, 1997, the date of
acquisition by the Company.
(2) Includes amortization of debt premiums and deferred financing fees.
(3) Historical capitalized interest represents construction interest incurred
subsequent to November 25, 1997, the date of acquisition by the Company.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement, of our reports dated as follows:
<TABLE>
<S> <C> <C>
- AMB Property Corporation and subsidiaries January 27, 1998
- AMB Property, L.P. and subsidiaries January 27, 1998
- AMB Contributed Properties March 27, 1998
- Crysen Corridor Warehouse February 24, 1998
- Boston Industrial Portfolio March 27, 1998
- The Jamesburg Property March 27, 1998
- Orlando Central Park March 27, 1998
- Totem Lake Malls March 27, 1998
- Dallas Warehouse Portfolio (Garland Industrial Portfolio) April 21, 1998
- Twin Cities Office/Showroom Portfolio (Minnetonka Industrial Portfolio) May 1, 1998
- Willow Park Portfolio June 8, 1998
- Amberjack Portfolio July 9, 1998
- Willow Lake Portfolio July 21, 1998
- National Distribution Portfolio July 31, 1998
- Mawah Portfolio July 31, 1998
- Cabot Industrial Portfolio October 27, 1997
- Cabot Business Park October 29, 1997
- Manhattan Village Shopping Center October 17, 1997
- Weslayan Plaza October 17, 1997
- Silicon Valley R&D Portfolio October 17, 1997
</TABLE>
and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
November 30, 1998
