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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 16, 1996
AMBASSADOR APARTMENTS, INC.
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
Maryland 0-24704 36-3948161
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (312) 917-1600
____________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
________________________________________________________________________________
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Item 5. Other Events.
On August 16, 1996, Ambassador Apartments, Inc. (the "Company") issued
and sold to Five Arrows Realty Securities L.L.C. ("Five Arrows"), an investment
fund advised by Rothschild Realty, Inc., 1,351,351 shares of its Class A Senior
Cumulative Convertible Preferred Stock (the "Class A Preferred"), liquidation
value $18.50 per share (the "Liquidation Value"), for an aggregate purchase
price of $25 million or approximately $18.50 per share. Net proceeds from the
sale of the Class A Preferred were approximately $24.25 million after deducting
a placement fee to Rothschild Realty, Inc. and closing costs. The following is
a summary of certain material provisions of the Class A Preferred and of its
issuance and sale, which by necessity is not complete and is subject to and
qualified in its entirety by the documents included as exhibits to this report.
The Class A Preferred has a cumulative annualized dividend equal to
$1.68, $1.73, $1.78, $1.83 and $1.89 in years one through five after issuance,
respectively, and thereafter equal to the greater of $1.68 and 105% of the
dividend paid by the Company on its Common Stock, par value $.01 per share (the
"Common Stock"). The Class A Preferred is convertible into Common Stock,
subject to certain anti-dilution adjustments, at rate of 1.08 shares of Class A
Preferred for each share of Common Stock during the first year after issuance
and at a rate of one share of Class A Preferred for each share of Common Stock
thereafter and after a Change in Control (as defined).
The Class A Preferred is redeemable at the option of the Company at
any time five years after issuance at a price equal to 106% of the Liquidation
Value in the sixth year after issuance, decreasing to 100% of the Liquidation
Value in the fifteenth year after issuance and thereafter, plus in each case
accrued and unpaid dividends. Upon a Change of Control, the holders of the
Class A Preferred may require the Company to redeem such holders' shares of
Class A Preferred at a price equal to 102% of the Liquidation Value plus
accrued and unpaid dividends. In addition, prior to the sixth year after
issuance, upon certain Changes in Control, the Company may redeem the Class A
Preferred at a price equal to 108% of the Liquidation Value plus accrued and
unpaid dividends.
For so long as Five Arrows and its affiliates are the holders of at
least 675,675 shares of the Class A Preferred or shares of Class A Preferred
convertible into at least 5% of the Common Stock on a fully diluted basis (the
"Minimum Threshold"), the holders of the Class A Preferred are entitled to
elect one director to the Company's Board of Directors (the "Board") and an
additional director if the regular quarterly dividend on the Common Stock is
less than $.40 per share or the Company fails to achieve certain specified
operating targets for three consecutive quarters. If Five Arrows and its
affiliates are not the holders of at least the Minimum Threshold, the holders
of the Class A Preferred are entitled to elect a number of directors to the
Board equal to two minus the number of directors elected and serving pursuant
to the preceding sentence if the Company fails to pay in full the quarterly
dividend in respect of the Class A Preferred for three consecutive quarters.
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The documents entered into in connection with the issuance of the
Class A Preferred contain certain representation and warranty, covenant and
indemnity provisions. In addition, so long as Five Arrows and its affiliates
hold at least the Minimum Threshold, the Company has agreed not to repurchase
shares of its Common Stock or the Class A Preferred at a price greater than
fair market value, not to enter into certain transactions with its affiliates,
to remain primarily in the business of owning and managing multi-family
properties as is currently conducted, and to designate one of the directors
elected by the holders of the Class A Preferred to each committee of the Board.
If the Company breaches any of such agreements, the holders of the Class A
Preferred may require the Company to redeem such holders' shares of Class A
Preferred at a price equal to the Liquidation Value plus accrued and unpaid
dividends. The Company has also granted the holders of the Class A Preferred
and the Common Stock issuable upon conversion of the Class A Preferred certain
registration rights with respect to such shares.
In connection with the issuance of the Class A Preferred, the Board
has exempted Five Arrows from the Common Stock Ownership Limit and the
Aggregate Stock Ownership Limit set forth and defined in the Company's Articles
of Incorporation (the "Charter"). In addition, the Board has elected to make
the provisions of Section 4.5.5(a)(iii) of the Charter applicable to holders of
Common Stock in lieu of Section 4.5.5(a)(i). This change permits Conversion
Holders (any person who becomes the beneficial owner or constructive owner of
Common Stock in excess of the Common Stock Ownership Limit by reason of the
conversion of shares of any series of preferred stock of the Company which are
convertible into Common Stock) to hold Common Stock in excess of the Common
Stock Ownership Limit provided that they do not hold capital stock of the
Company in excess of the Aggregate Stock Ownership Limit. As required by the
Amended and Restated Agreement of Limited Partnership of Ambassador Apartments,
L.P. (the "Operating Partnership"), of which the Company is the general
partner, the net proceeds of the sale were contributed to the Operating
Partnership and the Company received partnership units from the Operating
Partnership that were substantially similar the Class A Preferred.
Substantially all of the Company's operations are conducted through the
Operating Partnership.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMBASSADOR APARTMENTS, INC.
Date: August , 1996 By: /s/ Adam D. Peterson
-----------------------
Senior Vice President and
Chief Financial Officer
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INDEX OF EXHIBITS
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3.5 Articles Supplementary Classifying 1,351,351 Shares of Preferred Stock as Class A Senior
Cumulative Convertible Preferred Stock and 1,351,351 Shares of Excess Stock as Excess
Class A Preferred Stock of Ambassador Apartments, Inc.
10.42 Investment Agreement, dated as of August 15, 1996, among Ambassador Apartments, Inc.,
Ambassador Apartments, L.P., and Five Arrows Realty Securities L.L.C.
10.43 Supplemental Agreement, dated as of August 16, 1996, between Ambassador Apartments,
Inc. and Five Arrows Realty Securities L.L.C.
10.44 Registration Rights Agreement, dated as of August 16, 1996, between Ambassador
Apartments, Inc. and Five Arrows Realty Securities L.L.C.
10.45 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Prime Residential, L.P.
10.46 Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of Prime Residential, L.P.
10.47 Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of Ambassador Apartments, L.P.
99.3 Amended and Restated Certificate of Limited Partnership of Prime Residential, L.P.
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EXHIBIT 3.5
ARTICLES SUPPLEMENTARY
CLASSIFYING 1,351,351 SHARES OF PREFERRED STOCK AS CLASS A SENIOR CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND 1,351,251 SHARES OF EXCESS STOCK
AS EXCESS CLASS A PREFERRED STOCK
OF
AMBASSADOR APARTMENTS, INC.
Pursuant to Section 2-105 of the Maryland General Corporation
Law (the "M.G.C.L."), Ambassador Apartments, Inc., a corporation organized and
existing under the M.G.C.L. (the "Corporation"), and having its principal
office in the State of Maryland located at c/o United Corporate Service, 20
South Charles Street, Suite 1200, Baltimore, Maryland 21201,
DOES HEREBY CERTIFY TO THE STATE DEPARTMENT OF ASSESSMENT AND TAXATION OF
MARYLAND THAT:
Pursuant to authority granted to and vested in the Board of
Directors of the Corporation (the "Board") by the Charter of the Corporation
(the "Charter"), and pursuant to the provisions of Section 2-105 of the
M.G.C.L., the Board of Directors, at a meeting duly convened and held on
July 23, 1996, regarding the possible sale and issuance by the Corporation of
convertible preferred stock, adopted resolutions appointing a committee (the
"Committee") of the Board, comprised of Ms. Jane R. Patterson, Mr. David M.
Glickman and Mr. Richard F. Cavenaugh, and delegating to the Committee, to the
fullest extent permitted by Maryland law and the Corporation's Charter and
By-Laws, all powers of the Board with respect to classifying or reclassifying
any unissued shares of Preferred Stock and/or Excess Preferred Stock, and
setting the terms of the securities to be so classified or reclassified
(including, without limitation, the convertible preferred stock), and
determining the terms and conditions upon which such securities are to be
offered, sold and issued.
Pursuant to the authority conferred upon the Committee as
aforesaid, the Committee, on August 15, 1996, duly adopted resolutions by
unanimous written consent classifying 1,351,351 shares of Preferred Stock of
the Corporation into a single series of Preferred Stock to be designated as
"Class A Convertible Preferred Stock, par value $.01 per share," and
classifying 1,351,351 shares of Excess Stock of the Corporation into a single
series of Excess Preferred Stock to be designated as "Excess Class A Preferred
Stock, par value $.01 per share," which resolution is as follows:
"RESOLVED that a series of Preferred Stock of this
Corporation, to be designated "Class A Senior Cumulative
Convertible Preferred Stock," be and hereby is created to
consist of 1,351,351 shares, and that a series of Excess
Preferred Stock of this Corporation to be designated "Excess
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Class A Preferred Stock," be and hereby is created to consist
of 1,315,315 shares, the preferences, conversion or other
rights, voting powers, limitations as to dividends,
qualifications and terms and conditions of redemption of each
such series, are as follows:
Section 1. Preferred Shares -- Designation and Amount.
The shares of such class of Preferred Stock shall be designated as "Class A
Senior Cumulative Convertible Preferred Stock" and the number of shares
constituting the series so designated shall be 1,351,351 (the "Preferred
Shares").
Section 2. Preferred Shares -- Dividends.
(a) Subject to Section 11, the Corporation shall pay in
cash, when, as and if declared by the Board, out of funds legally available
therefor as provided by Section 2-304 of the M.G.C.L and limited by Section
2-311 of the M.G.C.L. (the "Legally Available Funds"), dividends at the
quarterly rate equal to the Applicable Dividend Rate (as defined below) per
Preferred Share, per quarter. Such dividends shall be cumulative and paid
quarterly on each February 15, May 15, August 15 and November 15, with respect
to the prior quarter, commencing November 15, 1996 (except that if such date is
not a Business Day (as defined below), then such dividend will be payable on
the next succeeding Business Day) to the holders of record at the close of
business on the date specified by the Board at the time such dividend is
declared no more than thirty (30) days prior to the date fixed for payment
thereof. Each of such dividends shall be fully cumulative, to the extent not
previously paid. Dividends shall begin to accrue and be cumulative from the
date of issuance of such Preferred Share to and including the first to occur of
(i) the date on which the Liquidation Value (as defined herein) of such
Preferred Share (plus all accrued and unpaid dividends thereon) is paid to the
holder thereof in connection with the liquidation of the Corporation or the
redemption of such Preferred Share by the Corporation, (ii) the last day of the
quarter preceding the quarter in which such Preferred Shares are converted into
shares of Common Stock hereunder if such date is after the record date for the
Regular Quarterly Dividend (as defined herein) on the Common Stock for the
quarter in which such conversion takes place, (iii) the last day of the quarter
second preceding the quarter in which such Preferred Shares are converted into
shares of Common Stock hereunder if such date is prior to the record date for
the Regular Quarterly Dividend on the Common Stock for the quarter in which
such conversion takes place, or (iv) the date on which such share is otherwise
acquired and paid for by the Corporation. Any accrued dividend that is not
paid, or made available for payment, on the date set forth herein shall accrue
dividends at the Applicable Dividend Rate until paid. Any dividend payment
with respect to the Preferred Shares shall first be credited against any prior
accrued and unpaid dividend.
(b) "Applicable Dividend Rate" means with respect to any
Preferred Share then issued and outstanding (i) $0.42 per Preferred Share, per
quarter (pro rated for the number of days in any partial quarter) on or prior
to August 14, 1997, (ii) for the period August 15, 1997 through August 14,
1998, $0.4325 per Preferred Share, per quarter, (iii) for the period August
15, 1998 through August 14, 1999, $0.445 per Preferred Share, per quarter, (iv)
for the period August 15, 1999 through August 14, 2001, $0.46 per Preferred
Share, per quarter, (v) for the period August 15, 2001 through August 14, 2002,
$0.4725 per Preferred Share, per quarter, and
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(vi) on or after August 15, 2002, the greater of (x) $0.42 per Preferred Share,
per quarter, and (y) the product of 1.05 and the per share quarterly dividend
paid in that quarter in respect of the common stock, par value $.01 per share,
of the Corporation (the "Common Stock."). If any of the events described under
Section 7(g), 7(i) or 7(j) occurs, such dividends payable thereafter on the
Common Stock shall be calculated for purposes of the foregoing clause (y) so as
to reverse the effect of such events. The Applicable Dividend Rate shall be
pro rated for the actual number of days in any partial quarter.
(c) All dividends paid with respect to Preferred Shares
pursuant to this Section 2 shall be paid pro rata in respect of each Preferred
Share entitled thereto. In the event that the Legally Available Funds
available for the payment of dividends shall be insufficient for the payment of
the entire amount of dividends payable with respect to Preferred Shares on any
date on which the Board has declared the payment of a dividend or otherwise,
the amount of any available surplus shall be allocated for the payment of
dividends with respect to the Preferred Shares and any other shares of capital
stock that are pari passu as to dividends, as permitted under Section 4(i)
below, pro rata based upon the amount of accrued and unpaid dividends of such
shares of capital stock.
(d) For purposes hereof, the term "Business Day" shall
mean any Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on
which banking institutions in New York City are authorized or obligated by law
or executive order to close.
Section 3. Preferred Shares -- Certain Restrictions.
Unless the dividends (including accrued and unpaid dividends in arrears)
described above in Section 2, which pursuant to their terms should have been
paid, have been paid in full or declared and set apart for payment, the
Corporation shall be prohibited from paying dividends on, making any other
distributions on, or redeeming or purchasing or otherwise acquiring for
consideration any capital stock of the Corporation junior to the Preferred
Shares with regard to its rank, either as to dividends or upon liquidation,
dissolution or winding up. The Corporation shall not permit any subsidiary or
subpartnership of the Corporation to purchase or otherwise acquire for
consideration or make any payment with respect to any shares of capital stock
of the Corporation if the Corporation is prohibited from purchasing or
otherwise acquiring for consideration or making any payment with respect to
such shares at such time and in such manner pursuant to the prior sentence,
provided, however, that the Corporation shall not be prohibited from making a
capital contribution of capital stock of the Corporation to any of its
subsidiaries or subpartnerships.
Section 4. Preferred Shares -- Voting Rights.
(a) Except as limited by law the holders of the Preferred
Shares shall be entitled to vote or consent on all matters submitted to the
holders of Common Stock together with the holders of the Common Stock as a
single class, including, but not limited to, any matter which, pursuant to the
Charter of the Corporation, requires the approval by vote or consent of those
entitled to vote-generally in the election of directors.
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(b) For the purposes of calculating the votes cast for a
particular matter when voting or consenting pursuant to Section 4(a), each
Preferred Share will entitle the holder thereof to one vote for each share of
Common Stock into which such Preferred Share is convertible as provided in
Section 7(c) herein as of the record date for such vote or consent or, if no
record date is specified, as of the date of such vote or consent.
(c) In addition to the voting rights described in Section
4(a), upon the issuance to Five Arrows Realty Securities L.L.C. of Preferred
Shares such that, and for as long as Five Arrows Realty Securities L.L.C., or
an affiliate, successor where the current members own greater than a majority
interest, or member of Five Arrows Realty Securities L.L.C., is the holder of
either (A) at least 675,675 Preferred Shares or (B) an amount of Preferred
Shares which if converted into shares of Common Stock would exceed 5% of the
Common Stock on a fully diluted basis (determined on the basis of then
convertible, exercisable or exchangeable securities, warrants or options issued
by the Company or Ambassador Apartments, L.P., a Delaware limited partnership
(the "Partnership") (such amount as set forth in clauses (A) and (B) above, the
"Minimum Threshold"), (i) the number of directors constituting the Board shall
be increased by one (1) member and (ii) upon the first to occur, or from time
to time following the Dividend Reductions/Earnings Cure (as defined herein)
upon the first to occur, of either (x) the Regular Quarterly Dividend paid in
the prior quarter on the Common Stock shall be reduced below $.40 per share
(adjusted to reverse the effect of any event set forth in Section 7(g), 7(i))
or 7(j) (the "Dividend Reduction Default") or (y) the Corporation reports for
the prior three consecutive fiscal quarters that the ratio of its Combined
EBITDA to its reported interest expense (as described in clause (2) under the
definition of Combined EBITDA below) for each such respective quarter was less
than 2.00 to 1.00 (the "Earnings Default"), the Board shall be increased by an
additional one (1) member for an aggregate increase of two directors. The term
"Regular Quarterly Dividend" means any cash dividend or dividends paid in any
calendar quarter that do not in the aggregate exceed the Corporation's reported
Funds From Operations (as defined by the National Association of Real Estate
Investment Trusts prior to 1996) for the quarter relating to such dividend.
The term "Combined EBITDA" means the combined net income of the Corporation
(before extraordinary income or gains) as reported in its Quarterly Report on
Form 10-Q under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or otherwise furnished to holders of Preferred Shares pursuant to Section
4(j) increased (to the extent deducted in determining consolidated net income)
by the sum of the following (without duplication):
(1) all income and state franchise taxes
paid or accrued according to Generally Accepted Accounting
Principals ("GAAP") for such period (other than income taxes
attributable to extraordinary, unusual or non-recurring gains
or losses except to the extent that such gains were not
included in Combined EBITDA),
(2) all interest expense paid or accrued
in accordance with GAAP for such period (including financing
fees and amortization of deferred financing fees and
amortization of original issue discount),
(3) depreciation and depletion reflected
in such reported net income,
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(4) amortization reflected in such
reported net income including, without limitation,
amortization of capitalized debt issuance costs (only to the
extent that such amounts have not been previously included in
the amount of Combined EBITDA pursuant to clause (2) above),
and
(5) any other non-cash charges to the
extent deducted from combined net income (including, but not
limited to, income allocated to minority interests).
The holders of the Preferred Shares shall have the special right, voting
separately as a single class, to elect as soon as practical, a director to fill
each vacancy created pursuant to this Section 4(c) upon the occurrence of the
Minimum Threshold having been met, and created upon the occurrence of the
Dividend Reduction Default and/or the Earnings Default, as hereinabove
provided, and to elect their respective successors at each succeeding annual
meeting of the Corporation thereafter at which such successor is to be elected.
The director so elected from time to time in respect of clause (i) of this
Section 4(c) following the Minimum Threshold having been met shall be referred
to herein as the "Section 4(c)(i) Director." The director so elected from time
to time in respect of clause (ii) of this Section 4(c) following the Dividend
Reduction Default or the Earnings Default, as the case may be, shall be
referred to herein as the "Section 4(c)(ii) Director." Each vacancy created
upon the Board from time to time pursuant to clause (i) or (ii) of this Section
4(c), as the case may be, shall be apportioned among the classes of directors
to prevent stacking in any one class of directors to ensure that all directors
in each of the classes of directors are as nearly equal in number as possible.
The Section 4(c)(i) Director and the Section 4(c)(ii) Director, as the case may
be, shall be classified accordingly. Each Section 4(c)(i) Director, as a
qualification for election as such, shall submit to the Board, a duly-executed,
valid, binding and enforceable letter of resignation from the Board to be
effective immediately upon such time as the Minimum Threshold no longer
continues to be met; and each Section 4(c)(ii) Director, as a qualification for
election as such, shall submit to the Board, a duly-executed, valid, binding
and enforceable letter of resignation from the Board, to be effective
immediately upon the first to occur of such time as (i) the Minimum Threshold
no longer continues to be met and (ii) the Dividend Reduction/Earnings Cure.
In addition, immediately following the effectiveness of the letter of
resignation delivered by the Section 4(c)(i) Director as contemplated by the
immediately preceding sentence, the Board shall be automatically decreased by
one (1) member; and immediately following the effectiveness of the letter of
resignation delivered by the Section 4(c)(ii) Director as contemplated by the
immediately preceding sentence, the Board shall be automatically decreased by
an additional one (1) member. In no event will there be more than one (1)
Section 4(c)(i) Director, nor more than one (1) Section 4(c)(ii) Director, on
the Board at any given time.
Upon the occurrence of a Dividend Reduction Default
or an Earnings Default, the same shall be deemed to continue to exist until
such time as (the "Dividend Reduction/Earnings Cure") (i) the Regular Quarterly
Dividend paid in each of the three immediately preceding quarters on the Common
Stock shall be greater than $.40 per share (adjusted to reverse the effect of
any event set forth in Section 7(g), 7(i) or 7(j)), (ii) the Corporation
reports for the prior three consecutive fiscal quarters that the ratio of its
Combined EBITDA to its reported interest expense (as described in clause (2)
under the definition of Combined EBITDA above) for each such quarter was
greater than 2.00 to 1.00, and (iii) all
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dividends, including accrued and unpaid dividends, on the Preferred Shares have
been paid or made available for payment.
(d) In addition to the voting rights described above, and for
as long as there are Preferred Shares outstanding, and provided that Five
Arrows Realty Securities L.L.C., or an affiliate, successor where the current
members own greater than a majority interest, or member of Five Arrows Realty
Securities L.L.C. does not hold the Minimum Threshold, upon the first
occurrence, and from time to time following the Dividend Payment Cure (as
defined herein) upon the first occurrence, of the failure of the Corporation to
pay in full the quarterly dividend payable in respect of the Preferred Shares
for the prior three consecutive quarters as provided herein (the "Dividend
Payment Default") the number of directors constituting the Board shall be
increased by a number of directors equal to two (2) minus any Section 4(c)(i)
Directors or Section 4(c)(ii) Directors who have not resigned from the Board as
provided in Sections 4(c). In such event the holders of Preferred Shares shall
have the special right, voting separately as a class, to elect as soon as
practicable a director to fill each vacancy on the Board created upon the
occurrence of the Dividend Payment Default, and to elect his or her successor
at each succeeding annual meeting of the Corporation thereafter at which his or
her successor is to be elected. The directors so elected from time to time in
respect of this Section 4(d) shall be referred to herein as the "Section 4(d)
Directors." The vacancy created upon the Board from time to time pursuant to
this Section 4(d) shall be apportioned among the classes of directors to
prevent stacking in any one class of directors and to ensure that all directors
in each of the classes of directors are as nearly equal in number as possible.
The Section 4(d) Directors shall be classified accordingly. Each Section 4(d)
Directors, as a qualification for election as such, shall submit to the Board a
duly-executed, valid, binding and enforceable letter of resignation from the
Board, to be effective immediately upon the earlier to occur of such time as
(i) there are no Preferred Shares of the Corporation outstanding and (ii) the
Dividend Payment Cure (as defined herein). In addition, immediately following
the effectiveness of any letter(s) of resignation delivered by any Section 4(d)
Director(s) as contemplated by the immediately preceding sentence, the Board
shall be automatically decreased by the number of Section 4(d) Directors so
resigning. In no event will there be more than two (2) Section 4(d) Directors
on the Board at any given time.
Upon the occurrence of the Dividend Payment Default,the same
shall be deemed to continue and exist until (the "Dividend Payment Cure") such
time as the earlier to occur of (i) none of the Preferred Shares shall remain
outstanding and (ii) all dividends, including accrued and unpaid dividends on
the Preferred Shares, have been paid or made available and the Corporation has
paid or made available dividends for three consecutive quarters on a timely
basis and all accrued and unpaid dividends have been paid or made available for
payment.
(e) [Reserved]
(f) At each meeting of the stockholders of the Corporation
at which the holders of the Preferred Shares shall have the right to vote as a
single class, as provided in this Section 4, the presence in person or by proxy
of the holders of record of a majority of the total number of Preferred Shares
then outstanding shall be necessary and sufficient to constitute a quorum of
such class for such election by such stockholders as a class. At any such
meeting or adjournment thereof, (x) the absence of a quorum of holders of
Preferred Shares shall not prevent the election of directors other than the
Section 4(c)(i) Director, the Section 4(c)(ii) Director or
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the Section 4(d) Directors (individually, a "Preferred Director" and
cumulatively, the "Preferred Directors"), and the absence of a quorum of the
holders of any other class or series of stock for the election of such other
directors shall not prevent the election of any Preferred Directors by the
holders of the Preferred Shares, and (y) in the absence of a quorum of the
holders of the Preferred Shares, a majority of the holders present or by proxy
shall, subject to applicable law, have the power to adjourn the meeting after
all other business has been conducted from time to time and place to place
without notice other than announcement at the meeting until a quorum shall be
present.
(g) In case any vacancy shall occur among the directors
elected by the holders of the Preferred Shares, other than upon the
effectiveness of a letter of resignation delivered as a qualification of
election pursuant to Section 4(c) or 4(d) above, as appropriate, such vacancy
shall be filled by the vote of holders of a majority of the Preferred Shares,
voting as a single class, present and voting, in person or by proxy, at a
special meeting of such stockholders called for that purpose.
(h) Notwithstanding the foregoing, any action required or
permitted to be taken by holders of Preferred Shares at any meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a unanimous consent, in writing, setting forth the action so taken,
shall be signed by each of the holders of Preferred Shares and shall be
executed and delivered to the Secretary of the Corporation for placement among
the minutes of proceedings of the stockholders of the Corporation.
(i) So long as Preferred Shares of the Corporation are
outstanding, without the consent of the holders of at least the majority of the
Preferred Shares at the time outstanding, given in person or by proxy, at a
meeting called for that purpose at which the holders of the Preferred Shares
shall vote separately as a class, or by the unanimous consent in writing of all
of the holders of the Preferred Shares, the Corporation may not (i) effect or
validate the amendment, alteration or repeal of any provision of these Articles
Supplementary, (ii) effect or validate the amendment, alteration or repeal of
any provision of the Charter of the Corporation which would with respect to the
holders of the Preferred Shares, amend adversely or repeal the dividend,
conversion, voting, redemption, liquidation or other rights set forth in these
Articles Supplementary, (iii) other than the 1,351,351 Preferred Shares
authorized herein, issue Preferred Shares (or a series of preferred stock that
would vote as a class with the Preferred Shares with respect to Section 4(c)
or Section 4(d)) or shares of stock ranking senior to the Preferred Shares (as
to dividends or upon liquidation, dissolution or winding up), (iv) other than
the 1,351,351 Preferred Shares authorized herein, issue shares of stock ranking
equal to the Preferred Shares (as to preference with respect to dividends or
upon liquidation, dissolution or winding up) that have a liquidation preference
that exceeds in the aggregate $20 million or a dividend rate higher than the
Preferred Shares, provided, however, in addition to such $20 million
liquidation value of stock, (A) if the provisions of Section 4(l) have been
satisfied, the Corporation shall also be permitted to issue additional shares
of stock ranking equal to the Preferred Shares (as to preference with respect
to dividends or upon liquidation, dissolution or winding up) with a liquidation
value not to exceed $20 million provided that such shares do not have a
dividend rate higher than the Preferred Shares and (B) the Corporation shall
also be permitted to issue an unlimited amount of additional shares of stock
ranking equal to the Preferred Shares (as to preference with respect to
dividends or upon liquidation, dissolution or winding up) provided that
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<PAGE> 8
such additional shares issued have been rated, at the time of such issuance, at
least "BBB" by Standard & Poor's Corporation or the equivalent by another
nationally recognized statistical rating agency and, provided, further, that no
additional securities may be issued pursuant to this Section 4(i)(iv) with a
dividend rate higher than the Preferred Shares or, with a conversion rate which
would allow one share of such additional securities to be converted into an
amount of shares of Common Stock which would be greater than the number of
shares of Common Stock which would be received upon conversion of one Preferred
Share or (v) either permit, without the unanimous approval of the Preferred
Directors (to the extent that at such time the holders of the Preferred Shares
are entitled to appoint a Preferred Director(s)) any subsidiary or
subpartnership to issue or sell any equity securities or partnership interests
in such entities ("Subsidiary Partnership Interests") to or for the account of
any entity other than the Corporation or sell, dispose or otherwise transfer
Subsidiary Partnership Interests to any person (other than the Corporation or
its subsidiaries); provided, however, that without the approval of the Section
4(c)(i) Directors, (i) the Corporation, or any subsidiary or subpartnership,
may issue Subsidiary Partnership Interests in an arms length transaction in
exchange for a multi-family property with a value equal to or exceeding the
value of the Subsidiary Partnership Interests issued, (ii) the Corporation or
any Subsidiary, may sell partnership interests in an operating subpartnership
(other than Ambassador Apartments, L.P.), provided, however, that (x) such
partnership interests to be sold do not in the aggregate exceed fifty (50)
percent of the interests in such operating subpartnership, (y) the gross book
value of the rental property before depreciation of such operating
subpartnership shall not exceed twenty-five (25) percent of the difference
between the gross book value of the rental property before depreciation of the
Corporation (including all subsidiaries and subpartnerships) and the gross book
value of the rental property before depreciation of the Jupiter-I, L.P. and the
Jupiter-II, L.P. operating subpartnerships and (z) such transaction has been
approved by at least two-thirds of the Board and (iii) with the prior approval
of at least two-thirds of the Board, the Corporation or Ambassador Apartments,
L.P. may sell in an arms length transaction, partnership interests in
Ambassador Apartments, L.P., not to exceed in the aggregate 10% of the total
partnership interest in Ambassador Apartments, L.P. Nothing in this Section
4(i) shall prevent the Corporation from issuing any shares of stock of the
Corporation which rank junior (as to dividends and upon liquidation,
dissolution or winding up) to the Preferred Shares upon such terms as the Board
shall authorize from time to time.
(j) The Corporation shall mail to each holder of record of
Preferred Shares, at such holder's address in the records of the Corporation,
within 45 days after the end of the first three fiscal quarters of each fiscal
year and within 90 days after the end of each fiscal year, its financial
reports for such fiscal period in such form and containing such independent
accountants report as set forth under the rules of the Securities and Exchange
Commission (together with the report of the Corporation's independent
accountants with respect to such fiscal period) irrespective of whether the
Corporation is then required to file reports under such rules.
(k) For as long as there are Preferred Shares of
the Corporation outstanding, and provided that Section 4(c) is applicable, no
holder of Preferred Shares or any member of a group (as such term is used in
Section 13(d)(2) of the Exchange Act) that includes such a holder shall have
the right, as such, to make any nomination of any person for election to the
Board (other than as a Preferred Director).
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<PAGE> 9
(l) No sale of any capital stock of the
Corporation may be made pursuant to the provisions of Section 4(i)(iv)(A)
unless the following procedures are fully complied with by the Corporation:
(i) The Corporation provides to the holders of the
Preferred Shares a bona fide offer (the "Offer") from an unaffiliated
third party to purchase such stock (the "Offering Notice"), which
notice shall include a term sheet executed by the Corporation and the
proposed purchaser(s) setting forth the terms of the securities
proposed to be sold (the "Offered Shares"), the terms on which the
Offered Shares are to be sold and the name and address of the proposed
purchaser(s). The terms of the Offer shall include, without
limitation, in reasonable detail, the amount, price, seniority,
conversion, redemption, voting, liquidation, dividend rate, preference,
registration rights, board representation, anti-dilution, restrictions
on transfer, change of control, closing conditions, fees and expenses,
put/call provisions, and relation to limited partnership agreement. As
hereinafter provided, an Offering Notice shall constitute an irrevocable
offer for the Option Period (as hereinafter defined) to sell the
Offered Shares to the holders of the Preferred Shares on the same terms
as set forth in the Offering Notice.
(ii) The holders of the Preferred Shares may elect, within
the 10- Business Day period following the date the Offering Notice
shall have been given (the "Option Period"), to purchase any or all of
the Offered Shares on the terms of the Offer at a closing as provided
in clause (iv) of this Section 4(l), by delivering to the Corporation a
written notice to that effect (the "Acceptance Notice"). If the
holders of the Preferred Shares elect in the aggregate to purchase a
number Offered Shares in excess of the number actually offered, such
purchases shall be made pro rata based upon the number of Preferred
Shares owned up to the number of Offered Shares elected to be purchased
in such holder's Acceptance Notice.
(iii) The Corporation may, up to and including the date
specified in the Offering Notice but not more than 90 days after the
expiration of the applicable Option Period, sell any Offered Shares
which the holders of the Preferred Shares do not agree to purchase in
the Acceptance Notice, provided that none of the terms of such purchase
are more favorable to the purchasers than were set forth in the
Offering Notice; provided, further, that the Corporation is permitted
to sell such Offered Shares on terms (the "Revised Terms") more
favorable to the purchasers than were set forth in the Offering Notice
if the Corporation shall provide to the holders of the Preferred Shares
the opportunity to purchase such Offered Shares on the Revised Terms.
The holders of Preferred Shares shall have three Business Days from the
date on which the holders of the Preferred Shares receive from the
Corporation the Revised Terms and the definitive instruments pursuant
to which such Offered Shares would be sold to notify the Corporation as
to their desire to accept the Revised Terms. If the Revised Terms are
so accepted, the transaction provided thereby shall be consummated at a
closing to be held as provided in clause (iv). If the holders of the
Preferred Shares shall fail to respond to the Revised Terms within such
three Business Day period, the Corporation may sell, within 90 days,
any of the Offered Shares, provided that such sale is documented by
such definitive instruments on terms, none of which are more favorable
to the purchasers then were provided for in the Revised Terms. If such
sale is not consummated by such date,
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<PAGE> 10
the restrictions provided for herein shall again become effective, and
no transfer of such Offered Shares may be made thereafter by the
Corporation without again offering the same to the holders of the
Preferred Shares in accordance with this Section 4(l).
(iv) The closing for the purchase of the Offered
Shares under this Section 4(l) shall be held at 10 a.m. at the
principal offices of the Corporation, on the date specified in the
Offering Notice (the "Closing Date"), which date shall be not earlier
than 30 nor later than 90 days after the expiration of the applicable
Option Period. The purchase price and all other terms for such
purchase of the Offered Shares shall be as set forth in the Offering
Notice.
Section 5. Preferred Share --Redemption.
(a) The Corporation may, at its option, to the extent it
shall have Legally Available Funds therefor, redeem all (but not less than all)
of the outstanding Preferred Shares, at any time on or after the date which is
the fifth anniversary of the original date of issuance of Preferred Shares.
(b) The option of the Corporation to redeem the Preferred
Shares pursuant to this Section 5 shall be exercised by mailing of a written
notice of election by the Corporation to the holders of the Preferred Shares at
such holder's address appearing the records of the Corporation, which notice
shall be sent at least 30 days prior to the date specified therein for the
redemption of the Preferred Shares.
(c) During the period beginning on the date on which each
holder of the Preferred Shares receives such a written notice of election
pursuant to subsection (b) above and ending on the thirtieth day following the
mailing of such notice, each holder of the Preferred Shares may exercise its
rights pursuant to Section 7 herein.
(d) Upon the thirtieth day following the receipt by the
holder of the Preferred Shares of a written notice of election pursuant to
subsection (b) above, the Corporation shall be required, unless such holder of
Preferred Shares has exercised its rights pursuant to subsection (c) above, to
purchase from such holder of Preferred Shares (upon surrender by such holder at
the Corporation's principal office of the certificate representing such Share),
such Preferred Shares, at a price equal to the product of (i) $18.50 per share
(the "Liquidation Value") plus accrued and unpaid dividends (accrued through
the date of payment for redemption or the date payment is made available for
payment to the holder thereof) plus a premium equal to the following percentage
of the Liquidation Value:
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<PAGE> 11
Redemption Occurs
On or After But Prior to % Premium
- ----------- ------------ ---------
August 15, 2001 August 14, 2002 6.0
August 15, 2002 August 14, 2003 5.0
August 15, 2003 August 14, 2004 4.0
August 15, 2004 August 14, 2005 3.0
August 15, 2005 August 14, 2006 2.5
August 15, 2006 August 14, 2007 2.0
August 15, 2007 August 14, 2008 1.5
August 15, 2008 August 14, 2010 1.0
August 15, 2010 0.0
and (ii) the number of Preferred Shares held by such holder to be redeemed.
(e) No Preferred Share is entitled to any dividends accruing after the
date on which the Liquidation Value of such Share (plus all accrued and unpaid
dividends thereof) is paid or made available for payment to the holder thereof.
On such date all rights of the holder of such Preferred Share shall cease, and
such Preferred Share shall not be deemed to be outstanding.
(f) In addition to the redemption provisions set forth in this Section 5,
if a Change of Control occurs, the Corporation will have the right to redeem
the Preferred Shares as provided in Section 8(a).
Section 6. Preferred Shares -- Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, then out of the assets of the Corporation before any distribution
or payment to the holders of shares of capital stock of the Corporation ranking
junior to the Preferred Shares (as to dividends or upon liquidation,
dissolution or winding up), the holders of the Preferred Shares shall be
entitled to be paid the Liquidation Value plus accrued and unpaid dividends (or
a pro rata portion thereof with respect to fractional shares) on a pro rata
basis with any other shares of Capital Stock of the Corporation that are pari
passu as to liquidation, dissolution or winding up, as permitted under Section
4(i); provided, however, that if such liquidation, dissolution or winding up of
the Corporation occurs in connection with or subsequent to a Change of Control
(as defined in Section 7(d)), then the holders of the Preferred Shares shall be
entitled to be paid the Change of Control Payment (as defined in Section 8(a)).
In the event of any liquidation, dissolution or winding up of the Corporation,
the Corporation by resolution of the Board shall, to the extent of any Legally
Available Funds therefor, to the extent not already declared, declare a
dividend on the Preferred Shares payable before any distribution is made to any
holders of shares of Capital Stock of the Corporation ranking junior to the
Preferred Shares (as to dividends or upon liquidation, dissolution or winding
up) in an amount equal to the accrued and unpaid dividends on the Preferred
Shares up to and including the date of such liquidation, dissolution or winding
up and, if the Corporation does not have sufficient Legally Available Funds to
pay all dividends in cash so accrued, an amount in cash equal to any remaining
accrued and unpaid
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<PAGE> 12
dividends, calculated at the rate or rates provided in Section 2, shall be
added to the amount to be received by the holders of the Preferred Shares for
such Preferred Shares upon such liquidation, dissolution or winding up. Except
as provided in this Section 6, the holders of the Preferred Shares shall be
entitled to no other or further distribution in connection with such
liquidation, dissolution or winding up.
(b) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of Preferred Shares shall be insufficient to permit payment in full to
such holders the sums which such holders are entitled to receive in such case,
then all of the assets available for distribution to the holders of the
Preferred Shares shall be distributed among and paid to the holders of
Preferred Shares, ratably in proportion to the respective amounts that would be
payable to such holders if such assets were sufficient to permit payment in
full.
Section 7. Preferred Shares -- Conversion.
(a) The holder of any Preferred Shares may, in its sole and absolute
discretion, convert all, but not less than all if such holder of Preferred
Shares holds less than 100,000 Preferred Shares, or if such holder holds more
than 100,000 Preferred Shares, not less than 100,000, of its Preferred Shares
into shares of Common Stock; provided, however, that if the Preferred Shares to
be converted have been previously registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, there shall be
no requirement as to the number of Preferred Shares required to be converted by
a holder of Preferred Shares.
(b) The option of the holder of any Preferred Shares to exercise its
rights pursuant to this Section 7 shall be exercised by the delivery of a
written notice of election by such holder to the Corporation, which notice
shall state the date on which such election is to be effective (the "Effective
Date") and shall be delivered on a date not less than five (seven if the
Corporation has sent a notice pursuant to Section 8(a)) nor more than sixty
days prior to the Effective Date. Such notice of election shall also state the
number of Preferred Shares to be converted. A notice of election, once
delivered, may be rescinded up to five days prior to the Effective Date.
(c) Upon the Effective Date the holder of Preferred Shares to be converted
pursuant to this Section 7 shall be entitled to receive, in exchange for the
Preferred Shares to be converted, the number of shares of Common Stock
determined by dividing the number of Preferred Shares to be converted by the
"Conversion Ratio." The "Conversion Ratio" with respect to any Preferred
Shares will be equal to (i) 1.08 if such Effective Date occurs on or prior to
August 14, 1997, and (ii) 1.00 if such Effective Date occurs on or after August
15, 1997; provided, however, that the Conversion Ratio shall be 1.00 at any
time after the occurrence of a Change of Control of the Corporation.
(d) "Change of Control" means each occurrence of any of the following:
(i) the acquisition, directly or indirectly, by any individual or entity or
group (as such term is used in Section 13(d)(3) of the Exchange Act) of
beneficial ownership (as defined in Rule 13d-3 under
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<PAGE> 13
the Exchange Act, except that such individual or entity shall be deemed to have
beneficial ownership of all shares that any such individual or entity has the
right to acquire, whether such right is exercisable immediately or only after
passage of time) of more than 25% of the aggregate outstanding voting power of
capital stock of the Corporation (other than by the Corporation) or of
Ambassador Apartments, L.P. (other than by the Corporation), other than the
acquisition of beneficial ownership of the Preferred Shares or the Common Stock
received upon conversion thereof; (ii) other than with respect to the election,
resignation or replacement of the Preferred Directors, during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Corporation (together with any new directors
whose election by such Board of Directors or whose nomination for election by
the shareholders of the Corporation was approved by a vote, prior to or
concurrently with the new director being elected, of the majority of the
directors of the Corporation then still in office who were either directors at
the beginning of such period, or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Corporation then in office; (iii) the Corporation
ceases to be the sole general partner of Ambassador Apartments, L.P.; (iv) (A)
the Corporation or Ambassador Apartments, L.P. consolidates with or merges into
another entity or conveys, transfers or leases all or substantially all of
their respective assets (including, but not limited to, real property
investments) to any individual or entity (other than the Corporation), or (B)
any corporation consolidates with or merges into the Corporation, which in
either event (A) or (B) is pursuant to a transaction in which the outstanding
voting capital stock of the Corporation is reclassified or changed into or
exchanged for cash, securities (unless the holders of the exchanged securities
of the Corporation immediately prior to such transaction hold immediately after
such transaction at least 75% of the securities into which such exchange was
made) or other property; or (v) the Corporation becomes a "Pension-held REIT"
as defined in Section 856(h)(3)(D) of the Internal Revenue Code of 1986, as
amended, other than as a result of any action, or unreasonable failure to act,
by the holders of Preferred Shares.
(e) The Corporation shall at all times when Preferred Shares shall be
outstanding reserve and keep available out of its authorized but unissued
stock, for the purposes of effecting the conversion of the Preferred Shares,
such number of its duly authorized shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding Preferred
Shares. Before taking any action which would cause an adjustment increasing
the Conversion Ratio such that Common Stock issuable upon the conversion of the
Preferred Shares would be issued below the par value of the Common Stock, the
Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully-paid and nonassessble shares of Common Stock at such adjusted
Conversion Ratio.
(f) All shares of Common Stock that are delivered upon conversion of the
Preferred Shares shall be validly issued, fully paid and nonassessable.
(g) If, after the date hereof, the Corporation, directly or indirectly,
(i) pays a dividend, or makes any other distribution, on its Common Stock in
shares of its Common Stock, (ii) subdivides the outstanding Common Stock into a
greater number of shares (by reclassification or otherwise than by a dividend
or distribution referred to in clause (i)) or (iii) combines the outstanding
Common Stock into a lesser number of shares, in each such case, the Conversion
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<PAGE> 14
Ratio in effect at the record date for the dividend or distribution or the
effective date of the subdivision or combination, will be adjusted so that,
upon the conversion of Preferred Shares after the record date or effective date
with respect to a specified number of shares of Common Stock, the holder will
receive the number and kind of shares which the holder would have received if
the holder had converted the Preferred Shares with respect to that number of
shares of Common Stock immediately before the first of those events and
retained all the shares and other securities which the holder received as a
result of each of those events.
(h) (i) In the event the Corporation or any subsidiary or
subpartnership shall, directly or indirectly, declare or pay any dividend
(other than a Regularly Quarterly Dividend, or dividends in the form of
shares of Common Stock or other securities), or make any distribution in
cash or property (other than shares of Common Stock or other securities),
to holders of the Common Stock (whether in connection with a merger or
consolidation in which the Corporation is the surviving or continuing
corporation, exchange of securities, sale of assets, plan of liquidation,
reorganization, restructuring, recapitalization or reclassification or
otherwise), each holder of Preferred Shares shall receive concurrently
with the receipt by holders of the Common Stock the kind and amount of
any such distribution that it would have owned or been entitled to
receive had such Preferred Shares been converted in accordance with
Section 7(c) immediately prior to such distribution or related record
date, as the case may be.
(ii) In the event the Corporation or any subsidiary or
subpartnership shall, directly or indirectly, issue to holders of the
Common Stock, as such (whether in connection with a merger or
consolidation in which the Corporation is the surviving or continuing
corporation, exchange of securities, sale of assets, plan of liquidation,
reorganization, restructuring, recapitalization, reclassification or
otherwise), any capital stock or any other securities or issue any
rights, warrants, options or other securities convertible into or
exercisable for any underlying security ("Distributable Securities") each
holder of Preferred Shares shall receive concurrently with the receipt by
holders of the Common Stock the kind and amount of any such Distributable
Securities that it would have owned or been entitled to receive had such
Preferred Shares been converted immediately prior to such issuance or
related record date, as the case may be.
(i) In the event, pursuant to the Contribution Agreement among the
Corporation, Ambassador Apartments, L.P., The Prime Group, Inc., Prime Group
Limited Partnership and Richard F. Cavenaugh, the Corporation or any subsidiary
or subpartnership shall, directly or indirectly, issue securities or
partnership interests or issue any rights, warrants, options or other
securities convertible into or exercisable for Common Stock, including, but not
limited to, Subsidiary Partnership Interests, as a result of meeting certain
Performance Criteria (as defined in such Contribution Agreement) the Conversion
Ratio shall be adjusted such that the holder of a Preferred Share would receive
upon conversion of such Preferred Share an amount of shares of Common Stock
such that the ratio of the number of shares received upon conversion to the
number of shares of Common Stock on a fully diluted basis (determined on the
basis of then convertible, exercisable or exchangeable securities, warrants or
options issued by the Company or the Partnership) would be the same as if such
Preferred Share had been converted immediately prior to such event.
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<PAGE> 15
(j) In case any other corporate event or transaction of the Corporation,
outside the ordinary course of business consistent with past practice, similar
in effect but not specified in Section 7(g), 7(h) or 7(i) occurs which
equitably requires an antidilutive adjustment to the Preferred Shares, the
Corporation and the holders of the Preferred Shares shall consult with each
other in good faith and mutually agree upon appropriate adjustments so that the
property (including securities) to be received by a holder of Preferred Shares
upon the conversion of the Preferred Shares after the effective date of such
event, shall be substantially similar, as nearly as practicable, to those to
which a holder would have been entitled had such holder converted the Preferred
Shares held by such holder immediately prior to such event.
(k) No adjustment pursuant to this Section 7 shall be required until
cumulative adjustments result in a concomitant change of 1% or more of the
number of shares of Common Stock to be received upon conversion of a Preferred
Share; provided, however, that any adjustments that by reason of this Section
7(k) are not required to be made shall be carried forward and taken into
account in the earlier of (i) any subsequent adjustment and (ii) conversion.
All calculations under this Section 7 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. No adjustment to the
Conversion Ratio pursuant to this Section 7 shall be made for cash dividends.
(l) In the event that:
(i) the Corporation takes any action that would require an
adjustment in the Conversion Ratio,
(ii) the Corporation declares or distributes any dividend,
distribution, security, instrument or other rights to its
shareholders (other than regular quarterly cash dividends) that
would require an adjustment in the Conversion Ratio pursuant to
Section 7(h),
(iii) the Corporation consolidates or merges with, or
transfers all or substantially all of its assets to, or makes
any statutory exchange of securities with, another
corporation or engages in any reorganization, restructuring,
recapitalization, reclassification of capital stock or other
similar transactions, or
(iv) there is a dissolution or liquidation or other winding
up of the Corporation,
each holder of Preferred Shares shall, to the extent practicable, be granted
the opportunity to convert some or all of such Preferred Shares prior to the
record date for, or the effective date of, the action or transaction so that
such holder may receive the rights, warrants, securities or assets that a
holder of shares of the Common Stock on that date. Therefore, to the extent
practicable, not later than 20 days prior to the earliest of the proposed
record or effective date, as the case may be, or any other applicable date with
respect to any of the foregoing actions or transactions (including the date, if
any is to be fixed, as of which holders of Common Stock shall be entitled to
convert their shares of Common Stock for securities or other property
deliverable upon any such merger, consolidations, reorganization,
restructuring, recapitalization, reclassification,
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<PAGE> 16
transfer, dissolution, liquidation or winding up) the Corporation shall give
the holder a notice stating such proposed record or effective date, as the case
may be, or such other applicable date. All notices to a holder of Preferred
Shares shall be deemed given only upon the earlier of (i) the date when
received by the holder or (ii) three days after the Corporation has sent such
notice. Conversion shall, however, be conditioned upon the actual occurrence
of the event giving rise to the right of conversion.
Section 8. Preferred Shares -- Change of Control Offer.
(a) In addition to the redemption provisions of Section 5, if an event or
transaction will result in a Section 8(a) Change of Control (as defined
herein), the Corporation may, at its option, to the extent it shall have
Legally Available Funds therefor, redeem all (but not less than all) of the
outstanding Preferred Shares on this date of such Section 8(a) Change of
Control. The right of the Corporation to redeem the Preferred Shares pursuant
to this Section 8(a) shall be exercised by mailing a written notice of election
by the Corporation to the holders of Preferred Shares at such holder's address
appearing in the records of the Corporation, to the extent practicable, not
less than 30 days prior to the date of the Section 8(a) Change of Control.
During the period beginning on the date such notice is mailed and ending on the
date seven days prior to the date of such Section 8(a) Change of Control, each
holder of Preferred Shares may exercise its rights pursuant to Section 7 herein
(which exercise shall, unless otherwise indicated, be conditioned upon the
occurrence of the specified Section 8(a) Change of Control). On the date of
the Section 8(a) Change of Control, the Corporation shall be required, unless
such holder of Preferred Shares has exercised its right to convert pursuant to
the prior sentence, to purchase from such holder of Preferred Shares (upon
surrender by such holder at the Corporation's principal office of the
certificate representing such share), such Preferred Shares, at a price equal
to the product of (i) $19.98 plus accrued and unpaid dividends (accrued through
the date of payment for redemption or the date such payment is made available)
(or if less the amount determined using the formula set forth in Section
5(d)(i)) and (ii) the number of Preferred Shares held by such holder to be
redeemed. No Preferred Share is entitled to any dividends accruing after the
date on which the payment for such share is paid or made available for payment
to the holder thereof.
(b) A "Section 8(a) Change of Control" means each occurrence of any of the
following: (i) the acquisition, directly or indirectly, by any individual or
entity or group (as such term is used in Section 13(d)(3) of the Exchange Act)
of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act,
except that such individual or entity shall be deemed to have beneficial
ownership of all shares that any such individual or entity has the right to
acquire, whether such right is exercisable immediately or only after passage of
time) of more than 33% of the aggregate outstanding voting power of capital
stock of the Corporation (other than by the Corporation) or of Ambassador
Apartments, L.P. (other than by the Corporation), other than the acquisition of
beneficial ownership of the Preferred Shares or the Common Stock received upon
conversion thereof; or (ii) (A) the Corporation or Ambassador Apartments, L.P.
consolidates with or merges into another entity or conveys, transfers or leases
all or substantially all of their respective assets (including, but not limited
to, real property investments) to any individual or entity (other than the
Corporation), or (B) any corporation consolidates with or merges into the
Corporation, which in either event (A) or (B) is pursuant to a transaction in
which the outstanding
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voting Capital Stock of the Corporation is reclassified or changed into or
exchanged for cash, securities (unless the holders of the exchanged securities
of the Corporation immediately prior to such transaction hold immediately after
such transaction at least 67% of the securities into which such exchange was
made) or other property.
(c) (i) If a Change of Control occurs and the Corporation has not
exercised its rights pursuant to Section 5(a), each holder of Preferred
Shares will have the right to require that the Corporation, to the extent
it shall have Legally Available Funds therefor, to redeem such holder's
Preferred Shares at a redemption price payable in cash in an amount equal
to 102% of the Liquidation Value thereof, plus accrued and unpaid
dividends, if any (the "Change of Control Payment"), to the date of
purchase or the date payment is made available (the "Change of Control
Payment Date"), pursuant to the offer described in subsection (ii) below
(the "Change of Control Offer").
(ii) Within 15 days following the Company becoming aware that an
event has occurred that has resulted in any Change of Control, the
Corporation shall mail a notice to each holder of Preferred Shares, at
such holder's address appearing in the records of the Corporation,
stating (A) that a Change of Control has occurred and that such holder
has the right to require the Corporation to redeem such holder's
Preferred Shares in cash, (B) the date of redemption (which shall be a
Business Day, no earlier than 30 days and no later than 60 days from the
date such notice is mailed, or such later date as may be necessary to
comply with the requirements of the Exchange Act), (C) the redemption
price for the redemption, and (D) the instructions determined by the
Corporation, consistent with this subsection, that a holder must follow
in order to have its Preferred Shares redeemed.
(iii) On the Change of Control Payment Date, the Corporation
will, to the extent lawful, accept for payment Preferred Shares or
portions thereof tendered pursuant to the Change of Control Offer and
pay an amount equal to the Change of Control Payment in respect of all
Preferred Shares or portions thereof so tendered. The Corporation shall
promptly mail to each holder of Preferred Shares to be redeemed payment
in an amount equal to the redemption price for such Preferred Shares.
(iv) Notwithstanding anything else herein, to the extent they are
applicable to any Change of Control Offer, the Corporation will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14D
and 14E and any other tender offer rules under the Exchange Act and any
other federal and state securities laws, rules and regulations and
all-time periods and requirements shall be adjusted accordingly.
Section 9. Preferred Shares -- Breach of Certain Covenants.
(a) In the event that the Corporation breaches any of its obligations
under Sections 4, 5, 6 or 7 of the Supplemental Agreement, dated as of the date
of the initial issuance of the Preferred Shares, among the Corporation,
Ambassador Apartments, L.P. and Five Arrows Realty Securities L.L.C., and, with
respect to a breach of Section 5 of the Supplemental Agreement, the Corporation
has not cured such breach within 30 days of obtaining knowledge
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thereof, each holder of Preferred Shares will have the right to require no
later than 60 days after notice from the Corporation of such breach (and the
expiration of the cure period, if applicable) that the Corporation, to the
extent it has Legally Available Funds therefor, redeem such holder's Preferred
Shares at a redemption price payable in cash in an amount equal to 100% of the
Liquidation Value thereof, plus accrued and unpaid dividends, if any (the
"Breach of Covenant Payment"), to the date of redemption (the "Breach of
Covenant Payment Date").
(b) In order to receive such Breach of Covenant Payment, the holder of
Preferred Shares must send a notice (the "Breach of Covenant Payment Notice")
to the Corporation. The Breach of Covenant Payment Notice shall specify the
number of Preferred Shares to be redeemed and Breach of Covenant Payment Date.
The Breach of Covenant Payment Notice shall be sent to the Corporation not less
than ten (10), or more than thirty (30), prior to the Breach of Covenant
Payment Date.
(c) On the Breach of Covenant Payment Date, the Corporation will, to the
extent lawful, accept for payment Preferred Shares or portions thereof as
specified in the related Breach of Covenant Payment Notice and pay an amount
equal to the Breach of Covenant Payment in respect of such Preferred Shares or
portions thereof. The Corporation shall promptly mail to each holder of
Preferred Shares so accepted payment in an amount equal to the redemption price
for such Preferred Shares.
Section 10. Preferred Shares -- Ownership Limitations.
(a) Certain Definitions. Unless the context otherwise requires, the terms
defined in this Section 10(a) shall have, for all purposes of Section 10, 11
and 12 of these Articles Supplementary, the meanings herein specified (with
terms defined in the singular having comparable meanings when used in the
plural).
"ACQUIRE" shall mean the acquisition of Beneficial Ownership or
Constructive Ownership of shares of Capital Stock by any means including,
without limitation, the exercise of any rights under any option, warrant,
convertible security, pledge or other security interest or similar right to
acquire shares, but shall not include the acquisition of any such rights
unless, as a result, the acquiror would be considered a Beneficial Owner or
Constructive Owner, as defined below. The term "Acquisition" shall have the
correlative meaning.
"AFFILIATE" shall have the meaning set forth in Rule 405 under the
Securities Act of 1933, as amended.
"AGGREGATE STOCK OWNERSHIP LIMIT" shall mean 9.9% (in value) of the
aggregate of the outstanding shares of Capital Stock. The number and value of
shares of the outstanding shares of Capital Stock shall be determined by the
Board of Directors in good faith, which determination shall be conclusive for
all purposes hereof.
"BENEFICIAL OWNERSHIP" shall mean ownership of Capital Stock by a Person
who is or would be treated as an actual owner of such shares of Capital Stock
either directly or constructively through the application of Section 544 of the
Code, as modified by Section
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856(h)(1)(B) of the Code (except where expressly provided otherwise). The
terms "Beneficial Owner," Beneficially Owns" and "Beneficially Owned" shall
have the correlative meanings.
"BENEFICIARY" shall mean a beneficiary of the Trust as determined pursuant
to Section 11(f).
"CAPITAL STOCK" shall mean all classes or series of capital stock of the
Corporation including, without limitation, Common Stock, Preferred Stock,
Preferred Shares, Excess Stock and Excess Class A Preferred.
"CLOSING PRICE" with respect to any class or series of Capital Stock on
any date shall mean the last sale price for such Capital Stock, regular way,
or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, for such Capital Stock in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if such Capital Stock is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such Capital Stock is listed or admitted to
trading or, if such Capital Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price, or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if such Capital Stock
is not quoted by any such organization, the average of the closing bid and
asking prices as furnished by a professional market maker selected by the Board
of Directors and making a market in such Capital Stock.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COMMON STOCK OWNERSHIP LIMIT" shall mean 9.9% (in value or in number of
shares, whichever is more restrictive) of the aggregate of the outstanding
shares of Common Stock and the outstanding shares of Excess Common Stock. The
number and value of outstanding shares of Common Stock and Excess Common Stock
shall be determined by the Board of Directors in good faith, which
determination shall be conclusive for all purposes hereof.
"CONSTRUCTIVE OWNERSHIP" shall mean ownership of Capital Stock by a Person
who is or would be treated as an actual owner of Capital Stock either directly
or constructively through the application of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code (except where expressly provided
otherwise). The terms "Constructive Owner," Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.
"CONVERSION" shall mean a conversion of shares of Preferred Stock into
Common Stock.
"CONVERSION HOLDER" shall mean any Person who becomes the Beneficial Owner
or Constructive Owner of Common Stock in excess of the Common Stock Ownership
Limit by reason of the Conversion of shares of any series of Preferred Stock
which are convertible into Common Stock.
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"EXCESS CLASS A PREFERRED DESIGNATION PERIOD" shall have the meaning set
forth in Section 11(f).
"EXCESS CLASS A PREFERRED LIMITATION PRICE" shall mean the lesser of (A)
in the case of Excess Class A Preferred resulting from a Transfer or
Acquisition for value, the price per share that the Purported Beneficial
Transferee paid for the Preferred Shares in the purported Transfer or
Acquisition that resulted in the issuance of the Excess Class A Preferred, or,
in the case of Excess Class A Preferred resulting from (1) a Transfer or
Acquisition other than for value (such as a gift, devise or similar transfer)
or (2) an event other than a Transfer or Acquisition, a price per share equal
to the Market Price of the Preferred Shares that were exchanged for such Excess
Class A Preferred on the date of the purported Transfer, Acquisition or other
event that resulted in the issuance of the Excess Class A Preferred, or (B) a
price per share equal to the Market Price of the Preferred Shares on the date
on which (i) the Corporation designates a Beneficiary pursuant to Section
11(f), or (ii) the Corporation, or its designee, accepts the offer to sell
pursuant to Section 11(g).
"EXCESS CLASS A PREFERRED" shall have the meaning set forth in Section
11(a) hereof.
"EXCESS COMMON STOCK" shall mean the Excess Common Stock, $.01 par value
per share, of the Corporation.
"EXCESS PREFERRED STOCK" shall mean the Excess Preferred Stock, $.01 par
value of the Corporation.
"EXCESS STOCK" shall mean the excess stock, $.01 par value per share, of
the Corporation, and includes Excess Common Stock, Excess Preferred Stock and
Excess Class A Preferred.
"INITIAL ISSUE DATE" shall mean the date that the Preferred Shares are
first issued by the Corporation.
"MARKET PRICE" on any date shall mean, with respect to any class or series
of outstanding Capital Stock, the average of the Closing Price for such Capital
Stock for the five consecutive Trading Dates ending on such date, or, if there
is no market in such Capital Stock, the fair market value thereof as determined
by the Board of Directors of the Corporation.
"PERSON" shall mean an individual, corporation, partnership, 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 and also includes a group as that term is used for
purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
"PREFERRED SHARE AFFECTED PERSONS" shall have the meaning set forth in
Section 10(c)(iii).
"PREFERRED SHARE CONSTRUCTIVE OWNERSHIP EVENT" shall have the meaning set
forth in Section 10(c)(iii).
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"PREFERRED STOCK" shall mean the preferred stock, $.01 par value per
share, of the Corporation, of which the Preferred Shares are a series.
"PURPORTED BENEFICIAL HOLDER" shall mean, with respect to any event other
than a purported Transfer or Acquisition which results in Excess Stock
(inclusive of Excess Class A Preferred), the person for whom the applicable
Purported Record Holder held the shares of Capital Stock (inclusive of
Preferred Shares) that were, pursuant to Section 10(c), automatically
exchanged for shares of Excess Stock upon the occurrence of such event. The
Purported Beneficial Transferee and the Purported Record Transferee may be the
same Person.
"PURPORTED BENEFICIAL TRANSFEREE" shall mean, with respect to any
purported Transfer or Acquisition which results in Excess Stock (inclusive of
Excess Class A Preferred), the purported beneficial transferee for whom the
Purported Record Transferee would have acquired shares of Capital Stock
(inclusive of Preferred Shares) if such Transfer or Acquisition had not
violated the provisions of Section 10(c). The Purported Beneficial Transferee
and the Purported Record Transferee may be the same Person.
"PURPORTED RECORD HOLDER" shall mean, with respect to any event other than
a purported Transfer or Acquisition which results in Excess Stock (inclusive of
Excess Class A Preferred), the record holder of shares of Capital Stock
(inclusive of Preferred Shares) that were, pursuant to Section 10(c),
automatically exchanged for shares of Excess Stock upon the occurrence of such
event. The Purported Record Holder and the Purported Beneficial Holder may be
the same Person.
"PURPORTED RECORD TRANSFEREE" shall mean, with respect to any purported
Transfer or Acquisition which results in Excess Stock (inclusive of Excess
Class A Preferred), the Person who would have been the record holder of the
Capital Stock if such Transfer or Acquisition had not violated the provisions
of Section 10(c). The Purported Beneficial Transferee and the Purported Record
Transferee may be the same Person.
"REIT" shall mean a real estate investment trust within the meaning of
Section 856 of the Code.
"RESTRICTION TERMINATION DATE" shall mean the first day on which the
Corporation determines pursuant to Section 5.1 of the Charter that it is no
longer in the best interests of the Corporation to attempt to, or continue to,
qualify as a REIT or that compliance with the restrictions and limitations on
Beneficial Ownership, Constructive Ownership and the Transfer or Acquisition of
shares of Capital Stock set forth herein is no longer required in order for the
Corporation to qualify as a REIT.
"SPECIAL TRIGGERING EVENT" shall mean either (i) the election by one or
more holders of any series of Preferred Stock (including the Preferred Shares)
convertible into Common Stock to convert all or a portion of such Preferred
Stock into shares of Common Stock, (ii) the redemption or purchase by the
Corporation of all or a portion of the outstanding shares of Capital Stock or
(iii) a change in the relative values of classes of Capital Stock.
"TRADING DAY" with respect to any class or series of Capital Stock shall
mean a day on which the principal national securities exchange on which the
applicable Capital Stock
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<PAGE> 22
is listed or admitted to trading is open for the transaction of business
or, if such Capital Stock is not listed or admitted to trading on any national
securities exchange, shall mean any Business Day.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Capital Stock or the right to vote or receive dividends on
Capital Stock (including (i) the granting of any option or entering into any
agreement for the sale, transfer or other disposition of Capital Stock or the
right to vote or receive dividends on Capital Stock or (ii) the sale, transfer,
assignment or other disposition of any securities or rights convertible into or
exchangeable for Capital Stock), in each case whether voluntary or involuntary,
whether of record of Beneficially Owned or Constructively Owned (including,
without limitation, Transfers of interests in other entities which result in
changes in Beneficial Ownership or Constructive Ownership of Capital Stock),
and whether by operation of law or otherwise. "Transferring" and "Transferred"
shall have the correlative meaning.
"TRUST" shall mean each of the trusts provided for in Section 11(b).
"TRUSTEE" shall mean the Corporation, acting as trustee for any of the
Trusts, or any successor trustee appointed by the Corporation.
(b) Charter Terms. So long as Preferred Shares are outstanding, without
the consent of the holders of at least a majority of the Preferred Shares at
the time outstanding, given in person or by proxy, at a meeting called for that
purpose at which the holders of the Preferred Shares shall vote separately as a
class, or by unanimous written consent in writing of all holders of the
Preferred Shares, the Corporation will not effect or validate any amendment,
alteration or repeal of any Section of the Charter, so as to increase in any
respect the restrictions or limitations on ownership applicable to the
Preferred Shares (as such and not inclusive of the Common Stock issuable upon
conversion thereof) pursuant thereto. It is not the intent that, and is in no
event shall, the terms of Section 10 or 11 of these Articles Supplementary
alter, amend or modify any of the restrictions or limitations on ownership
applicable to any Capital Stock of the Corporation, other than to the extent
that terms of the Preferred Shares and Excess Class A Preferred are established
and set by these Articles Supplementary, and then only insofar as such terms,
as applied to the Preferred Shares or Excess Class A Preferred, are in addition
to, or not in conflict with, those terms established in the Charter for terms
of the Capital Stock.. Without limiting the generality of the foregoing, in no
event shall the terms of Sections 10 or 11 of these Articles Supplementary be
deemed to modify or amend the restrictions or limitations on ownership
contained in Sections 4.5.5 through 4.5.11 of the Charter, exclusive of these
Articles Supplementary, as applied to the Common Stock or any Beneficial or
Constructive Owner or Ownership thereof.
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(c) Aggregate Stock Ownership Limitation.
(i) During the period commencing on the Initial Issue Date and prior
to the Restriction Termination Date:
(A) (x) Except as provided in Section 10(i), no Person
other than a Conversion Holder shall Acquire or Beneficially
or Constructively Own any shares of Capital Stock, if, as the
result of such Acquisition or Beneficial or Constructive Ownership,
such Person shall Beneficially or Constructively Own shares of
Capital Stock in excess of the Common Stock Ownership Limit;
provided, however, a Conversion Holder shall only be permitted to
Acquire or Beneficially Own or Constructively Own shares of Common
Stock in excess of the limitation provided herein to the extent
that such Beneficial or Constructive Ownership was caused by a
Conversion of Preferred Stock into Common Stock; and
(y) Except as provided in Section 10(i), no Person,
including but not limited to a Conversion Holder, shall Acquire
or Beneficially or Constructively Own any shares of Preferred Stock
(inclusive of the Preferred Shares) or Common Stock in excess of
the Aggregate Stock Ownership Limit; and
(B) No Person shall Acquire or Beneficially or Constructively
Own shares of Capital Stock to the extent that such Acquisition or
Beneficial or Constructive Ownership of Capital Stock 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, an Acquisition or 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 from such tenant would cause the Corporation to
fail to satisfy any of the gross income requirements of Section
856(c) of the Code).
(ii) If, during the period commencing on the Initial Issue Date and
prior to the Restriction Termination Date, any Transfer or
Acquisition of Preferred Shares (other than a Transfer or
Acquisition to which Section 10(c)(iii) applies) (whether or not
such Transfer or Acquisition is the result of a transaction entered
into through the facilities of the New York Stock Exchange or any
other national securities exchange or automated inter-dealer
quotation system), occurs which, if effective, would result in any
Person Acquiring Preferred Shares in violation of Section 10(c)(i)
hereof, (A) then that number of Preferred Shares being Transferred
or Acquired that otherwise would cause such Person to violate
Section 10(c)(i) hereof (rounded up to the nearest whole share)
shall be automatically converted into and exchanged for an equal
number of shares of Excess Class A Preferred, effective as of the
close of business on the Business Day prior to the date of such
Transfer or Acquisition, and such Person shall acquire no rights in
such shares or (B) if the conversion to, and exchange for, shares
of Excess Class A Preferred described in clause (A) of this
sentence would not be
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effective for any reason to prevent any Person from Acquiring or
Transferring Preferred Shares in violation of Section 10(c)(i)
hereof, then the Transfer or Acquisition of that number of
Preferred Shares that otherwise would cause any Person to violate
Section 10(c)(i) hereof shall be void ab initio, and the intended
transferee shall acquire no rights in such Preferred Shares.
(iii) If, during the period commencing on the Initial Issue Date
and prior to the Restriction Termination Date, a change in the
relationship between two or more Persons ("Preferred Share Affected
Person") results in any of such Preferred Share Affected Person
Beneficially or Constructively Owning Preferred Shares in violation
of Section 10(c)(i) hereof because of the application of Section
318(a) of the Code (as modified by Section 856(d)(5) of the Code)
or Section 544 of the Code (as modified by Section 856(h)(1)(B) of
the Code) (a "Preferred Share Constructive Ownership Event"), then
that number of Preferred Shares Beneficially or Constructively
Owned by the Preferred Share Affected Person (rounded up to the
nearest whole share) that would otherwise cause a violation of
Section 10(c)(i) hereof, shall be automatically converted into and
exchanged for an equal number of shares of Excess Class A
Preferred, effective as of the close of business on the Business
Day prior to such Preferred Share Constructive Ownership Event, and
such Person or Persons shall acquire no rights in such shares.
(iv) If, during the period commencing on the Initial Issue Date and
prior to the Restriction Termination Date, a Special Triggering
Event (if effective) or other event or occurrence (if effective),
other than a Transfer or Acquisition described in Section 10(c)(ii)
or a Preferred Share Constructive Ownership Event described in
Section 10(c)(iii), would result in any violation of Section
10(c)(i) hereof, then (A) the number of Preferred Shares (rounded
up to the nearest whole share) that would (but for this Section
10(c)(iv)) cause any Person to Beneficially or Constructively Own
Capital Stock in violation of Section 10(c)(i) hereof, shall be
automatically repurchased by the Corporation from the actual owner
of such shares of Capital Stock, effective as of the close of
business on the Business Day prior to the date of such Special
Triggering Event or other event or occurrence; (B) if the
automatic repurchase described in clause (A) of this Section
10(c)(iv) would not be effective for any reason to prevent any
Person from Beneficially or Constructively Owning shares of Capital
Stock in violation of Section 10(c)(i) hereof, then the number of
Preferred Shares (rounded up to the nearest whole share) that
otherwise would cause any Person to violate Section 10(c)(i) shall
be automatically converted into and exchanged for an equal number
of shares of Excess Class A Preferred effective as of the close of
business on the Business Day prior to the date of such Special
Triggering Event or other event or occurrence, and the actual owner
shall retain no rights in the Preferred Shares so converted; or (C)
if the conversion to, and exchange for shares of Excess Class A
Preferred described in clause (B) would not be effective for any
reason to prevent any Person from Beneficially or Constructively
Owning Capital Stock in violation of Section 10(c)(i) hereof, then
the Special Triggering Event or other event or occurrence that
otherwise would cause such Person to violate Section 10(c)(i) shall
be void ab initio. The repurchase price of Preferred Share
automatically repurchased pursuant to clause (A) of this Section
10(c)(iv) shall be a price per share equal to the
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Market Price on the date of the Special Triggering Event or other
event or occurrence that resulted in the automatic repurchase.
Dividends which were accrued but unpaid with respect to the
repurchased Preferred Shares as of the date of the Special
Triggering Event or other event or occurrence that resulted in the
repurchase shall be paid to the actual owner of the Preferred
Shares prior to the repurchase. Any dividend or other distribution
paid after the Special Triggering Event or other event or
occurrence that resulted in the repurchase, but prior to the
discovery of the Corporation that Preferred Shares have been
automatically repurchased by the Corporation shall be repaid to the
Corporation upon demand and any dividend declared but unpaid shall
be rescinded as void ab initio with respect to such Preferred
Shares.
(v) Subject to Section 12(a) hereof, notwithstanding any other
provisions contained in this Section 10, during the period
commencing on the Initial Issue Date and prior to the Restriction
Termination Date, any Transfer or Acquisition of Preferred Shares
(whether or not such Transfer or Acquisition is the result of a
transaction entered into through the facilities of the New York
Stock Exchange or any other national securities exchange or
automated inter-dealer quotation system) that, if effective, would
result in the Capital Stock 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 Preferred Shares.
(d) Remedies for Breach. If the Board of Directors or any duly authorized
committee thereof shall at any time determine in good faith that a Transfer or
other event has in either case in respect of the Preferred Shares taken place
that results in a violation of Section 10(c) hereof, or that a Person intends
to Acquire or has attempted to Acquire Beneficial or Constructive Ownership of
any Preferred Shares in violation of Section 10(c) hereof, (whether or not such
violation is intended), the Board of Directors or a committee thereof shall
take such action as it or they deem advisable, subject to Section 12(a) hereof,
to refuse to give effect to or to prevent such Transfer or other event,
including, without limitation, causing the Corporation to redeem shares,
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 attempted Transfers or, in the case of an event other than a
Transfer, Beneficial or Constructive Ownership, in violation of Section 10(c)
hereof, shall automatically result in the exchange for Excess Class A Preferred
described in Section 10(c) or the automatic repurchase described in Section
10(c)(iv), as applicable, and, where applicable, such Transfer (or other event)
shall be void ab initio as provided above irrespective of any action (or
non-action) by the Board of Directors or a committee thereof.
(e) Notice of Restricted Transfer. Any Person who Acquires or attempts or
intends to Acquire shares of Preferred Shares in violation of Section 10(c), or
any Person who is a transferee of Preferred Shares in a Transfer or is
otherwise affected by an event other than a Transfer that results in, in
respect of any Preferred Shares, a violation of Section 10(c), shall
immediately give written notice to the Corporation of such Acquisition or
Transfer or other 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 Acquisition, Transfer or attempted, intended or purported
Acquisition, Transfer or other event on the Corporation's status as a REIT.
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(f) Owners Required to Provide Information. From the Initial Issue Date
to the Restriction Termination Date:
(i) every Beneficial Owner of more than 5% (or such lower
percentage as required by the Code or the Treasury Regulations
promulgated thereunder) of the outstanding Preferred Shares of the
Corporation shall, within 30 days after December 31 of each year,
give written notice to the Corporation stating the name and address
of such Beneficial Owner, the number of Preferred Shares and other
shares of the Capital Stock of the Corporation Beneficially or
Constructively Owned, and a description of the manner in which such
shares are held. Each such Beneficial Owner shall provide to the
Corporation such additional information as the Corporation may
request in order to determine the effect, if any, of such
Beneficial or Constructive Ownership on the Corporation's status as
a REIT and to ensure compliance with the Common Stock Ownership
Limit and the Aggregate Stock Ownership Limit; and
(ii) each Person who is a Beneficial or Constructive Owner of
Preferred Shares and each Person (including the stockholder of
record) who is holding Preferred Shares for a Beneficial 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 and to comply
with requirements of any taxing authority or governmental authority
or to determine such compliance.
(g) Remedies Not Limited. Nothing contained in this Section 10 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 interest of its
stockholders in preserving 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 10, Section 11 or any definition contained
herein or otherwise in the Charter of the Corporation, the Board of Directors
shall have the power to determine the application of the provisions of this
Section 10 or Section 11 with respect to any situation based on the facts known
to it. In the event Section 10 or 11 requires an action by the Board of
Directors and these Articles Supplementary or the Charter fails 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 Sections 10 or 11. Absent a decision to the
contrary by the Board of Directors (which the Board may make in its sole and
absolute discretion), the shares to be affected by the remedies set forth in
Sections 10(c)(ii), (iii), and (iv) shall be as follows: (1) if a Person would
have (but for the remedies set forth in Section 10(c)(ii), (iii), and (iv) as
applicable) Acquired Preferred Shares in violation of Section 10(c)(i) hereof,
such remedies (as applicable) shall apply first to the shares which, but for
such remedies, would have been Acquired and actually owned by such Person,
second to shares which, but for such remedies, would have been Acquired by such
Person and which 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 based upon the relative value of the shares held by
each such Person; and (2) if a Person is in violation of Section 10(c)(i)
hereof, as a result of an event other than an Acquisition of Preferred Shares
by such Person, the remedies set forth in Section 10(c)(ii), (iii), or (iv) (as
applicable) shall apply first to shares which are actually owned by such Person
and second to shares which are Beneficially or Constructively Owned (but not
actually owned) by such
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Person, pro rata among the Persons who actually own such shares based upon the
relative value of the shares held by each such Person.
(i) Exceptions.
(i) The Board of Directors, in its sole discretion, may exempt a Person
from the Common Stock Ownership Limit or the Aggregate Stock Ownership Limit
(but not from the limitations set forth in Section 10(c)(i)(B) hereof), if (A)
such Person is not (1) an individual for purposes of Section 542(a)(2) of the
Code as modified by Section 856(h) of the Code, or (2) treated as the owner of
such stock for purposes of Section 542(a)(2) of the Code as modified by Section
856(h) of the Code, and the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain that no
individual's Beneficial or Constructive Ownership of such shares of Capital
Stock will violate Section 10(c), (B) such Person does not and represents that
it will not own, actually or Constructively, shares of Capital Stock to the
extent that such Actual or Constructive Ownership of Capital Stock 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, an Acquisition or Beneficial or Constructive Ownership that would result in
the Corporation owning (actually or Constructively) an interest in a tenant of
the Corporation (or a tenant of any entity owned or controlled by the
Corporation) that would cause the Corporation to own, actually or
Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B)
of the Code) in such tenant) and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary
to ascertain this fact, and (C) such Person agrees that any violation or
attempted violation of such representations or undertakings (or other action
which is contrary to the restrictions contained in Section 10(c) through
Section 10(h) hereof will result in such Preferred Shares being exchanged for
Excess Class A Preferred or automatically repurchased in accordance with
Section 10(c) hereof.
(ii) Prior to granting any exception pursuant to Section 10(i)(i),
the Board of Directors shall 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.
Notwithstanding the receipt of any ruling or opinion, the Board of
Directors may impose such conditions or restrictions as it deems
appropriate in connection with granting such exception.
(iii) Subject to Section 10(c)(i)(A), an underwriter which
participates in a public offering or private placement of Capital
Stock (or securities convertible into or exchangeable for Capital
Stock) may acquire or Beneficially Own or Constructively Own shares
of Capital Stock (or securities convertible into or exchangeable
for Capital Stock) in excess of the Common Stock Ownership Limit or
the Aggregate Stock Ownership Limit, but only to the extent
necessary to facilitate such public offering or private placement
and for a period not exceeding 90 days.
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(j) Legend. Each certificate for Preferred Shares shall bear a legend in
substantially the following form:
"The shares 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 Charter of the
Corporation, no Person may (i) (other than, subject to certain limitations, a
Conversion Holder) Beneficially or Constructively Own shares of Common Stock in
excess of 9.9% of the outstanding Common Stock; (ii) Beneficially or
Constructively Own shares of Capital Stock (including the Common Stock,
Preferred Stock and Excess Stock) which have an aggregate value greater than
9.9% of the total outstanding Capital Stock; (iii) Beneficially or
Constructively Own shares of Capital Stock that 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; or (iv) Transfer or Acquire shares of
Capital Stock if such Transfer or Acquisition 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 shares of Capital Stock which cause or will cause a Person
to Beneficially or Constructively Own shares of Capital Stock in violation of
the above restrictions must immediately notify the Corporation. If any of the
restrictions on Transfer or ownership applicable to the Class A Senior
Cumulative Convertible Preferred Stock are violated, the shares of
Class A Senior Cumulative Convertible Preferred Stock represented hereby will
be automatically exchanged for shares of Excess Class A Preferred Stock which
will be held in trust by the Corporation or in certain circumstances will be
automatically repurchased by the Corporation. Excess Class A Preferred Stock
has no dividend rights, no conversion rights and no voting rights, and the
Corporation has a right to acquire Excess Class A Preferred Stock under certain
circumstances. In addition, the Corporation may repurchase 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. In addition, upon the
occurrence of certain events, attempted Transfers in violation of the
restrictions set forth in the Charter of the Corporation shall be void ab
initio. The Corporation will furnish to the holder hereof upon request and
without charge a complete written statement of the terms and conditions of each
class of Capital Stock. All capitalized terms in this legend have the meanings
defined in the Charter, as the same may be amended from time to time, a copy of
which, including the restrictions on transfer, will be sent without charge to
each holder of Class A Senior Cumulative Convertible Preferred Stock who so
requests."
Section 11. Excess Class A Preferred.
(a) Designation and Amount. The shares of such series of Excess Preferred
Stock shall be designated as "Excess Class A Preferred Stock" and the number of
shares constituting such series shall be 1,351,351 ("Excess Class A
Preferred").
(b) Ownership in Trust. Upon any purported Transfer or other event that
results in an exchange of Preferred Shares for Excess Class A Preferred
pursuant to Section 10(c), such Excess Class A Preferred shall be deemed to
have been Transferred to the Corporation, as Trustee of a Trust for the
exclusive benefit of the Beneficiary or Beneficiaries to whom an interest in
such Trust may later be transferred pursuant to Section 11(f). Shares of
Excess Class A Preferred so held in trust shall
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<PAGE> 29
be issued and outstanding stock of the Corporation but shall not be considered
issued and outstanding for purposes of any stockholder vote. The Purported
Record Transferee or, in the case of Excess Class A Preferred resulting from an
event other than a Transfer or Acquisition, the Purported Record Holder, shall
have no rights in such Excess Class A Preferred. The Purported Beneficial
Transferee or, in the case of Excess Class A Preferred resulting from an event
other than a Transfer or Acquisition, the Purported Beneficial Holder, shall
have no rights in such Excess Class A Preferred except as provided in Section
11(f).
(c) Dividend Rights. Excess Class A Preferred shall not be entitled to
any dividends or periodic distributions. Any dividend or distribution paid
with respect to Preferred Shares which have been automatically exchanged for
shares of Excess Class A Preferred prior to the discovery by the Corporation
that such Preferred Shares have been exchanged for Excess Class A Preferred
shall be repaid to the Corporation upon demand, and any dividend or
distribution declared but unpaid with respect to such Preferred Shares shall be
rescinded as void ab initio.
(d) Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets
of, the Corporation, the Corporation, as holder of shares of Excess Class A
Preferred in trust, shall be entitled to receive, subject to the preferential
rights of holders of any senior Capital Stock (as to preference on
distributions on liquidation), ratably with each other holder of Preferred
Shares and Excess Class A Preferred, that portion of the assets of the
Corporation available for distribution to the holders of its Preferred Shares
and Excess Class A Preferred as the number of shares of the Excess Class A
Preferred held by the Corporation in trust bears to the total number of
Preferred Shares and Excess Class A Preferred then outstanding. The
Corporation, as holder of the Excess Class A Preferred in trust, or if the
Corporation shall have been dissolved, any trustee appointed by the Corporation
prior to its dissolution, shall distribute ratably to the Beneficiaries of the
Trust, when and if determined in accordance with Section 11(f), any such assets
received in respect of the Excess Class A Preferred in any liquidation,
dissolution or winding up of, or any distribution of the assets, of the
Corporation.
(e) Voting Rights. The holders of shares of Excess Class A Preferred
shall not be entitled to vote on any matters (except as required by the
M.G.C.L.).
(f) Restrictions On Transfer; Designation of Beneficiary. Except as
otherwise herein provided or contemplated, Excess Class A Preferred shall not
be transferable. Unless the Corporation exercises its purchase rights under
Section 11(g), the Corporation, as Trustee, must, within 15 days of its receipt
of Excess Class A Preferred (the "Excess Class A Preferred Designation Period")
designate a Beneficiary of the Trust (which holds the number of shares of
Excess Class A Preferred attributable to the purported Transfer or other event
that resulted in the issuance of such Excess Class A Preferred), which
designation must satisfy the following conditions: (i) the shares of Excess
Class A Preferred held in the Trust would not result in a violation of Section
10(c) hereof, in the hands of the Beneficiary and (ii) the consideration
received by the Purported Beneficial Transferee, or, in the case of Excess
Class A Preferred resulting from an event other than a Transfer or Acquisition,
the Purported Beneficial Holder, does not exceed the Excess Class A Preferred
Limitation Price. Upon a permitted transfer of an interest in the Trust, the
corresponding shares of Excess Class A Preferred in the Trust shall be
automatically exchanged for an equal number of Preferred Shares and such
Preferred Shares shall be transferred of record to the Beneficiary of the
interest in the Trust designated by the Corporation in accordance with the
requirements set forth in this Section 11(f). "Excess Class
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<PAGE> 30
A Preferred Limitation Price" shall mean the lesser of (A) in the case of
Excess Class A Preferred resulting from a Transfer or Acquisition for value,
the price per share that the Purported Beneficial Transferee paid for the
Preferred Shares in the purported Transfer or Acquisition that resulted in the
issuance of the Excess Class A Preferred, or, in the case of Excess Class A
Preferred resulting from (1) a Transfer or Acquisition other than for value
(such as a gift, devise or similar Transfer) or (2)an event other than a
Transfer, Acquisition or other event that resulted in the issuance of the
Excess Class A Preferred, or (B) a price per share equal to the Market Price of
the Preferred Shares on the date on which (1) the Corporation designates a
Beneficiary pursuant to Section 11(f), or (2) the Corporation, or its designee,
accepts the offer to sell pursuant to Section 11(g).
(g) Purchase Right in Excess Class A Preferred. Notwithstanding Section
11(f), shares of Excess Class A Preferred shall be deemed to have been offered
for sale to the Corporation, or its designee, at a price per share equal to the
Excess Class A Preferred Limitation Price. The Corporation shall have the
right to accept such offer up to the end of the Excess Class A Preferred
Designation Period, with payment of the Excess Class A Preferred Limitation
Price due no later than 75 days after the end of the Excess Class A Preferred
Designation Period.
(h) Redemption.
(i) The Corporation may, at its option, to the extent it shall
have Legally Available Funds therefor, redeem all (but not less
than all) of the outstanding shares of Excess Class A Preferred, at
any time and from time to time.
(ii) The option of the Corporation to redeem the Excess Class
A Preferred pursuant to this Section 11(h) shall be exercised by
the mailing of a written notice of election by the Corporation to
the holders of the Excess Class A Preferred, which notice shall be
sent at least 30 days prior to the date specified therein for the
redemption of the Excess Class A Preferred.
(iii) Upon the thirtieth day following receipt by the holder
of Excess Class A Preferred of a written notice of election
pursuant to subsection (ii) above, the Corporation shall be
required to purchase from such holder of Excess Class A Preferred
(upon surrender by such holder at the Corporation's principal
office of the certificate representing such shares), such Excess
Class A Preferred, at a price equal to the product of (i) $18.50
per share (the "Liquidation Value") and (ii) the number of shares
of Excess Class A Preferred held by such holder to be redeemed.
(iv) After the date on which the Liquidation Value of such
share is paid or made available for payment to the holder thereof,
all rights of the holder of such shares of Excess Class A Preferred
shall cease, and such shares of Excess Class A Preferred shall not
be deemed to be outstanding.
(i) Conversion. The Excess Class A Preferred has no conversion
rights.
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<PAGE> 31
Section 12. Miscellaneous.
(a) Exchange or Market Transactions. Nothing in Section 10, Section 11 or
this Section 12 shall preclude the settlement of any transaction entered into
through the facilities of the New York Stock Exchange or any other national
securities exchange or automated inter-dealer quotation system. However, as
set forth in Section 10, Section 11 or this Section 12 certain transactions may
be settled by providing shares of Excess Class A Preferred.
(b) Severability. If any provision of Section 10, Section 11 or this
Section 12 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.
(c) Waiver. The Corporation shall have authority at any time to waive the
requirements that Excess Stock be issued or be deemed outstanding or that the
Corporation repurchase Preferred Shares in accordance with the provisions of
Section 10 or Section 11 if the Corporation determines, based on an opinion of
nationally recognized tax counsel, that the issuance of such Excess Stock or
the fact that such Excess Stock is deemed to be outstanding, or any such
repurchase, would not jeopardize the status of the Corporation as a REIT for
federal income tax purposes.
(d) All mailings shall be made by overnight United States mail or by
another overnight courier service.
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<PAGE> 32
IN WITNESS WHEREOF, AMBASSADOR APARTMENTS, INC. has caused its corporate
seal to be hereunto affixed and these Articles Supplementary to be signed by
its Chairman of the Board, David M. Glickman, and attested by its Secretary,
Adam D. Peterson this 15th day of August, 1996.
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
------------------------
David M. Glickman
Chairman of the Board
THE UNDERSIGNED, Secretary of Ambassador Apartments, Inc. who executed on
behalf of said corporation the foregoing Articles Supplementary, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles Supplementary to be the corporate act
of said corporation and further certify that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof or otherwise required to be verified under oath are true
in all material respects, under the penalties of perjury.
By: /s/ Adam D. Peterson
--------------------------
Adam D. Peterson
Secretary
Corporate Seal
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<PAGE> 1
EXHIBIT 10.42
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of August 15, 1996 among
Ambassador Apartments, Inc., a corporation organized under the laws of the
State of Maryland (the "Company"); Ambassador Apartments, L.P., a Delaware
limited partnership (the "Partnership"); and Five Arrows Realty Securities
L.L.C., a limited liability company organized under the laws of the State of
Delaware (the "Investor").
WHEREAS, the Company wishes to issue the Preferred Shares (as
defined herein) to the Investor, and the Investor wishes to purchase, acquire
and accept the Preferred Shares from the Company (the "Investment").
WHEREAS, the Investor, as a condition to the Investment,
desires that the Partnership issue a preferred general partnership interest to
the Company in an aggregate amount of the net proceeds to the Company of the
Investment, and the Company wishes to acquire such preferred general
partnership interest in the Partnership.
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1 DEFINED TERMS.
Section 1.1 Defined Terms. The following terms shall, unless
the context otherwise requires, have the meanings set forth in this Section 1.1.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
disbursements.
"Affiliate" means, with respect to any Person, (a) any member
of the Immediate Family of such Person or a trust established for the benefit
of such member, (b) any beneficiary of a trust described in (a), (c) any Entity
which, directly or indirectly though one or more intermediaries, is deemed to
be the beneficial owner of 25% or more of the voting equity of the Company for
the purposes of Section 13(d) of the Exchange Act, (d) any officer of the
Company or any member of the Board of Directors of the Company, other than a
Preferred Director (as such term is defined in the Certificate of Designation)
or (e) any Entity which, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person, including such Person or Persons referred to in the preceding
clauses (a) or (d); provided, however, that none of the Investor, its partners,
members or Affiliates shall be considered an Affiliate of the Company or the
Partnership or any of their respective Subsidiaries for purposes of this
Agreement.
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"Agreement" means this Investment Agreement, as originally
executed and as hereafter from time to time supplemented, amended and restated.
"Agreement and Waiver" means the Agreement and Waiver, dated
as of the Initial Closing Date, between the Company and the Investor.
"Amended Partnership Agreement" means the Partnership
Agreement as amended on the Closing Dates by the respective Amendments.
"Amendments" means the amendments to the Partnership Agreement
set forth in Exhibit A hereto.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday
or Friday which is not a day in which banking institutions in New York City are
authorized or obligated by law or executive order to close.
"Certificate of Designation" means the Articles Supplementary
classifying 1,351,351 shares of preferred stock as Class A Senior Cumulative
Convertible Preferred Stock of the Company and 1,351,351 shares of excess
stock, par value $.01 per share, as Excess Class A Preferred Stock of the
Company, in the form of Exhibit C attached hereto.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor statute thereto.
"Common Stock" means the shares of the common stock, par value
$.01 per share, of the Company.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment
trust, limited liability company, cooperative or association.
"Environmental Claim" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
governmental agency, department, bureau, office or other authority, or any
third party involving violations of Environmental Laws or Releases of Hazardous
Materials.
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as
amended; the Resource Conservation and Recovery Act ("RCRA), 42 U.S.C. 6901 et
seq., as amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as
amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as amended; the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 655 et seq., and any
other federal, state, local or municipal laws, statutes, regulations, rules or
ordinances imposing liability or establishing standards of conduct for
protection of the environment.
"Environmental Liabilities" means any monetary obligations,
losses, liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages,
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<PAGE> 3
costs and expenses (including all reasonable out-of-pocket fees, disbursements
and expenses of counsel, reasonable out-of-pocket expert and consulting fees
and reasonable out-of-pocket costs for environmental site assessments, remedial
investigation and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any Environmental Claim filed by any
governmental authority or any third party which relate to any violations of
Environmental Laws, Remedial Actions, Releases or threatened Releases of
Hazardous Materials from or onto (i) any assets, properties or businesses
presently or formerly owned by the Company, the Partnership, their Subsidiaries
or a predecessor in interest, or (ii) any facility which received Hazardous
Materials generated by the Company, the Partnership, any of their Subsidiaries
or a predecessor in interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means any (i) corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Company, (ii) partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Company, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Company, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Evaluation Material" means all information furnished by the
Company, the Partnership and their respective Representatives to the Investor
and its Representatives, whether or not in writing, in connection with the
issuance and sale of the Preferred Shares from the Company to the Investor,
provided, however, such term does not include information which (i) becomes
generally available to the public other than as a result of a disclosure by the
Investor or its Representatives, (ii) was available to the Investor or its
Representatives on a non-confidential basis prior to its disclosure to the
Investor or its Representatives by the Company or its Representatives, (iii)
becomes available to the Investor or its Representatives on a non-confidential
basis from a source other than the Company or its Representatives, provided
that such source is not known to the Investor or its Representatives to be
bound by a confidentiality agreement with the Company or (iv) is independently
developed by the Investor or its Representatives without reference to the
Evaluation Material.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means United States Generally Accepted Accounting
Principles, as in effect from time to time.
"General Partner" means the Company for so long as it is a
general partner of the Partnership, and any other person who is admitted as a
successor general partner of the Partnership at the time of reference thereto.
"Hazardous Materials" means include (a) any element, compound,
or chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or
3
<PAGE> 4
hazardous substances, extremely hazardous substance or chemical, hazardous
waste, medical waste, biohazardous or infectious waste, special waste, or solid
waste under Environmental Laws; (b) petroleum, petroleum-based or
petroleum-derived products; (c) polychlorinated biphenyls; (d) any substance
exhibiting a hazardous waste characteristic including but not limited to
corrosivity, ignitibility, toxicity or reactivity as well as any radioactive or
explosive materials; and (e) asbestos-containing materials.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren, sons-in-law
and daughters-in-law.
"Material Adverse Effect," when used with reference to events,
acts, failures or omissions to act, or conduct of a specified Person, means
that such events, acts, failures or omissions to act, or conduct would have a
material adverse effect on (i) the condition (financial or otherwise),
earnings, business affairs or business prospects of such Person and its
consolidated subsidiaries, considered as one enterprise, or (ii) the ability of
such Person to perform its obligations under the Operative Instruments.
"Operative Instruments" means the Partnership Agreement, the
Amendments, this Agreement, the Certificate of Designation, the Registration
Rights Agreement, the Supplemental Agreement and the Agreement and Waiver.
"Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Partnership, dated as of August 31,
1994, as amended as of September 20, 1994 and June 21, 1996.
"Permit" means a permit, licenses, consent, order or approval
by any federal, state or local governmental agency.
"Person" means any individual or Entity.
"Plan" means an employee benefit plan defined in Section 3(3)
of ERISA in respect of which the Company or any ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Preferred Shares" means the shares of the Company designated
in the Certificate of Designation as Class A Senior Cumulative Convertible
Preferred Stock.
"Preferred Units" means the Partnership Units designated as
Class A Cumulative Convertible Preferred Units under the Amended Partnership
Agreement and issued to the Company pursuant to the Amended Partnership
Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Initial Closing Date, between the Company and the
Investor, in the form of Exhibit B attached hereto.
"REIT" means a real estate investment trust described in Code
Section 856.
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<PAGE> 5
"Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, dumping, or
disposing of Hazardous Materials (including the abandonment or discarding of
barrels, containers or other closed receptacles containing Hazardous Materials)
into the environment.
"Remedial Action" means all actions taken to (i) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in any other
way address Hazardous Materials in the indoor or outdoor environment; (ii)
prevent or minimize a Release or threatened Release of Hazardous Materials so
they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; (iii) perform pre-remedial
studies and investigations and post-remedial operation and maintenance
activities; or (iv) any other actions authorized by 42 U.S.C. 9601.
"Representatives" means, with respect to any Person, the
directors, officers, employees, Affiliates, representatives (including, but not
limited to, financial advisors, attorneys and accountants), agents or potential
sources of financing of such person.
"SEC" means the Securities and Exchange Commission or any
successor regulatory authority.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" of any Person or Entity means an Entity in which
such Person or Entity has the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation or the trustees of a real
estate investment trust, to select the managing partner of a partnership, or
otherwise to select, or have the power to remove and then select, a majority of
those persons exercising governing authority over such Entity. In the case of
a limited partnership, the sole general partner, all of the general partners to
the extent each has equal management control and authority, or the managing
general partner or managing general partners thereof shall be deemed to have
control of such partnership and, in the case of a trust other than a real
estate investment trust, any trustee thereof or any Person having the right to
select any such trustee shall be deemed to have control of such trust.
"Supplemental Agreement" means the Supplemental Agreement,
dated as of the Initial Closing Date, between the Company and the Investor in
the form of Exhibit D attached hereto.
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Section 1.2 Terms Defined Herein . In addition to the
terms defined in Section 1.1 above, the following terms shall, unless the
context otherwise requires, have the meanings set forth in this Agreement in
the section set forth next to such term.
<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------
<S> <C>
accredited investor . . . . . . . . . . . . . . . . . . . . . . . 5.2
Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Excess Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . 10.5.3
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . 10.5.3
Initial Closing Date . . . . . . . . . . . . . . . . . . . . . . 3.1
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.20
1996 10-Qs . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8
1995 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
1996 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . 4.8
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 4.12
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
SDAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Second Closing Date . . . . . . . . . . . . . . . . . . . . . . . 3.1
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . 10.5.3
</TABLE>
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES.
Section 2.1 Sale of Preferred Shares. At the closings
provided for in Section 3.1 hereof (each a "Closing"): (i) the Company shall
issue and sell an aggregate of 1,351,351 Preferred Shares to the Investor, and
shall deliver to the Investor a stock certificate or certificates
representing all of the Preferred Shares, registered in the Investor's or its
nominee's name; and (ii) the Investor shall purchase, acquire and accept such
Preferred Shares for $18.50 per share or an aggregate of twenty-five million
dollars ($25,000,000.00) (the "Purchase Price").
Section 2.2 Payment for the Preferred Shares
At the Closings and in accordance with the provisions set forth
in Section 3.1, the Purchase Price shall be paid by the Investor to the Company
in United States dollars by wire transfer of funds immediately available in New
York City to such account(s) as the Company shall designate in a written notice
delivered to the Investor not less than five (5) Business Days prior to the
applicable Closing Date.
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Section 2.3 Transfer Taxes. The Company shall pay all
stock transfer taxes, recording fees and other sales, transfer, use, purchase
or similar taxes resulting from the Investment.
ARTICLE 3 CLOSING.
Section 3.1 Closings. Each Closing of the sale and
purchase of the Preferred Shares shall take place at the offices of Schulte
Roth & Zabel, 900 Third Avenue, New York, New York 10022 at 10:00 a.m. New York
City time. The first Closing shall occur on August 16, 1996, or at such
other time and place as the Company and the Investor mutually agree in writing
(the "Initial Closing Date"). Such Closing shall not be for less than 675,676
Preferred Shares at a purchase price of $18.50 per share, and shall be for such
number of shares as the Company notifies the Investor not less than five (5)
days prior to the Closing Date. If the Company exercises its option to sell on
the Initial Closing Date less than all of the 1,351,351 Preferred Shares to the
Investor pursuant to this Agreement, than a second Closing will take place.
Such second Closing shall occur on October 15, 1996, or on such earlier date as
the Company notifies the Investor on not less than five (5) days notice (the
"Second Closing Date"). At such second Closing, the Company will sell the
balance of the Preferred Shares to be sold to the Investor pursuant to this
Agreement for $18.50 per share. The Initial Closing Date and the Second
Closing Date shall each be referred to herein as a "Closing Date."
Section 3.2 Cancellation of the Second Closing . In the
event that a Change of Control (as defined in the Certificate of Designation)
occurs after the Initial Closing Date, but prior to a second Closing, and the
Investor notifies the Company that it will tender into the Change of Control
Offer (as defined in the Certificate of Designation) such second Closing shall
be canceled and the Company shall immediately pay to the Investor by wire
transfer in immediately available funds an amount equal to the product of $0.37
and the number of Preferred Shares which the Company would have been required
to sell to the Investor at such second Closing.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor
as follows:
Section 4.1 Due Incorporation and Status of the Company
Section 4.1.1 Due Incorporation. The Company and
each of its Subsidiaries has been formed and is existing and in good standing
under the laws of the state of its respective organization and is qualified or
licensed, and in good standing, to do business in each other jurisdiction in
which its ownership of properties or its conduct of business requires such
qualification or licensing, except where the failure to be so qualified or
licensed, or in good standing, would not have a Material Adverse Effect on the
Company.
Section 4.1.2 REIT Status. Assuming the correctness of
the representations and warranties of the Investor in Article 5, the Company
qualifies as a REIT
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under the Code and has taken no action or omitted to take any action, the
effect of which would reasonably be expected to disqualify the Company as a
REIT under the Code.
Section 4.2 Authority. The Company has the power and
authority to own, lease and operate its properties, directly or indirectly, and
to conduct its business as presently conducted and as contemplated by the
Annual Report on Form 10-K as filed by the Company under the Exchange Act for
the year ended December 31, 1995 (the "1995 10-K"), except where the failure to
have such power or authority would not have a Material Adverse Effect on the
Company.
Section 4.3 Valid Agreement of the Company. The execution,
delivery and performance of this Agreement, the Supplemental Agreement, the
Registration Rights Agreement and the Agreement and Waiver have each been duly
authorized by the Company. This Agreement has been and the Supplemental
Agreement, the Registration Rights Agreement and the Agreement and Waiver, upon
the Closing, will be executed and delivered by the Company. This Agreement
represents and the Supplemental Agreement, the Registration Rights Agreement
and the Agreement and Waiver, upon the Closing will represent, the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
Section 4.4 No Default. Assuming the correctness of the
representations and warranties of the Investor in Article 5, except as set
forth on Schedule 4.4, the execution and delivery of the Operative Instruments
by such of the Company and the Partnership as are parties thereto and the
performance by such parties of their respective obligations thereunder do not
(or if not yet executed, upon the execution and delivery thereof will not) (a)
violate the Articles of Incorporation or By-Laws of the Company; (b) violate
the terms of the Partnership Agreement; (c) violate or constitute a breach of
or default under any mortgage, indenture, loan agreement, promissory note or
other agreement to which the Company, the Partnership or any of their
respective Subsidiaries is a party, or by which any of them is bound, or to
which any property of the Company, the Partnership or any of their respective
Subsidiaries is subject; or (d) conflict with or violate any law or any
regulation, rule, order or decree of any governmental body, court or
administrative agency having jurisdiction over the Company, the Partnership or
any of their respective Subsidiaries or the properties of any of them except
with respect to clause (c) and (d) above where such conflict, breach, default
or violation would not reasonably be expected to have a Material Adverse Effect
on the Company.
Section 4.5 No Required Consents. Assuming the correctness
of the representations and warranties of the Investor in Article 5, except as
set forth on Schedule 4.5, the execution and delivery of the Operative
Instruments by such of the Company and the Partnership as are parties thereto
and the performance by such parties of their respective obligations thereunder
do not require any filing or registration with, or the receipt of any consent
by, any governmental or regulatory authority by such parties or any of their
respective Subsidiaries other than any which have already been obtained or
waived.
Section 4.6 Reservation of Shares. The Company has duly
reserved solely for purposes of issuance upon conversion of the Preferred
Shares the shares of Common Stock into which the Preferred Shares may be
converted from time to time.
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Section 4.7 Validity of Preferred Shares. The Company has
duly authorized the issuance and delivery of 1,351,351 shares of Preferred
Stock pursuant to this Agreement and, upon delivery thereof and receipt by the
Company of the Purchase Price therefor, such shares of Preferred Stock will be
duly authorized, validly issued, fully paid and nonassessable. The Preferred
Shares have the dividend, conversion, voting and other terms set forth in the
Certificate of Designation and, to the extent not inconsistent therewith, as
set forth in the Charter and By-Laws of the Company and the Maryland General
Corporation Law.
Section 4.8 Disclosure. The Company has heretofore delivered
to the Investor the Proxy Statement relating to its 1996 Annual Meeting of
Shareholders (the "1996 Proxy Statement"), the 1995 10-K, and the Quarterly
Reports on Form 10-Q as filed by the Company under the Exchange Act for the
quarters ended March 31, 1996 and June 30, 1996 (the "1996 10-Qs").
Section 4.8.1 No Misstatement or Omission. At the
time of filing, the 1996 Proxy Statement, the 1995 10-K and the 1996 10-Qs
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated by the SEC thereunder. The 1996 Proxy
Statement, the 1995 10-K and the 1996 10-Qs do not, as of their respective
dates, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
Section 4.8.2 Financial Statements. The financial
statements, including the notes thereto, and supporting schedules included in
the 1995 10-K and the 1996 10-Qs have been prepared in conformity with GAAP
applied on a consistent basis (except as otherwise noted therein) and present
fairly the financial position of the Company and its Subsidiaries as of the
dates indicated and the results of their operations for the periods shown.
Section 4.8.3 Subsequent Events. Since the respective
dates as of which information is given in the 1995 10-K and the 1996 10-Qs,
except as otherwise stated therein or in the press releases listed on Schedule
4.8.3 hereto and other than changes in general economic conditions or industry
conditions, there has not been any change in the condition (financial or
otherwise) or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business which would have a Material Adverse
Effect on the Company.
Section 4.9 Partnership Agreement. The Partnership Agreement
is, and upon execution and delivery on each Closing Date, the Amended
Partnership Agreement will be, a valid agreement enforceable in accordance with
its terms. The Partnership Agreement has not been amended, modified or
waived in any manner except as expressly set forth therein. The Partnership
has been managed, operated and governed in all material respects in accordance
with the Partnership Agreement.
Section 4.10 Valid Agreement of the Partnership. The
execution, deliver and performance of this Agreement and the Amendments have
been duly authorized by the Company as general partner of the Partnership.
This Agreement has been and the Amendments, upon the applicable Closing, will
be executed and delivered by the Company as general partner of the
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Partnership. This Agreement represents, and the Amendments upon the applicable
Closing will represent, the valid and binding obligations of the Partnership,
enforceable against the Partnership in accordance with its terms.
Section 4.11 Issuance of Preferred Units. All action
required to be taken by the Partnership and the Company, as General Partner,
for the issuance of the Preferred Units to the Company has been taken.
Section 4.12 Capitalization. The authorized capital stock
of the Company consists of: (i) 100,000,000 shares of Common Stock; (ii)
20,000,000 shares of preferred stock having a par value of one cent ($.01) per
share (the "Preferred Stock"); and (iii) 120,000,000 shares of excess stock
having a par value of one cent ($.01) per share (the "Excess Stock"). (i)
8,958,525, 0, and 0 shares of the Common Stock, the Preferred Stock and
the Excess Stock, respectively, were validly issued and outstanding, fully paid
and nonassessable; and (ii) 4,385,567, 0, and 0 shares of the Common Stock, the
Preferred Stock and the Excess Stock, respectively, were reserved for issuance
as set forth on Schedule 4.12 hereto. Except as contemplated by clauses (i)
through (ii) of this Section 4.12 or as set forth on Schedule 4.12 hereto,
there are no other shares of capital stock of the Company outstanding and no
other outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including preemptive rights), stock appreciation rights,
calls or commitments of any character whatsoever to which the Company is a
party or may be bound requiring the issuance or sale of shares of any capital
stock of the Company, and there are no contracts or other agreements by which
the Company is or may become bound to issue additional shares of its capital
stock or any options, warrants, convertible or exchangeable securities,
subscriptions, rights (including preemptive rights), stock appreciation rights,
calls or commitments of any character whatsoever relating to such shares.
Section 4.13 Litigation. Except as set forth on Schedule
4.13 or in the 1995 10-K or the 1996 10-Qs, the Company has not received any
notice of any outstanding judgments, rulings, orders, writs, injunctions,
awards or decrees of any court or any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority or arbitral tribunal against or involving the Company, the
Partnership or any of their respective Subsidiaries. Neither the Company, the
Partnership nor any of their respective Subsidiaries is a party to, or to the
knowledge of the Company, threatened with, any litigation or judicial,
governmental, regulatory, administrative or arbitration proceeding which, if
decided adversely to their respective interests could have an adverse effect
upon the transactions contemplated hereby or that would have a Material Adverse
Effect on their respective business.
Section 4.14 ERISA. (i) Each of the Company's Plans is
set forth on Schedule 4.14, (ii) each such Plan complies in all material
respects with the applicable provisions of ERISA, the Code and the terms of
such Plan, and (iii) no annual report (Form 5500 Series) has been filed or
required to be filed with respect to any such Plan. Except as required by
Section 4980B of the Code, the Company does not maintain a welfare plan (as
defined in Section 3(1) of ERISA) which provides post-employment welfare
benefits after a participant's termination of employment. Neither the Company
nor any of its ERISA Affiliates have incurred any liability under the Worker
Adjustment and Retraining Notification Act.
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Section 4.15 Environmental Matters. Except as set
forth in Schedule 4.15 hereto, in the Environmental Reports (as defined below),
or in the 1995 10-K or the 1996 10-Qs:
(a) The operations of the Company, the Partnership, or any of
their Subsidiaries are in compliance with Environmental Laws except for any
such noncompliance that would not reasonably be expected to have a Material
Adverse Effect on the Company;
(b) There has been no Release at any of the (i) any assets,
properties or businesses currently owned or operated by the Company, the
Partnership, any of their Subsidiaries or, to the best of the Company's
knowledge upon reasonable investigation, any predecessor in interest; (ii) from
adjoining properties or businesses; or (iii) from or onto any facilities which
received Hazardous Materials generated by the Company, the Partnership, any of
their Subsidiaries or, to the best of the Company's knowledge upon reasonable
investigation, any predecessor in interest that would result in any
Environmental Liabilities except for any such Environmental Liabilities that
would not reasonably be expected to have a Material Adverse Effect on the
Company;
(c) No Environmental Claims have been asserted against the
Company, the Partnership, any of their Subsidiaries or, to the best of the
Company's knowledge upon reasonable investigation, any predecessor in interest
nor does the Company, the Partnership or any of their Subsidiaries have
knowledge or notice of any threatened or pending Environmental Claims, except
in any case where any such Environmental Claim would not reasonably be expected
to have a Material Adverse Effect on the Company;
(d) No Environmental Claims have been asserted against any
facilities that may have received Hazardous Materials generated by the Company,
the Partnership, any of their Subsidiaries or to the best of the Company's
knowledge upon reasonable investigation, any predecessor in interest;
(e) The Company and the Partnership have conducted Phase 1
Environmental Site Assessments on all of the assets, properties and businesses
owned or operated since January 1, 1991 and have delivered to Investor true and
complete copies of all material environmental reports, studies or
investigations ("Environment Reports") in their possession regarding any
Environmental Liabilities at the assets, properties or businesses of the
Company, the Partnership or any of their Subsidiaries; and
(f) None of the assets, properties or businesses owned or
operated by the Company, the Partnership or any Subsidiaries are located in
"wetlands" regulated under Environmental Laws and no dredged or fill materials
have been placed, discharged or deposited in any wetlands located at any asset,
property or business owned or operated by the Company, the Partnership or any
Subsidiaries except in either case where such was in compliance with
Environmental Laws or would not reasonably be expected to have a Material
Adverse Effect on the Company.
Section 4.16 Investment Company. The Company is not, and
upon the issuance and sale of the Preferred Shares as herein contemplated will
not be, an "investment company" or, assuming the correctness of the
representations and warranties of the Investor in Article 5, an Entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
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Section 4.17 Taxes. The Company and the Partnership, have
each filed all federal, state, local or foreign tax returns that are required
to be filed or has duly requested extensions thereof and has paid all taxes
required to be paid by it and any related assessments, fines or penalties,
except for any such tax, assessment, fine or penalty that is being contested in
good faith and by appropriate proceedings or where the failure to make any
such filing or payment would not be reasonably expected to have a Material
Adverse Effect on the Company; and adequate charges, accruals and reserves have
been provided for in the financial statements of the Company and the
Partnership, respectively, in respect of all material federal, state, local and
foreign taxes for all periods as to which the tax liability of the Company and
the Partnership, respectively, has not been finally determined or remains open
to examination by applicable taxing authorities. Neither the Company nor the
Partnership has received written notice that either of them or their respective
Subsidiaries is currently under review by any federal or state taxing
authority.
Section 4.18 Insurance. The Company and the Partnership
each carry or is entitled to the benefits of insurance in such amounts and
covering such risks as is reasonably sufficient under the circumstances and all
such insurance is in full force and effect.
Section 4.19 Affiliated Transactions. Except as set forth
on Schedule 4.19 or as disclosed in the 1995 10-K, the 1996 10-Qs or the 1996
Proxy Statement describe all transactions with, or payments to, any Affiliate
in excess of $60,000 in the aggregate since August 24, 1994 (other than
reimbursement of expenses and compensation payable to employees or officers
or directors' fees payable to the Company's directors). Neither the Company
nor the Partnership, nor any officer or director of the Company or the
Partnership, nor any of their respective Subsidiaries, or any Affiliate of any
of the foregoing, or any member of the Immediate Family of any of the
foregoing: (i) owns, directly or indirectly, any interest in (excepting not
more than five (5) percent stock holdings held solely for investment purposes
in securities of any Person which are listed on any national securities
exchange or regularly traded in the over-the-counter market) or is an owner,
sole proprietor, shareholder, partner, director, officer, employee, consultant
or agent of any person which is a competitor, lessor, lessee, customer or
supplier of the Company, the Partnership or any of their respective
Subsidiaries; (ii) owns, directly or indirectly, in whole or in part, any
property, patent, trademark, service mark, trade name, copyright, franchise,
invention, permit, license or secret or confidential information which the
Company, the Partnership or any of their respective Subsidiaries is using or
the use of which is necessary for the business of the Company, the Partnership
or their respective Subsidiaries; or (iii) has any cause of action or other
suit, action or claim whatsoever against, or owes any amount to, the Company,
the Partnership or any of their respective Subsidiaries, in each case (i)
through (iii) except for those in the ordinary course of business and not
involving in excess of $60,000 annually.
Section 4.20 Liabilities. Except as set forth on Schedule
4.20, to the actual knowledge of the executive officer's of the Company, the
Company, the Partnership and their respective Subsidiaries do not have any
material direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, subordinated or
unsubordinated, matured or unmatured, accrued, absolute, contingent or
otherwise, including, without limitation, liabilities
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on account of taxes, other governmental, regulatory or administrative charges
or lawsuits brought, whether or not of a kind required by GAAP to be set forth
on a financial statement (collectively, "Liabilities"), that were not fully and
adequately reflected or reserved for on the 1995 10-K or the March 1995 10-Q.
Section 4.21 Integration. Neither the Company nor the
Partnership, nor any Person or Entity acting on behalf of the Company or the
Partnership, has offered, transferred, pledged, sold or otherwise disposed of
any Preferred Shares, any interest in the Preferred Shares or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or
other disposition of any Preferred Share, any interest in any Preferred Share
or any such other similar security from, or otherwise approached or negotiated
with respect to any Preferred Share, or any other similar security with, any
Person in any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, in each case
that would constitute a distribution of the Preferred Shares under the
Securities Act and would disqualify the issuance and sale of the Preferred
Shares without a registration statement by the Company to the Investor pursuant
to Section 4(2) of the Securities Act. Assuming the correctness of the
representations and warranties of the Investor in Article 5, the Investment is
exempt from registration under applicable federal and state securities laws.
Section 4.22 Limited Waiver of Ownership Limitations.
Subject to the terms and conditions set forth in the Agreement and Waiver, the
Board of Directors of the Company, acting pursuant to Section 4.5.11 of the
Articles of Incorporation of the Company, has properly voted to exempt the
Investor, and has agreed to exempt any successor in interest to the Investor,
any holder of the Preferred Shares and any holder of shares of Common Stock
issuable upon conversion of Preferred Shares from the Common Stock Ownership
Limit and the Aggregate Stock Ownership Limit imposed by the Articles of
Incorporation of the Company; provided, however, that such waiver shall not be
effective, unless the terms and conditions of the Agreement and Waiver have
been satisfied, or to exempt any Person from such ownership limits imposed by
the Articles of Incorporation of the Company if the ownership of such interest
by such Person would cause the Company to fail to qualify as a REIT.
Section 4.23 No Event of Default. No event has occurred and
is continuing and no condition exists which constitutes, to the Company's
knowledge, a breach, an event of default, or otherwise gives any other party
the rights to accelerate or require payment of any obligation, or with the
passage of time would constitute such an event (a "Breach"), under any
agreement or instrument to which the Company or any of its Subsidiaries is a
party, unless such Breach would not have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has received any
notice that an event has occurred and is continuing or that a condition exists
which constitutes, to the Company's knowledge, a Breach under any agreement or
instrument to which the Company or any of its Subsidiaries is a party, unless
such Breach would not have a Material Adverse Effect on the Company.
Section 4.24 No Brokers In connection with the Investment,
the Company has not retained or become obligated to any broker or finder other
than Rothschild Realty, Inc.
Section 4.25 Full Disclosure. All documents set forth on
Schedule 4.25 and the 1996 10-Qs have been delivered to the Investor by or on
behalf of the Company or the
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Partnership in connection with this Agreement and the transactions contemplated
hereby, and all such documents are in all material respects true, complete,
accurate and authentic and, when taken together with the Company's
representations and warranties set forth in this Agreement, do not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
In order to induce the Company and the Partnership to enter
into this Agreement and to consummate the transactions contemplated hereby, the
Investor hereby represents and warrants to, and covenants with, the Company and
the Partnership as follows:
Section 5.1 Organization. The Investor has been duly
organized and is validly existing and in good standing under the laws of the
State of Delaware.
Section 5.2 Accredited Investor. The Investor is an
"accredited investor," as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
Section 5.3 Member Information. The representations and
warranties of the Investor in the Agreement and Waiver are true and correct in
all material respects.
Section 5.4 Valid Agreements of the Investor. The Investor
has all right, power and authority to enter into this Agreement, the
Supplemental Agreement and the Registration Rights Agreement and to consummate
the transactions contemplated hereby and thereby. Each of the Operative
Instruments to which the Investor is a party has each been duly authorized,
executed and delivered by the Investor, and constitutes a legal, valid and
binding obligation of the Investor, enforceable against the Investor in
accordance with its terms.
Section 5.5 No Default. The execution and delivery of this
Agreement, the Registration Rights Agreement and the Supplemental Agreement by
the Investor and the performance by the Investor of its obligations thereunder
do not (or if not yet executed, upon the execution and delivery thereof will
not) (a) violate the organizational documents of the Investor; (b) violate or
constitute a breach of or default under any mortgage, indenture, loan
agreement, promissory note or other agreement to which the Investor is a
party, or by which the Investor is bound, or to which any property of the
Investor is subject; or (c) conflict with or violate any law or any regulation,
rule, order or decree of any governmental body, court or administrative agency
having jurisdiction over the Investor or its properties except with respect to
clauses (b) and (c) where such conflict, breach, default or violation would not
reasonably be expected to have a Material Adverse Effect on the Investor.
Section 5.6 Opportunity for Inquiry. The Investor has had a
reasonable opportunity to ask questions of and receive answers from
representatives of the Company and the Partnership regarding the business,
management and financial affairs of the Company and the Partnership; it being
understood that no inquiry or investigation shall affect the Investor's ability
to rely on any representation or warranty of the Company or the Partnership or
the conditions to the obligations of the Investor under this Agreement.
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Section 5.7 Materials. The Investor acknowledges that all
documents, agreements, instruments, records, and books that it has requested
pertaining to the Company and the Partnership and their respective businesses
and financial affairs, have been made available to the Investor and the
Investor's attorneys, accountants and advisors for inspection and the
Investor has received each of the Environmental Reports listed on Schedule 5.7.
Section 5.8 Knowledge and Experience. The Investor has such
knowledge and experience in financial and business matters that the Investor is
capable of evaluating the merits and risks involved in connection with the
Investment.
Section 5.9 No Brokers. In connection with the Investment,
the Investor has not retained or become obligated to any broker or finder.
Section 5.10 Registration. The Preferred Shares to be
acquired by Investor pursuant to this Agreement and the Common Stock to be
received upon conversion of the Preferred Shares are being acquired by Investor
for its own account and not with a view to, or intention of, distribution
thereof in violation of the Securities Act, or any applicable state securities
laws.
Section 5.11 Transfer Restrictions. The certificates
representing the Preferred Shares and the Common Stock received upon conversion
of the Preferred Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION THEREFROM.
The Investor may not sell, transfer or dispose of any of the Preferred Shares
or the Common Stock received upon conversion of the Preferred Shares (except
pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that neither registration nor
qualification under the Securities Act and applicable state securities laws is
required in connection with such transfer and the written agreement of the
transferee to be bound by the provisions of this Section 5.11.
Section 5.12 Investment Company. The Investor is not, and
upon the purchase of the Preferred Shares as herein contemplated, will not be,
an "investment company" or an Entity "controlled" by and "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended.
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ARTICLE 6 COVENANTS AND UNDERTAKINGS.
Section 6.1 Performance by Partnership. The Company, as
General Partner shall cause the Partnership timely and diligently to observe in
all material respects all of its covenants and responsibilities under the
Amended Partnership Agreement.
Section 6.2 Closings. The Company and the Partnership
shall each use their best efforts to comply with all conditions precedent to
the Closings, including, without limiting the foregoing, the Company shall
cause the Certificate of Designation to have been adopted, filed with the State
Department of Assessment and Taxation of Maryland (the "SDAT") and become
effective and the Company shall cause the Amendments to be adopted at the
applicable Closing.
Section 6.3 Fees and Expenses of Rothschild Realty Inc.
The Company agrees to pay to Rothschild Realty Inc. at the first Closing a
placement fee in the amount of $500,000 and to reimburse Rothschild Realty Inc.
at each Closing for its reasonable out-of-pocket expenses documented to the
reasonable satisfaction of the Company. All such amounts paid pursuant to this
Section 6.3 shall be paid by wire transfer of funds immediately available in
New York City to such account(s) as Rothschild Realty Inc. shall designate in a
written notice delivered to the Company not less than two Business Days prior
to the Initial Closing Date; provided, however, that the Investor, on behalf of
the Company, may directly pay out of the Purchase Price payable hereunder such
fees and expenses to Rothschild Realty Inc.
Section 6.4 Fees and Expenses of Schulte Roth & Zabel.
The Company agrees to pay to Schulte Roth & Zabel, counsel to the Investor, at
each Closing reasonable fees and expenses in connection with services rendered
and expenses incurred in connection with the issuance and sale of Preferred
Shares to the Investor (Schulte Roth & Zabel to provide to the Company
reasonable detail as to fees and expenses incurred). All such amounts paid
pursuant to this Section 6.4 shall be paid by wire transfer of funds
immediately available in New York City to such account(s) as Schulte Roth &
Zabel shall designate in a written notice delivered to the Company not less
than two Business Days prior to each Closing Date; provided, however, that the
Investor, on behalf of the Company, may directly pay out of the Purchase Price
hereunder such fees and expenses to Schulte Roth & Zabel.
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE INVESTOR TO CLOSE
The obligation of the Investor to complete each Closing is subject, at
its option, to the fulfillment on or prior to the related Closing Date (unless
otherwise provided) the following conditions, any one (1) or more of which may
be waived by it in its sole discretion:
Section 7.1 Representations and Covenants. The
representations and warranties of the Company contained in this Agreement shall
be true, complete and accurate in all material respects on and as of the
related Closing Date with the same force and effect as though made on and as of
the related Closing Date, except for changes contemplated or permitted by this
Agreement and except to the extent that any representation or warranty is made
as of a
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specified date, in which case, such representation and warranty shall be true
and correct in all material respects as of such date. The Company shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Company and the Partnership on or prior to the related Closing Date. The
Company shall have delivered to the Investor a certificate, dated the related
Closing Date and signed by the President and Chief Financial Officer of the
Company, to the foregoing effect and stating that all conditions to the
Investor's obligations hereunder have been satisfied.
Section 7.2 Good Standing CertifiStanding Certificates . The
Company shall have delivered to the Investor: (i) copies of its Amended and
Restated Articles of Incorporation, including all amendments thereto, certified
by the SDAT or other appropriate official of its jurisdiction of incorporation;
(ii) copies of the Partnership Agreement, including all amendments thereto, of
the Partnership; (iii) certificates from the Secretary of State or other
appropriate official of the respective jurisdiction of incorporation or
formation to the effect that the Company and the Partnership, respectively,
is in good standing and subsisting in such jurisdiction and listing all charter
documents of the Company and the Partnership on file in such state; (iv) a
certificate from the Secretary of State or other appropriate official in each
State in which the Company and the Partnership is qualified to do business to
the effect that the Company and the Partnership is in good standing in such
State; and (v) a certificate as to the Tax status of the Company and the
Partnership from the appropriate official in its respective jurisdiction of
incorporation or formation and each State in which the Company and the
Partnership is qualified to do business, in each case, dated as of a date
within reasonable proximity to the related Closing Date.
Section 7.3 Governmental Permits and Approvals. Any and all
Permits necessary for the consummation of the transactions contemplated
hereby shall have been obtained and a copy thereof shall have been delivered to
the Investor.
Section 7.4 Legislation. Nolegislation shall have been
proposed or enacted, and no statute, law, ordinance, code, rule or regulation
shall have been adopted, revised or interpreted, by any foreign, federal,
state, county or local government or any other governmental, regulatory or
administrative agency or authority, which would require, upon or as a condition
to the acquisition of the Preferred Shares by the Investor, the divestiture
or cessation of the conduct of any business presently conducted by the Company
or the Partnership, on the one hand, or by the Investor, on the other hand, or
which, in the good faith judgment of the Investor, may, individually or in the
aggregate, have a material adverse effect on it or on the Company or the
Partnership in the event that the transactions contemplated hereby are
consummated.
Section 7.5 Legal Proceedings. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened by or
before any court or any foreign, federal, state, county or local government or
any other governmental, regulatory or administrative agency or authority
seeking to restrain, prohibit or invalidatethe issuance or sale of the
Preferred Shares to the Investor hereunder or the consummation of the
transactions contemplated hereby or to seek damages in connection with such
transactions.
Section 7.6 Third Party Consents Consents . All consents,
waivers, licenses, variances, exemptions, franchises, permits, approvals and
authorizations from parties to any contracts and other agreements (including
any amendments and modifications thereto) with the Company and
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<PAGE> 18
the Partnership which may be required in connection with the performance by the
Company and the Partnership of their obligations under this Agreement or to
assure such contracts and other agreements continue in full force and effect
after the consummation of the transactions contemplated hereby (without any
Breach by the Company or any of its Subsidiaries) shall have been obtained.
Section 7.7 Stock Certificates. The Company shall have
tendered to the Investor the stock certificate or certificates representing the
Preferred Shares to be purchased on such Closing Date in accordance with
Section 3.1 hereof, registered in the Investor's or it's nominee's name.
Section 7.8 Satisfactory Business Review. With respect to
the first Closing only, the Investor shall have satisfied itself, after the
Investor and its representatives have completed the review of the assets,
properties and businesses of the Company and the Partnership contemplated
hereby, that none of the information revealed thereby or in the financials
has resulted in, or in the opinion of the Investor may result in a Material
Adverse Effect to the Company and its Subsidiaries, taken as a whole.
Section 7.9 Approval of Counsel to the Investor. The Company
and the Partnership shall furnish to counsel for the Investor such certificates
and documents as may be reasonably be requested by counsel to the Investor to
enable such counsel to pass on or evaluate the satisfaction of the conditions
set forth in this Article 7. All actions and proceedings hereunder and all
documents and other papers required to be delivered by the Company and the
Partnership hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters, shall be
subject to the reasonable approval of Schulte Roth & Zabel, counsel to the
Investor, as to their form and substance.
Section 7.10 Appointment of Director. Prior to or concurrent
with the initial Closing, the nominee designated by the Investor as a director
of the Company shall have been elected and qualified to become a member of the
Board of Directors of the Company, and prior to and concurrent with any
second Closing, the nominee designated by the Investor as a director of the
Company shall be continuing to serve as a member of the Board of Directors of
the Company.
Section 7.11 Amended Partnership Agreement. The Amendment
with respect to such Closing Date shall be effective and shall reflect the
capital contribution by the Company to the Partnership of the purchase price
paid for the Preferred Shares on such Closing Date net of expenses incurred
in connection with the Investment.
Section 7.12 Preferred Units. The Company shall have,
subject to the receipt of the purchase price reflecting the number of Preferred
Shares being sold on such Closing Date under this Agreement, contributed the
amount of such purchase price net of expenses incurred in connection with the
Investment to the Partnership, and in exchange, the Company shall have received
Preferred Units in the Partnership in an amount equal to such number of
Preferred Shares sold on such Closing Date.
Section 7.13 Certificate of Designation. The Certificate of
Designation shall be effective.
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Section 7.14 Registration Rights Agreement. The Company shall
have executed and delivered to the Investor the Registration Rights Agreement.
Section 7.15 Supplemental Agreement. The Company shall have
executed and delivered to the Investor the Supplemental Agreement.
Section 7.16 Opinion of Kirkland & Ellis. The Investor shall
have received opinion letters from Kirkland & Ellis and Ballard Spahr Andrews &
Ingersoll substantially in the form of Exhibit E and Exhibit F hereto,
respectively.
Section 7.17 Fees and Expenses of Rothschild Realty Inc.
Rothschild Realty Inc. shall have received the fees and expenses to be paid by
the Company as described under Section 6.3.
Section 7.18 Fees and Expenses of Schulte Roth &
Zabel. Schulte Roth & Zabel shall have received the fees and disbursements to
be paid by the Company as described under Section 6.4.
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE COMPANY AND THE PARTNERSHIP TO CLOSE
The obligation of each of the Company and the Partnership to complete
each Closing is subject, at its option, to the fulfillment on or prior to the
related Closing Date of the following conditions, any one (1) or more of which
may be waived it in its sole discretion:
Section 8.1 Representations and Covenants. The
representations and warranties of the Investor contained in this Agreement
shall be true, complete and accurate in all material respects on and as of the
related Closing Date with the same force and effect as though made on
and as of the related Closing Date, except for changes contemplated or
permitted by this Agreement and except to the extent that any representation or
warranty is made as of a specified date, in which case, such representation and
warranty shall be true, complete and accurate in all material respects as of
such date. The Investor shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the related Closing Date. The
Investor shall have delivered to the Company a certificate, dated the related
Closing Date and signed by an officer of the Investor to the foregoing effect
and stating that all conditions to the Company's obligations hereunder have
been satisfied.
Section 8.2 Governmental Permits and Approvals. Any and all
Permits necessary for the consummation of the transactions contemplated hereby
shall have been obtained.
Section 8.3 Legal Proceedings. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened before
any court or any foreign, federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority seeking to
restrain, prohibit or invalidate the sale of the Preferred Shares to the 19
19
<PAGE> 20
Investor hereunder or the consummation of the transactions contemplated hereby
or to seek damages in connection with such transactions.
Section 8.4 Third Party Consents. All consents, waivers,
licenses, variances, exemptions, franchises, permits, approvals and
authorizations from parties to any contracts and other agreements (including
any amendments and modifications thereto) with the Investor which may be
required in connection with the performance by the Investor of its obligations
under this Agreement shall have been obtained.
Section 8.5 Purchase Price. The Investor shall have tendered
payment for the Preferred Shares in the amount and in the manner specified in
Section 3.1 hereof.
Section 8.6 Approval of Counsel to the Company. The Investor
shall furnish to counsel for the Company such certificates and documents as may
reasonably be requested by counsel to the Company to enable such counsel to
pass on or evaluate the satisfaction of the conditions set forth in this
Article 8. All actions and proceedings hereunder and all documents or other
papers required to be delivered by the Investor hereunder or in connection with
the consummation of the transactions contemplated hereby, and all other related
matters, shall be subject to the reasonable approval of Kirkland & Ellis,
counsel to the Company, as to their form and substance.
Section 8.7 Opinion. The Company shall have received an
opinion letter from Schulte Roth & Zabel substantially in the form of Exhibit G
hereto.
ARTICLE 9 ASSIGNMENT
Section 9.1 Assignability by Investor. The Investor may,
without the consent or approval of the Company, assign its rights and
obligations under this Agreement to a Person to whom the Investor assigns its
interest in the Preferred Shares, pro rata based upon the percentage of
Preferred Shares transferred, provided that such assignee agrees in writing to
be bound by the terms of this Agreement. Notwithstanding the foregoing, the
Investor may not, prior to the Second Closing Date, assign or delegate any of
its rights or obligations under this Agreement other than an assignment and/or
a delegation to an Affiliate of the Investor, by operation of law or otherwise
(including by a change of ownership or control of the Investor), without the
prior written consent of the Company, in the sole and absolute discretion of
the Company.
Section 9.2 Assignability by the Company or the Partnership.
Without the prior written consent of the Investor, in the sole and absolute
discretion of the Investor, neither the Company nor the Partnership may assign
or delegate its rights or obligations hereunder.
Section 9.3 Binding Agreement. Subject to the provisions of
Sections 9.1 and 9.2, this Agreement shall be binding upon the heirs,
successors and assigns of the parties.
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ARTICLE 10 MISCELLANEOUS.
Section 10.1 Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
as applied between residents of that State entering into contracts to be
performed wholly within that State.
Section 10.2 Notices. All notices hereunder shall be in
writing and shall be given: (a) if to the Company or the Partnership, at 77
West Wacker Drive, 40th Floor, Chicago, Illinois, Attention: President,
or such other address or addresses of which the Investor shall have been given
notice, with copies to Kirkland & Ellis, 200 East Randolph Drive, 54th Floor,
Chicago, Illinois 60601, Attention: Robert Osborne, P.C., or such other address
of which the Investor shall have been given notice; and (b) if to the Investor,
at Rothschild Realty Inc., 1251 Avenue of the Americas, New York, New York
10020, Attn: Matthew Kaplan, or such other address of which the Company shall
have been given notice, with copies to Schulte Roth & Zabel, 900 Third Avenue,
New York, New York 10022, Attention: Andre Weiss, Esq., or such other address
of which the Company shall have been given notice. Any notice shall be deemed
to have been given if personally delivered or sent by United States mail or by
commercial courier or delivery service or by telegram or telex and shall be
deemed received, unless earlier received, (i) if sent by certified or
registered mail, return receipt requested, three business days after deposit in
the mail, postage prepaid, (ii) if sent by United States Express Mail or by
commercial courier or delivery service, one Business Day after delivery to a
United States Post Office or delivery service, postage prepaid, (iii) if sent
by telegram, telex or facsimile transmission, when receipt is acknowledged by
answerback, and (iv) if delivered by hand, on the date of receipt.
Section 10.3 Entire Agreement; Amendments. This Agreement
and other agreements referred to herein set forth the entire understanding of
the parties hereto, and this Agreement shall not be amended except by an
instrument in writing executed by the Company and the Investor.
Section 10.4 Remedies for Breaches of This Agreement.
Section 10.4.1 Survival of Representations and
Warranties. All of the representations and warranties of the Company contained
in Article 4 above (other than Section 4.2 through 4.7) shall survive the
Closing hereunder and continue in full force and effect for a period of two
years thereafter. All of the other representations and warranties of the parties
contained in this Agreement (including the representations and warranties of the
Investor contained in Article 5 and the representations and warranties of the
Company contained in Section 4.2 through 4.7) shall survive the Closing and
continue in full force and effect forever thereafter (subject to any applicable
statutes of limitations).
Section 10.4.2 Indemnification Provisions for Benefit of
the Investor. In the event the Company breaches any of its representations,
warranties, and covenants contained herein (other than the covenants in
Sections 2.1 and 3.1), and, if there is an applicable survival period pursuant
to Section 10.4(a), provided that the Investor makes a written claim for
indemnification against the Company pursuant to Section 10.2 within such
survival period, then the Company and the Partnership agree to indemnify the
Investor from and against the entirety
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of any Adverse Consequences the Investor may suffer through and after the date
of the claim for indemnification (including any Adverse Consequences the
Investor, its members or Rothschild Realty Inc. may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by such breach.
Section 10.4.3 Matters Involving Third Parties.
(i) If any third party shall notify any party
entitled to be indemnified hereunder (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against the Company or the Partnership (the
"Indemnifying Party") under this Section 10.4, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
assume the defense of the Third Party Claim with counsel of his or its
choice reasonably satisfactory to the Indemnified Party at any time
within 15 days after the Indemnified Party has given notice of the Third
Party Claim; provided, however, that the Indemnifying Party must conduct
the defense of the Third Party Claim actively and diligently thereafter
in order to preserve its rights in this regard; and provided further
that the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party
Claim.
(iii) So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, the Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the judgment
or proposed settlement involves only the payment of money damages by one
or more of the Indemnifying Parties and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(iv) So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
(v) In the event none of the Indemnifying Parties
assumes and conducts the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner he or it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith) and (B) the Indemnifying Parties will remain
responsible for any Adverse Consequences the
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Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Section 10.4.
Section 10.5 Confidentiality. The Investor agrees not to use,
and that the Investor's Representatives will not use, any Evaluation Material
for any purpose other than in connection with evaluating the Investment. The
Investor agrees that it and its Representatives will keep the Evaluation
Material confidential; provided, however, that (i) any of such information may
be disclosed by the Investor to such of Representatives of the Investor who
need to know such information for the purpose of evaluating the Investment (it
being understood that such Representatives shall be informed by the Investor of
the confidential nature of such information and the Investor agrees to be
responsible for any such breach of this Section 10.5 by such Representatives),
and (ii) any disclosure of such information may be made if the Company shall
consent thereto. Except as required by law, without the prior written consent
of the other party or until such time as a mutually agreeable public
announcement is made, no party hereto will disclose to any Person other than
Representatives either the fact that discussion or negotiations are taking place
concerning the Investment or any of the terms, conditions or other facts with
respect to the Investment, including status or that the Evaluation Material has
been made available to the Investor and its Representatives.
In the event that the Investor or any of its Representatives
are requested or required (by oral question, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any Evaluation Material, the Investor will, to the extent
permitted by law, promptly notify the Company of such request or requirement so
that the Company may seek an appropriate protective order or exception. The
Investor shall use reasonable efforts at the Company's request and expense to
assist the Company in obtaining such an order or exception. In the event that
such protection is not obtained, the Investor agrees that it or its
Representatives may furnish only that portion of the Evaluation Material that
it is advised by counsel is legally required to be disclosed.
Section 10.6 Termination. This Agreement may be terminated
at any time prior to the second Closing:
(a) by the mutual written consent of the Investor and the
Company; or
(b) by the Company or the Investor if the first Closing has
not occurred on or prior to August 30, 1996, or if the second Closing, if one
is to occur, has not occurred on or prior to November 29, 1996; providing that
the party attempting to terminate this Agreement is not in material breach of
any of its representations, warranties, covenants or agreements contained in
this Agreement. In the event of termination by the Company or the Investor
pursuant to this Section 10.6, written notice thereof shall forthwith be
delivered to the other party.
Section 10.7 Counterparts. This Agreement may be executed in
more than one counterpart, each of which may be executed by fewer than all the
parties, with the same effect as if the parties executed one counterpart as of
the day and year first above written.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals as of the day and year first above written.
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
---------------------------------
Name: David M. Glickman
Title: Chairman of the Board
AMBASSADOR APARTMENTS, L.P.
By: AMBASSADOR APARTMENTS, INC.,
General Partner
By: /s/ David M. Glickman
---------------------------------
Name: David M. Glickman
Title: Chairman of the Board
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
---------------------------------
Name: Matthew W. Kaplan
Title: Manager
24
<PAGE> 1
EXHIBIT 10.43
SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT dated as of August 16, 1996 between Ambassador
Apartments, Inc., a corporation organized under the laws of the State of
Maryland (the "Company"), and Five Arrows Realty Securities L.L.C., a limited
liability company organized under the laws of the State of Delaware (the
"Investor"), for the benefit of the Investor and any subsequent registered
holder of Preferred Shares (as hereinafter defined).
WHEREAS, pursuant to the Investment Agreement (as defined below) the
Company has agreed to issue the Preferred Shares (as defined herein) to the
Investor, and the Investor has agreed to purchase, acquire and accept the
Preferred Shares from the Company (the "Investment").
WHEREAS, the parties hereto desire to set forth their understanding with
respect to certain terms of the Investment and the Preferred Shares.
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Definitions.
As used in this Supplemental Agreement, the following capitalized
terms shall have the following meanings:
"Affiliate" means, with respect to any Person, (a) any member of the
Immediate Family of such Person or a trust established for the benefit of such
member, (b) any beneficiary of a trust described in (a), (c) any Entity which,
directly or indirectly though one or more intermediaries, is deemed to be the
beneficial owner of 25% or more of the voting equity of such Person for the
purposes of Section 13(d) of the Exchange Act, (d) any officer of such Person or
any member of the Board of Directors of such Person, other than, in the case of
the Company, a Preferred Director (as such term is defined in the Certificate of
Designation) or (e) any Entity which, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person, including such Person or Persons referred to in the preceding
clauses (a) or (d); provided, however, that none of the Investor, its partners,
members or Affiliates shall be considered an Affiliate of the Company or the
Partnership or any of their Subsidiaries for purposes of this Agreement.
"Certificate of Designation" means the Articles Supplementary classifying
1,351,351 shares of preferred stock as Class A Senior Cumulative Convertible
Preferred Stock of the Company and 1,351,351 shares of excess stock, par value
$.01 per share, as Excess Class A Preferred Stock of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time or any successor statute thereto.
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<PAGE> 2
"Common Stock" means the shares of the common stock, par value $.01 per
share, of the Company.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, business trust, real estate investment trust, limited
liability company, cooperative or association.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Immediate Family" means, with respect to any Person, such Person's spouse,
parents, parents-in-law, descendants, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, stepchildren, sons-in-law and daughters-in-law.
"Investment Agreement" means the Investment Agreement, dated as of August
15, 1996 among the Company, the Partnership and the Investor.
"Issuance Date" means the date of original issuance of the Preferred
Shares.
"Partnership" means Ambassador Apartments, L.P., a Delaware limited
partnership.
"Person" means any individual or Entity.
"Preferred Shares" means the shares of the Company designated in the
Certificate of Designation as Class A Senior Cumulative Convertible Preferred
Stock.
"REIT" means a real estate investment trust described in Code Section 856.
"Subsidiary" of any Person or Entity means an Entity in which such Person
or Entity has the ability, whether by the direct or indirect ownership of shares
or other equity interests, by contract or otherwise, to elect a majority of the
directors of a corporation or the trustees of a real estate investment trust, to
select the managing partner of a partnership, or otherwise to select, or have
the power to remove and then select, a majority of those persons exercising
governing authority over such Entity. In the case of a limited partnership, the
sole general partner, all of the general partners to the extent each has equal
management control and authority, or the managing general partner or managing
general partners thereof shall be deemed to have control of such partnership
and, in the case of a trust other than a real estate investment trust, any
trustee thereof or any Person having the right to select any such trustee shall
be deemed to have control of such trust.
2. REIT Status.
So long as any Preferred Shares remain outstanding, the Company will
continue to qualify as a REIT.
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3. Maintenance of Listing of Shares of Common Stock.
The Company shall, prior to August 31, 1996, make an application to
list the Common Stock issuable upon the conversion of the Preferred Shares on
the New York Stock Exchange (the "NYSE"). The Company shall use its best
efforts to keep the Common Stock listed on the NYSE. If, notwithstanding its
exercise of its reasonable best efforts, the Common Stock fails to be listed on
the NYSE, the Company shall, at its own expense, cause the Common Stock to be
listed or admitted to trading on the NASDAQ National Market System.
4. Repurchase of Preferred Shares or Common Stock.
So long as the Investor or an Affiliate of the Investor, or one of
their respective members or partners, is the holder of (i) six hundred
seventy-five thousand six hundred seventy-five (675,675) or more Preferred
Shares or (ii) an amount of Preferred Shares which if converted into shares of
Common Stock would exceed five (5) percent of the Common Stock on a fully
diluted basis (determined on the basis of then convertible, exercisable or
exchangeable securities, warrants or options issued by the Company or the
Partnership), the Company shall not repurchase any shares of Common Stock or
Preferred Shares at a price which is greater than the market price for such
Common Stock or Preferred Shares except pursuant to an agreement listed in
Schedule 1 hereto.
5. Affiliate Transactions.
So long as the Investor or an Affiliate of the Investor, or one of
their respective members or partners, is the holder of (i) six hundred
seventy-five thousand six hundred seventy-five (675,675) or more Preferred
Shares or (ii) an amount of Preferred Shares which if converted into shares of
Common Stock would exceed five (5) percent of the Common Stock on a fully
diluted basis (determined on the basis of then convertible, exercisable or
exchangeable securities, warrants or options issued by the Company or the
Partnership), the Company and the Partnership will not, and will not permit any
of their respective Subsidiaries to, directly or indirectly, enter into any
transaction or series of transactions (including, without limitation, the sale,
purchase, exchange or lease of any assets or properties or the rendering of any
services) with any Affiliate (other than among the Company, the Partnership or
their respective Subsidiaries) (an "Affiliate Transaction") unless (i) such
transaction or series of related transactions is on terms that are no less
favorable to the Company, the Partnership or their respective Subsidiaries, as
the case may be, than would available in a comparable transaction in
arm's-length dealings with an unrelated third party and (ii) with respect to any
one transaction or series of related transactions involving aggregate payments
in excess of $1,000,000, the Company delivers a certificate, certified by an
officer of the Company, to the Investor certifying that such transaction or
series of related transaction complies with clause (i) above and such
transaction or series of related transactions has received the approval of a
majority of the disinterested members of the Board of Directors of the Company;
provided, however, that such provision shall not apply to any transaction
arising out of any agreement existing on the date hereof or any transaction in
which all holders of any class or series of outstanding capital stock of the
Company have the right to participate on a pro rata basis.
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6. Change in Nature of Business.
So long as the Investor or any Affiliate of the Investor is the holder
of (i) 675,675 or more Preferred Shares or (ii) an amount of Preferred Shares
which if converted into shares of Common Stock would exceed 5% of the Common
Stock on a fully diluted basis (determined on the basis of then convertible,
exercisable or exchangeable securities, warrants or options issued by the
Company or the Partnership), the Company and the Partnership will not, without
the prior written consent of the Investor, cease to be primarily in the
business of owning and managing multi-family properties directly or through
subsidiaries, as carried on as of the date hereof and described in the Company's
Annual Report on Form 10-K as filed with the Securities and Exchange Commission
for the year ended December 31, 1995 and the Company's Quarterly Report on Form
10-Q as filed with the Securities and Exchange Commission for the quarterly
period ended March 31, 1996.
7. Committees.
At least one Preferred Director (as defined in the Certificate of
Designation), as determined by the holders of a majority of the outstanding
Preferred Shares shall be designated as a member of each Committee of the Board
of Directors of the Company.
8. Indemnification and Insurance of Directors.
The Company shall not amend, or permit the amendment, of the Charter
or By-Laws of the Company so as to limit the right to indemnification provided
to any present or future member or members of the Board of Directors of the
Company elected by the holders of the Preferred Stock so long as the Investor or
any Affiliate of the Investor is the holder of (i) 675,675 or more Preferred
Shares or (ii) an amount of Preferred Shares which if converted into shares of
Common Stock would exceed 5% of the Common Stock on a fully diluted basis
(determined on the basis of then convertible, exercisable or exchangeable
securities, warrants or options issued by the Company or the Partnership), and
shall obtain and maintain directors' and officers' reimbursement and liability
insurance in the name of each Preferred Director in an amount not less than the
amount provided to other outside directors of the Company or less than the
amount of the current policy therefor; provided that such directors supply the
information required by the Company's insurance carrier and meet the
qualifications established by such carrier, if any, which shall not be more
burdensome than those of the Company's current policy.
9. Inspection Rights.
So long as the Investor or any Affiliate of the Investor is the holder
of (i) 675,675 or more Preferred Shares or (ii) an amount of Preferred Shares
which if converted into shares of Common Stock would exceed 5% of the Common
Stock on a fully diluted basis (determined on the basis of then convertible,
exercisable or exchangeable securities, warrants or options issued by the
Company or the Partnership), the Company shall permit, and cause the Partnership
and each of their respective Subsidiaries to permit, the Investor or any agents
or representatives thereof to examine and inspect the books and records of the
Company and
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the Partnership and take copies and extracts therefrom on reasonable prior
notice and at reasonable times and during normal business hours. Any such
information obtained by the Investor or any such agents or representatives
shall be Evaluation Material as such term is used in the Investment Agreement,
and the Investor and any such agents or representatives shall be bound by the
provisions set forth in Section 10.5 of the Investment Agreement with respect
thereto.
10. Reservation of Shares
The Company will continue to maintain as reserved those shares of
Common Stock reserved in accordance with Section 4.6 of the Investment
Agreement, for purposes of conversion of the Preferred Shares and shall take all
such action as may be required from time to time in order that it may validly
and legally issue fully paid and non-assessable shares of Common Stock in
accordance herewith and therewith.
11. Preferred SharesSection 6.2 Preferred Shares .
So long as any Preferred Shares remain outstanding, the Company shall
comply with all terms of the Preferred Shares, as provided for in the
Certificate of Designation, and shall take no action, nor permit any action to
be taken, which would adversely affect the rights, powers and preferences of the
Preferred Shares or the holders thereof in their capacity as such, in each case
as set forth in the Certificate of Designation, other than as permitted by the
Certificate of Designation.
12. Election of Directors.
Until such time as the Investor has either (x) transferred more than
50% of the Preferred Shares to a non-Affiliate third party or (y) converted more
than 50% of the Preferred Shares into Common Stock, the Investor agrees, and
prior to the transfer of any Preferred Shares to a third party will require such
third party (and to cause its tranferees) to agree that it, and that it will
cause any member of a group (as such term is used in Section 13(d)(2) of the
Exchange Act) in which it is also a member (i) with respect any Preferred
Shares and any Common Stock owned by such person or any member of a group (as
such term is used in Section 13(d)(2) of the Exchange Act) that includes such
person, not to nominate any person for election to the Board of Directors of the
Company (other than as a Preferred Director, as such term is defined in the
Certificate of Designation), and (ii) in any election of the members of the
Board of Directors of the Company when the only persons nominated for election
to the Board of Directors of the Company have been nominated by members of the
then existing Board of Directors of the Company, to vote all of its Preferred
Shares with respect to the persons so nominated by the Board of Directors of the
Company in the same proportion as the votes cast by the Common Stock in such
election. The Investor agrees that the Company can include a legend on the
Preferred Shares referring to the restrictions set forth in this Section 12 of
this Supplemental Agreement.
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13. Certain Expenses Paid by the Company.
In the event that the holders of the Preferred Shares deliver an
Acceptance Notice (as defined in Section 4(l) of the Certificate of Designation)
pursuant to the provisions of clause (ii) of Section 4(l) of the Certificate of
Designation, but the purchase of the Offered Shares (as defined in Section 4(l)
of the Certificate of Designation) thereunder is not consummated, the Company
shall be required to pay, in addition to amounts required to be paid pursuant to
the Offer (as defined in Section 4(l) of the Certificate of Designation), but
without duplication the reasonable fees and expenses, not to exceed $50,000, of
the holders of the Preferred Shares relating to the finalization and negotiation
of definitive documents relating to the Offer.
14. Miscellaneous.
14.1 Remedies. If the Company shall breach its obligations under
this Supplemental Agreement, each holder of Preferred Shares will be entitled to
exercise all rights provided herein or granted by law (including recovery of
damages) or in equity. Additionally, if the Company shall breach its
obligations under Section 4, 5, 6 or 7 of this Supplemental Agreement in any
material respect, each holder of Preferred Shares will also be entitled,
pursuant to Section 9 of the Certificate of Designation, to require the Company
to purchase such holder's Preferred Shares at a purchase price payable in cash
in an amount equal to 100% of the Liquidation Value (as defined in the
Certificate of Designation) thereof, plus accrued and unpaid dividends, if any,
to the date of purchase.
14.2 Assignment and Transfers. This Supplemental Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
each of their respective successors and assigns to the extent specifically
applicable thereto. This Supplemental Agreement is intended for the benefit of
holders of the Preferred Shares who are entitled to the benefits hereof as
though they were a party hereto.
14.3 Amendments and Waivers. The provisions of this Supplemental
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Investor, as long as the Investor
holds any Preferred Shares, or, if the Investor shall not longer hold any
Preferred Shares, the holders of more than 50% of the aggregate outstanding
principal amount of the Preferred Shares consent in writing to such amendment,
modification, supplement or waiver. Each such consent or waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
14.4 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
14.5 Headings. The headings in this Supplemental Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
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14.6 Governing Law; Conflicts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York as applied
between residents of that State entering into contracts wholly to be performed
in that State. Any conflict between the terms of the Investment Agreement and
the terms of this Supplemental Agreement shall be resolved in favor of the terms
of this Supplemental Agreement.
14.7 Notices. Any notice or other communication required or
permitted hereunder shall be deemed to be delivered if in writing addressed as
provided below and if either (a) actually delivered to said address, (b) in the
case of overnight delivery of a notice, the next business day after properly
posted with postage prepaid, or (c) in the case of a letter, 3 business days
shall have elapsed after the same shall have been deposited in the United States
mails, postage prepaid and registered or certified:
If to the Company, then to Prime Residential, Inc., 77 West Wacker
Drive, 40th Floor, Chicago, Illinois, Attention: President, or such other
address or addresses of which the Investor shall have been given notice,
with copies to Kirkland & Ellis, 200 East Randolph Drive, 54th Floor,
Chicago, Illinois 60601, Attention: Robert Osborne, P.C., or such other
address of which the Investor shall have been given notice.
If to any holder of Preferred Shares, to it at its address set forth
on the books and records of the Company. The failure to deliver a copy of
any notice to any party's counsel shall not affect the validity of such
notice.
The failure to deliver a copy of any notice to any party's counsel
shallnot affect the validity of such notice.
14.8 Counterparts. This Supplemental Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
---------------------------------
Name: David M. Glickman
Title: Chairman of the Board
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
---------------------------------
Name: Matthew W. Kaplan
Title: Manager
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EXHIBIT 10.44
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 16, 1996,
between Ambassador Apartments, Inc., a Maryland corporation (the "Company"),
and Five Arrows Realty Securities L.L.C., a limited liability company organized
under the laws of the State of Delaware (the "Investor"), for the benefit of
the Investor and any subsequent registered holder of Registrable Securities (as
hereinafter defined). The Investor and such registered holders are referred to
collectively as the "Holders."
This Agreement is executed pursuant to the Investment
Agreement, dated as of August 15, 1996, among the Company, Ambassador
Apartments, L.P. and the Investor (the "Investment Agreement"). In order to
induce the Investor to enter into the Investment Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. The following terms shall have the meanings set forth
below:
"Affiliate" means, with respect to any Person, (a) any member
of the Immediate Family of such Person or a trust established for the
benefit of such member, (b) any beneficiary of a trust described in
(a), (c) any Entity which, directly or indirectly though one or more
intermediaries, is deemed to be the beneficial owner of 25% or more of
the voting equity of the Company for the purposes of Section 13(d) of
the Exchange Act, (d) any officer of the Company or any member of the
Board of Directors of the Company, other than a Preferred Director (as
such term is defined in the Certificate of Designation) or (e) any
Entity which, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, such Person, including such Person or Persons referred to in the
preceding clauses (a) or (d); provided, however , that none of the
Investor, its partners, members or Affiliates shall be considered an
Affiliate of the Company or the Partnership or any of their
Subsidiaries for the purposes of this Agreement.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday
or Friday which is not a day on which banking institutions in New York
City are authorized or obligated by law or executive order to close.
"Certificate of Designation" means the Articles Supplementary
classifying 1,351,351 shares of preferred stock as Class A Senior
Cumulative Convertible Preferred Stock of the Company, and 1,351,351
shares of Excess Stock, par value $.01 per share, as Excess Class A
Preferred Stock of the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, collectively, (i) the Common Stock, par
value $.01 per share of the Company, (ii) any other capital stock of
the Company, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and
(iii) any other securities into which
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or for which any of the securities described in clauses (i) or (ii)
above have been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise
but excluding any shares of the Company's Excess Common Stock (as
defined in the Company's Charter).
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate
investment trust, limited liability company, cooperative or
association.
"equity security of the Company" includes common stock,
preferred stock and any other security issued by the Company or
Ambassador Apartments, L.P. that is treated as an equity security by
either of them or any other security convertible into, exercisable
into, or exchangeable for such an equity security and any other
instrument, such as an equity swap, the value of which is based, at
least in part, on the value of such equity security.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Body" means any foreign, federal, state,
municipal or other government, or any department, commission,
investigative body, board, bureau, agency, public authority or
instrumentality thereof or any court, mediator, arbitrator or other
tribunal.
"Holders" has the meaning set forth in the recitals to this
Agreement. A Person is deemed to be a Holder whenever such Person owns
Registrable Securities or has the right to acquire such Registrable
Securities, whether or not such acquisition has actually been effected
and disregarding any legal restrictions upon the exercise of such right.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren,
sons-in-law and daughters-in-law.
"Majority Holders" means (a) the Investor, so long as the
Investor holds at least 25% of the outstanding Registrable Securities
and (b) otherwise, the holder or holders at the relevant time
(excluding the Company or any of its Subsidiaries) of more than 50% of
the Registrable Securities then outstanding.
"Person" means any individual or Entity.
"Preferred Shares" means Class A Senior Cumulative Convertible
Preferred Stock issued by the Company to the Investor, pursuant to the
Investment Agreement, and convertible for shares of Common Stock of the
Company pursuant to the provisions of Section 7 of the Certificate of
Designation of the Company, dated the date hereof.
"Prospectus" means the Prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration
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Statement and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference in such Prospectus.
"Registrable Securities" means all Preferred Shares and all
shares of Common Stock that have been issued, or are issuable on
conversion, in respect of the Preferred Shares pursuant to the
provisions of Section 7 of the Certificate of Designation of the
Company, dated the date hereof, and any other securities that are
received by the Holders pursuant to Sections 7(h) or 7(j) of the
Certificate of Designation, until such time as (a) they have been
effectively registered and sold under the Securities Act, or (b) they
are distributed to the public pursuant to Rule 144 (or any similar
provisions then in force) under the Securities Act and are not subject
to any stop transfer order delivered by or on behalf of the Company and
no other restriction on transfer exists under any federal securities
law but shall not include any shares of the Company's Excess Stock.
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to
the provisions of this Agreement, including the Prospectus, amendments
and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Underwriters Maximum Number" means for any underwritten
Demand Registration, Piggyback Registration or other registration,
that number of shares of securities to which such registration should,
in the written opinion of the managing underwriter or underwriters of
such registration in light of market factors, be limited.
"underwritten registration" or "underwritten offering" means a
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
2. DEMAND REGISTRATION
2.1 Right to Demand Registration. (a) Subject to Section 2.5, at
any time, any Holder or Holders holding an aggregate of not less than 20% of
the Registrable Securities then outstanding (the "Demand Requesting Holders")
may make a written request to the Company for registration with the Commission
(a "Demand Registration") under and in accordance with the provisions of the
Securities Act of all or part of its Registrable Securities and any other
equity security of the Company owned by them (the "Additional Securities");
provided, however, that the Company (i) shall be required to effect no more
than two such Demand Registrations pursuant to this Section 2 (other than the
"shelf" registration provided for under Section 2.1(c)) and (ii) shall not be
required to effect a Demand Registration if fewer than 500,000 shares would be
registered.
(b) Each Demand Registration shall be in the form of an
underwritten offering managed by an underwriter or underwriters selected by the
Company.
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(c) At the election of the Majority Holders (in their sole
discretion), the Company shall promptly file with the Commission a "shelf"
registration statement with respect to all of their Registrable Shares, on an
appropriate Form, pursuant to Rule 415 under the Securities Act or any similar
rule that may be adopted by the Commission (the "Shelf Registration"). The
Company shall use its reasonable best efforts to have the Shelf Registration
declared effective as soon as practicable after such filing and,
notwithstanding anything to the contrary herein, shall use reasonable best
efforts to keep the Shelf Registration continuously effective for a period of
three years from the date such Shelf Registration is declared effective or
until all shares registered on such "shelf" registration statement have been
sold. Such "shelf" registration shall provide for distributions other than
through underwritten offerings and shall not qualify as one of the two Demand
Registrations to which the Holders are entitled. Any Holder shall be required
to comply with the rules of the New York Stock Exchange or any other stock
exchange on which the Common Stock is then listed.
(d) Within ten days after receipt of any request by the Demand
Requesting Holders under Section 2.1(a) or the Majority Holders under Section
2.1(c), the Company will give written notice (the "Other Holders Notice") of
such registration request to all other Holders, if any, and, subject to Section
2.3, shall include in such registration all Registrable Securities and
Additional Securities with respect to which the Company has received written
requests for inclusion therein from the Holders thereof within 15 days after
such notice by the Company.
(e) Notwithstanding anything herein to the contrary, the
Company is not required to file a Demand Registration or a Shelf Registration
with the Commission prior to August 15, 1997.
2.2 Effective Registration and Expenses. A registration will
qualify as a Demand Registration or a Shelf Registration when it has become
effective; provided, however, that (i) if the Demand Requesting Holders with
regard to a Demand Registration, or the Majority Holders with regard to a Shelf
Registration, withdraw their Registrable Securities after the filing with the
Commission of the initial Registration Statement related thereto, such demand
will count as a Demand Registration or a Shelf Registration, respectively,
notwithstanding that it does not become effective unless such Demand Requesting
Holders or Majority Holders, as applicable, agree to pay all of the
Registration Expenses of such Demand Requesting Holders or Majority Holders, as
applicable, and of the Company and (ii) an effective Demand Registration will
not count as a Demand Registration if the Demand Requesting Holders have not as
a result of the cut back provisions of Section 2.3 been permitted to register
and sell registered and sold a majority of the Registrable Securities requested
to be included in such registration by such Demand Requesting Holders.
2.3 Priority on Underwritten Demand Registrations. Subject to
the rights granted pursuant to the agreements set forth on Schedule 10.2, if
the managing underwriter or underwriters of any underwritten Demand
Registration advise the Company and the Holders in writing of an Underwriters
Maximum Number, the Company will be obligated and required to include in such
registration (i) first, the Registrable Securities requested to be included in
such Demand Registration by the Holders, pro rata in proportion to the number
of Registrable
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Securities requested to be included in such registration by each of them until
all such Registrable Securities have been so included, (ii) second, the
Registrable Securities requested to be included in such Demand Registration by
the Company and other Persons having contractual rights thereto, in accordance
with the priorities that exist among them, (iii) third, the Additional
Securities and (iv) fourth, any other securities of the Company to be
registered on behalf of any other Person. Neither the Company nor any of its
securityholders (other than Holders of Registrable Securities) shall be
entitled to include any securities in any Demand Registration unless the
Company or such securityholders (as the case may be) shall have agreed in
writing to sell such securities on the same terms and conditions as shall apply
to the Registrable Securities to be included in such Demand Registration.
2.4 Selection of Underwriters. The managing underwriter and
any additional investment bankers and managers for use in connection with any
underwritten Demand Registration will be selected by the Company from a list of
five choices provided by the Majority Holders; provided, that the Majority
Holders shall be required to select such five firms from the list attached
hereto as Schedule 2.4.
2.5 Limitations Regarding Registration at the Request of
Holders. (a) The Company shall not be required to effect a Demand
Registration or a Shelf Registration under Section 2.1 and the Holders of
Registrable Securities will discontinue the disposition of their securities
covered by a Shelf Registration during any Blackout Period (as defined below)
(i) if the Board of Directors of the Company determines in good faith that
effecting such a registration or continuing such disposition at such time would
have a material adverse effect upon a proposed sale of all (or substantially
all) of the assets of the Company or a merger, reorganization, recapitalization
or similar current transaction materially affecting the capital structure or
equity ownership of the Company, (ii) if the Company is in possession of
material information which the Board of Directors of the Company determines in
good faith it is not in the best interests of the Company to disclose in a
registration statement at such time, or (iii) if the Company has delivered a
notice pursuant to Section 3.1 that it is undertaking an underwritten offering
in which the Holders will be entitled to exercise their piggyback rights;
provided, however, that the Company may only delay a Demand Registration
pursuant to this Section 2.5 by delivery of a Blackout Notice (as defined
below) within thirty (30) days of delivery of the notice requesting a Demand
Registration under Section 2.1 and only for a period not exceeding three (3)
months (or until such earlier time as such transaction is consummated or no
longer proposed or the material information has been made public) (the
"Blackout Period"). There shall not be more than one Blackout Period in any
twelve (12) month period.
(b) The Company shall promptly notify the Holders in writing
(a "Blackout Notice") of any decision not to effect a Demand Registration or a
Shelf Registration or to discontinue sales of Registrable Securities pursuant
to this Section 2.5 and shall include an undertaking by the Company promptly to
notify the Holders as soon as a Demand Registration or a Shelf Registration may
be effected or sales may resume. In making any such determination to initiate
or terminate a Blackout Period, the Company shall not be required to consult
with or obtain the consent of any Holder, and any such determination shall be
the Company's sole responsibility. Each Holder shall treat all notices
received from the Company pursuant to this Section 2.5 in the strictest
confidence and shall not disseminate such information.
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(c) The Company shall not be required to effect a Demand
Registration or Shelf Registration under Section 2.1 during any period the
Company is restricted from filing a registration statement or from making any
public sale or distribution of its equity securities pursuant to any agreement
on Schedule 10.2.
3. PIGGYBACK REGISTRATION
3.1 Right to Include Registrable Securities. Subject to Section
3.3, if the Company at any time or from time to time proposes to register
shares of its Common Stock under the Securities Act (other than in a
registration on Form S-4 or S-8 or any successor form to such forms or in
connection with an exchange offer or an offering of securities solely to the
existing stockholders or employees of the Company), whether or not for sale for
its own account, the Company shall deliver prompt written notice to all Holders
of Registrable Securities of its intention to undertake such registration and
of such Holders' rights to participate in such registration under this Section
3 as hereinafter provided. The Company shall use its reasonable best efforts
to effect the registration under the Securities Act of all Registrable
Securities with respect to which the Company receives a request for
registration from the Holders thereof by written notice to the Company within
30 days after the date of the Company's notice to Holders of its intended
registration (which notice by Holders shall specify the amount of Registrable
Securities to be registered and the intended method of disposition thereof), to
the extent necessary to permit the disposition in accordance with the intended
methods thereof of all such Registrable Securities by including such
Registrable Securities in the registration statement pursuant to which the
Company proposes to register the shares of Common Stock (a "Piggyback
Registration"); provided, however, that if such registration involves an
underwritten offering, all Holders requesting inclusion in the registration
shall be required to sell their Registrable Securities to the underwriters
selected by the Company at the same price and on the same terms of underwriting
applicable to the Company and any other Persons selling shares of Common Stock.
From the date of such notice by the Company and for so long as the Company is
on a reasonable best efforts basis pursuing its registration under this Section
3.1, the right of the Holders to effect a Demand Registration or Shelf
Registration shall be suspended. The Holders requesting inclusion in a
registration pursuant to this Section 3 may, at any time prior to the effective
date of the registration statement relating to such registration, revoke such
request by delivering written notice to the Company revoking such requested
inclusion. All requests for Piggyback Registration under this Section 3 shall
be without prejudice to the rights of the Holders to request, and shall not be
counted as, Demand Registrations under Section 2 above.
3.2 Priority in Piggyback Registration. Subject to any rights
granted pursuant to the agreements set forth on Schedule 10.2, if any of the
Registrable Securities registered pursuant to any Piggyback Registration are to
be sold in one or more firm commitment underwritten offerings, and the managing
underwriters advise in writing the Company and the Holders of such Registrable
Securities of an Underwriters Maximum Number, or, in the case of a Piggyback
Registration not being underwritten, the Company shall reasonably determine
(and notify the Holders of Registrable Securities of such determination), after
consultation with an investment banker of nationally recognized standing, that
the number of shares of Common Stock (including Registrable Securities)
proposed to be sold in such offering exceeds the number of shares of Common
Stock which can be sold in such offering within a price range acceptable to the
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Company, the Company shall include in such registration only such number of
shares of Common Stock (including Registrable Securities) which in the opinion
of such underwriter or underwriters or the Company, as the case may be, can be
sold within such price range, selected in the following order of priority: (i)
first, all of the shares of Common Stock that the Company proposes to register
(but solely to the extent that the proceeds thereof shall not be used to
purchase Common Stock or other securities of the Company), and the shares
requested by any other Person having demand registration rights and having made
demand for the subject registration, (ii) second, the Eligible Securities
required to be included in such registration pursuant to the Registration
Rights Agreement dated as of August 31, 1994, among the Company, the Operating
Partnership, the Investors and the Management Investors (each as defined
therein), (iii) third, the Registrable Securities requested to be included in
such registration by Holders that have requested their Registrable Securities
to be included therein, pro rata in proportion to the number of Registrable
Securities requested to be included in such registration by each of them, (iv)
fourth, other Registrable Securities requested to be included in such
registration by any other Persons, (v) fifth, the Additional Securities owned
by the Holders and (vi) sixth, other securities of the Company to be registered
on behalf of any other Person.
3.3. Limitations Regarding Piggyback Registrations. If the Company,
at any time after giving written notice under Section 3.1 of its intention to
register Common Stock and prior to the effectiveness of the registration
statement filed in connection with such registration, determines for any reason
consistent herewith either not to effect such registration or to delay such
registration, the Company may, at its election, by the delivery of written
notice to each Holder, (i) in the case of a determination not to effect
registration, relieve itself of its obligation to register the Registrable
Securities in connection with such registration, or (ii) in the case of a
determination to delay the registration, delay the registration of such
Registrable Securities for the same period as the delay in the registration of
such other shares of Common Stock.
4. HOLD-BACK AGREEMENTS
4.1 Restrictions on Public Sale by Holder of Registrable
Securities. (a) Each Holder of Registrable Securities agrees, if requested by
the managing underwriter or underwriters in an underwritten offering of any
Registrable Securities, not to effect any public sale or distribution or any
other sale pursuant to the exemption from the registration requirements of the
Securities Act available for private placements, of its remaining equity
securities of the Company, including a sale pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act (except as part of
such underwritten registration), during the 14-day period prior to, and during
the 90-day period (or such shorter period as may be agreed to by the parties
hereto) beginning on, the effective date of such Registration Statement, to the
extent timely notified in writing by the Company or the managing underwriter or
underwriters, unless the underwriters managing the registered offering and the
Company otherwise agree.
(b) Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities not to effect any public sale or
distribution or any other sale pursuant to the exemption from the registration
requirements of the Securities Act available for private placements, of its
remaining equity securities of the Company, including a sale pursuant to Rule
144 (or any similar provision then in force) under the Securities Act (except
as part of such underwritten registration), during the period that a holder of
securities registrable under any of the agreements set forth on
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Schedule 10.2 is prohibited from making any such sale or distribution as a
result of a underwritten public offering pursuant to such agreement.
(c) Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities not to dispose of any Registrable
Securities pursuant to the Shelf Registration Statement during the period
commencing with the effective date of a registration statement for any
underwritten public offering of the Company's equity securities and terminating
on the 90th day (or any such shorter period during which the Company shall be
subject to a lock-up agreement pursuant to the underwriting arrangements
relating to such offering) after the effectiveness of the registration
statement for such offering pursuant to the Securities Act unless the
underwriter or underwriters administering such offering otherwise agree. The
restrictions contained in this Section 4.1(c) shall apply to primary
registrations on behalf of the Company and to secondary registrations on behalf
of holders of the Company's securities.
4.2 Restriction on Public Sale by the Company and Others. The
Company agrees (i) not to effect any public sale or distribution of any of its
equity securities during the 14-day period prior to, and during the 90-day
period beginning on, the effective date of a Registration Statement filed
pursuant to Section 3 or such longer periods as may be required in the
reasonable judgment of the managing underwriter or underwriters (except as part
of such underwritten registration or pursuant to registrations on Forms S-4 or
S-8 or any successor form to such forms or in connection with an exchange offer
or an offering of securities solely to the existing stockholders or employees
of the Company), and (ii) that it will cause each holder of equity securities
of the Company purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) who as a result of such
purchase, owns more than 5% of the Common Stock on a fully diluted basis, to
agree not to effect any public sale or distribution or any other sale pursuant
to the exemption from the registration requirements of the Securities Act
available for private placements, of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such underwritten registration, if permitted).
5. REGISTRATION PROCEDURES
Upon the Company incurring registration obligations under
Section 2 or 3 and subject thereto, the Company will use its reasonable best
efforts to effect such registrations to permit the sale of such Registrable
Securities and Additional Securities in accordance with the intended method or
methods of distribution thereof, and pursuant thereto the Company will, at its
expense, as expeditiously as reasonably possible:
(a) prepare and file with the Commission a Registration
Statement relating to such registration on any appropriate form under the
Securities Act, which form shall be available for the sale of the Registrable
Securities and Additional Securities by the Holders thereof in accordance with
the intended method or methods of distribution thereof, and use its reasonable
best efforts to cause such Registration Statement to become effective;
provided, however, that before filing a Registration Statement or Prospectus or
any amendments or supplements thereto, including documents incorporated by
reference after the initial filing of any Registration Statement, the Company
will furnish to the Holders of the Registrable Securities covered by such
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Registration Statement, their counsel and the underwriters, if any, copies of
all such documents proposed to be filed sufficiently in advance of filing to
provide them with a reasonable opportunity to review such documents and comment
thereon;
(b) prepare and file with the Commission such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for a period of not less than 180
days (or such shorter period which shall terminate when all Registrable
Securities and Additional Securities covered by such Registration Statement
have been sold or withdrawn, but not prior to the expiration of the 90-day
period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable); cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the applicable Period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement or supplement to such Prospectus;
(c) notify each Holder of Registrable Securities included in the
Registration Statement, their counsel and the managing underwriters, if any, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, promptly, and (if requested by any such Person) confirm
such notice in writing, (1) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(2) of any request by the Commission for amendments or supplements to a
Registration Statement or related Prospectus or for additional information,
(3) of the issuance by the Commission of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (4) if at any time the representations and warranties of the
Company contained in agreements contemplated by Section 5(n) cease to be true
and correct, (5) of the receipt by the Company of any notification with respect
to the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, (6) of the happening of any event as a result of which the
Prospectus included in the Registration Statement (as then in effect) contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or any preliminary Prospectus, in light of the
circumstances under which they were made) not misleading and (7) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate or that there exist circumstances
not yet disclosed to the public which make further sales under such
Registration Statement inadvisable pending such disclosure and post-effective
amendment;
(d) at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, upon the occurrence of any event
contemplated by Section 5(c)(2)-(7), prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, which Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
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(e) use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement, or the
lifting of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction required pursuant to Section 5(i), as
soon as reasonably possible;
(f) if requested by a managing underwriter or any Holder of
Registrable Securities, immediately incorporate in a prospectus supplement or
post-effective amendment such information concerning such Holder of Registrable
Securities, the managing underwriter or underwriters or the intended method of
distribution as the managing underwriter or underwriters or the Holder of
Registrable Securities reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of shares of the Registrable
Securities being sold to such underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and with respect to any
other terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required filings
of such Prospectus supplement or post-effective amendment as soon as notified
of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; and supplement or make amendments to any Registration
Statement if requested by a managing underwriter of such Registrable
Securities;
(g) furnish to each Holder of Registrable Securities included
in such Registration Statement and each managing underwriter, if any, without
charge, one manually-signed copy of the Registration Statement and any
post-effective amendments thereto, including financial statements and
schedules, and, upon request, all documents incorporated therein by reference
and all exhibits (including those incorporated by reference);
(h) deliver to each Holder of Registrable Securities included
in such Registration Statement, their counsel and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses (including
each preliminary Prospectus) and any amendment or supplement thereto as such
Persons may reasonably request; the Company consents to the use of such
Prospectus or any amendment or supplement thereto by each Holder of Registrable
Securities included in the Registration Statement and the underwriters, if any,
in connection with the offering and sale of the Registrable Securities covered
by such Prospectus or any amendment or supplement thereto;
(i) prior to any public offering of Registrable Securities use
its reasonable best efforts to register or qualify, or cooperate with the
Holders of Registrable Securities included in the Registration Statement, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of, such Registrable Securities and Additional
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any Holder or underwriter reasonably requests in writing; use
its reasonable best efforts to keep each such registration or qualification
effective, including through new filings or amendments or renewals, during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities and Additional Securities
covered by the applicable Registration Statement; provided, however, that the
Company will not be required to qualify to do business or take any
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action that would subject it to taxation or general service of process in any
jurisdiction where it is not then so qualified or subject;
(j) cooperate with the Holders of Registrable Securities
included in the Registration Statement and the managing underwriter or
underwriters, if any, to facilitate, at the election of the Majority Holders,
(x) the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities and Additional
Securities to be sold under the Registration Statement or (y) the timely
transfer of beneficial ownership of such Registrable Securities and Additional
Securities in machine book-entry fashion under the auspices of The Depository
Trust Company or other similar organization; and cause such Registrable
Securities and Additional Securities to be in such denominations and registered
in such names as the managing underwriter or underwriters, if any, or such
Holders may request at least two business days prior to any sale of Registrable
Securities and Additional Securities;
(k) use its reasonable best efforts to cause the Registrable
Securities and Additional Securities covered by the Registration Statement to
be registered with or approved by such Governmental Bodies consistent with the
provisions of Section 5(i) as may be necessary to enable the seller or sellers
thereof or the managing underwriter or underwriters, if any, to consummate the
disposition of such Registrable Securities;
(l) cause all Registrable Securities and Additional Securities
included in such Registration Statement to be (1) listed, by the date of first
sale of Registrable Securities pursuant to such Registration Statement, on each
securities exchange on which the Common Stock is then listed or proposed to be
listed thereon, if any, or (2) quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or the National Market System of
NASDAQ if the Common Stock is then quoted thereon;
(m) provide a transfer agent and registrar for the Registrable
Securities and Additional Securities not later than the effective date of such
Registration Statement;
(n) enter into such agreements as are reasonable and customary
for comparable transactions and take all such other reasonable actions in
connection therewith in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, in the case of an underwritten
offering, (1) enter into an underwriting agreement in form, scope and substance
as is customary in comparable underwritten offerings by such underwriter and
use its reasonable best efforts to obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriter or underwriters)
addressed to each selling Holder and the underwriters, if any, covering the
matters customarily covered in opinions requested in underwritten offerings and
such other related matters as may be reasonably requested by such Holders and
underwriters, (2) use its reasonable best efforts to obtain a "cold comfort"
letter and updates thereof from the Company's independent certified public
accountants addressed to each Holder of Registrable Securities included in the
Registration Statement and the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters given by accountants in connection with underwritten
offerings, (3) the underwriting agreement shall set forth in full the
indemnification provisions and procedures of Section 7 with respect to all
parties to be indemnified pursuant to said Section, and (4) the
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Company shall deliver such documents and certificates as may be reasonably
requested by the managing underwriter or underwriters, if any, to evidence
compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company. The above shall be
done at each closing under such underwriting or similar agreement or as and to
the extent required thereunder;
(o) make available for inspection by a representative of the
Holders of Registrable Securities included in the Registration Statement, any
underwriter participating in any disposition pursuant to such Registration
Statement and any lawyer, accountant or other advisors retained by such selling
Holders or underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company as they may reasonably
request, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative, underwriter,
lawyer, accountant or other advisors in connection with such Registration
Statement, provided, however, that any records, information or documents that
are furnished by the Company and that are non-public shall be used only in
connection with such registration and shall be kept confidential by such
Persons except to the extent disclosure of such records, information or
documents is required by law; and
(p) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and make generally
available to its security holders earnings statements satisfying the provisions
of Section 11(a) of the Securities Act, no later than 90 days after the end of
any 12-month period (1) commencing at the end of any fiscal quarter in which
Registrable Securities and Additional Securities are sold to underwriters in
a firm or best efforts underwritten offering and (2) beginning with the first
day of the Company's first fiscal quarter next succeeding each sale of
Registrable Securities and Additional Securities after the effective date of a
Registration Statement, which statements shall cover said 12-month periods.
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish promptly to the Company
such information regarding the distribution of such securities as the Company
may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that (i) such Holder will sell its securities
covered by any Registration Statement in accordance with the plan of
distribution provided for therein and (ii) upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
5(c)(2)-(7), such Holder will forthwith discontinue disposition of Registrable
Securities and Additional Securities covered by such Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(d), or until it is advised in
writing by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in such Prospectus, and, if so directed by
the Company, such Holder will, or will request the managing underwriter or
underwriters, if any, to, deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time period
mentioned in Section 5(b) during which a Registration Statement is required to
be kept effective shall be extended by the number
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of days during the time period from and including the date of the giving of
such notice pursuant to Section 5(c) to and including the date when each seller
of Registrable Securities covered by such Registration Statement shall have
received the copies of the supplemented or amended Prospectus contemplated by
Section 5(d). The Company shall be obligated to use its reasonable best
efforts to cause such Registration Statement and Prospectus to conform to all
legal requirements and to notify the Holders that the use of the applicable
Prospectus may be resumed. Nothing in this paragraph shall limit the
obligations of the Company under Section 2.5 of this Agreement.
6. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration and filing
fees (excluding the incremental portion of any such Commission registration
filing fees relating to Additional Securities, which shall be paid by each
Holder in proportion to the number of Additional Securities of such Holder
included in the registration), fees and expense of compliance with state
securities or blue sky laws, including reasonable fees and disbursements of
counsel for the underwriters or selling Holders in connection with blue sky
qualifications of the Registrable Securities under the laws of such
jurisdictions as the managing underwriter or underwriters or Holders of a
majority of the shares of the Registrable Securities being sold may reasonably
designate (but excluding any incremental portion of such state or blue sky
filing, qualification or registration fees relating to Additional Securities,
which shall be paid by each Holder in proportion to the number of Additional
Securities of such Holder included in the registration), printing expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel for the Company and for the Holders and of all independent certified
public accountants of the Company (including the expenses of any special audit
and "cold comfort" letters required by or incident to such performance), and of
underwriters, to the extent required by such underwriters if it is customary
for such underwriters in similar underwriting for the issuer to pay such
expenses (but, in any event, excluding the following expenses none of which
shall be paid by the Company: transfer taxes, discounts, commissions or fees
of underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of the Registrable
Securities and the Additional Securities), securities acts liability insurance
if the Company so desires and fees and expenses of other Persons retained by
the Company (all such expenses being herein called "Registration Expenses")
will be borne by the Company whether or not the Registration Statement becomes
effective. The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees and expenses of
any Person, including special experts, retained by the Company.
7. INDEMNIFICATION
7.1 Indemnification by the Company. The Company agrees to
indemnify, defend, exonerate and hold harmless, to the full extent permitted by
law, each Holder of Registrable Securities registered pursuant to any
registration hereunder and each of its officers, directors, employees, agents,
partners, members and representatives and each Person who controls such
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Holder (within the meaning of the Securities Act) against any and all actions,
causes of action, suits, losses, liabilities, obligations, damages,
deficiencies, demands, claims, judgments, taxes, assessments, settlement costs,
court costs and other costs and expenses, including, without limitation,
interest, penalties, fines, reasonable costs of investigation, discovery, case
preparation, defense or appeal, expert witness fees and expenses and reasonable
attorneys' and paralegal fees and disbursements (collectively, "Losses")
incurred by any such Person in any capacity and caused by any untrue statement
of a material fact contained in any Registration Statement, Prospectus or
preliminary Prospectus or any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of a Prospectus or any preliminary Prospectus, in the light of the
circumstances under which they were made) not misleading, except insofar as the
same are caused by or contained in any information furnished in writing to the
Company by such Holder or its representative expressly for use therein. The
Company will also indemnify underwriters, their officers and directors and each
Person who controls such Persons (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification of the
Holders; provided, however, that if pursuant to an underwritten public offering
of Registrable Securities, the Company and any underwriters enter into an
underwriting or purchase agreement relating to such offering which contains
provisions relating to indemnification and contribution between the Company and
such underwriters, such provisions shall be deemed to govern indemnification
and contribution as between the Company and such underwriters.
7.2 Indemnification by Holders. In connection with any
registration hereunder, each Holder participating in such registration will
promptly furnish to the Company in writing such information and affidavits with
respect to such Holder as the Company reasonably requests for use in connection
with any Registration Statement or Prospectus (limited, in each case, to such
Holder's identity, organization, domicile, securities of the Company held and
intended method of distribution) and agrees to indemnify, defend, exonerate and
hold harmless, to the full extent permitted by law, the Company, its directors,
officers, agents and representatives and each Person who controls the Company
(within the meaning of the Securities Act) against any Losses incurred by any
such Person in any capacity and caused by any untrue statement of a material
fact or any omission of a material fact required to be stated in any
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein (in the case of a Prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information or affidavit with respect to such Holder so furnished in writing by
such Holder or its representatives to the Company specifically for inclusion in
such Registration Statement or Prospectus. The Company shall be entitled to
receive indemnities from underwriters to the same extent as provided above with
respect to information so furnished in writing by such persons or their
representatives to the Company specifically for inclusion in any Prospectus or
Registration Statement.
7.3 Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party.
Notwithstanding the foregoing, any Person entitled to indemnification hereunder
shall have the right to employ separate counsel and to participate in the
defense of such claim, but the
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reasonable fees and expenses of such counsel shall be at the expense of such
Person unless (a) the indemnifying party has agreed in writing to pay such fees
or expenses, (b) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Person or (c)
a conflict of interest may exist between such Person and the indemnifying party
or such Person is entitled to a defense not permitted to be used by the
indemnifying party with respect to such claims (it being understood that (x) in
the case of each of (a), (b) and (c) above, the reasonable fees and expenses of
such separate counsel to such Person shall be paid by the indemnifying party
and (y) in the case of (c) above, if the Person notifies the indemnifying party
in writing that such Person elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such claim on behalf of such Person). If such defense is
not assumed by the indemnifying party, the indemnifying party will not be
subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld or delayed). No indemnifying party
will be required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to the indemnified party of a release from all
liability in respect to such claim or litigation. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the reasonable fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional
counsel or counsels. The Company may not enter into any settlement of any
claim relating to the offer and sale of Registrable Securities or Additional
Securities that does not provide for the complete and unconditional release of
such Person.
7.4 Contribution. If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expense
referred to therein, then the indemnifying party in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action; provided, however, that in no event shall the liability of
any selling Holder hereunder be greater in amount than the difference between
the dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such contribution obligation and all
amounts previously contributed by such Holder with respect to such losses,
claims, damages, liabilities and expenses. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
8. RULE 144
The Company will use its reasonable best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations adopted by the Commission thereunder, and it will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
information and requirements.
9. EFFECTIVENESS. This Agreement shall be effective upon the execution of a
counterpart by each of the parties hereto.
10. MISCELLANEOUS
10.1 No Adequate Remedy at Law. In the event of a breach by the
Company of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate. The
failure to file a Registration Statement within 60 days of a written request
delivered under Section 2.1 shall constitute, in the absence of an injunction
or a Blackout Period having been imposed, a breach thereof entitling the
Holders to remedies hereunder.
10.2 No Inconsistent Agreement. (a) Except for the
registration rights contained in the agreements set forth on Schedule 10.2
hereto, the Company has not previously entered into any agreement with respect
to its capital stock granting any registration rights to any Person.
(b) The Company will not on or after the date of this
Agreement enter into any agreement with respect to its securities, (i) which
grants registration rights to anyone on a preferred or pari passu position to
the Holders or (ii) which is inconsistent with the rights granted to the
Holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof.
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10.3 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter which relates exclusively
to the rights of Holders of Registrable Securities whose securities are being
sold pursuant to a Registration Statement and which does not directly or
indirectly affect the rights of other Holders may be given by Holders owning a
majority of the shares of the Registrable Securities being sold by such
Holders, provided that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
10.4 Notices. Any notice or other communication required or
permitted hereunder shall be deemed to be delivered if in writing (or in the
form of a telecopy) addressed as provided below and if either (a) actually
delivered or telecopied to said address, (b) in the case of overnight delivery
of a notice, the next business day after properly posted with postage prepaid,
or (c) in the case of a letter, 3 business days shall have elapsed after the
same shall have been deposited in the United States mails, postage prepaid and
registered or certified:
If to the Company, then to Prime Residential, Inc., 77 West Wacker
Drive, 40th Floor, Chicago, Illinois, Attention: President, or such
other address or addresses of which the Investor shall have been given
notice, with copies to Kirkland & Ellis, 200 East Randolph Drive, 54th
Floor, Chicago, Illinois 60601, Attention: Robert Osborne, P.C., or
such other address of which the Investor shall have been given notice.
If to any Holder of Registrable Securities, to it at its address
set forth on the books and records of the Company. The failure to
deliver a copy of any notice to any party's counsel shall not affect
the validity of such notice.
The failure todeliver a copy of any notice to any party's counsel
shall not affect the validity of such notice.
10.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, including, without limitation, subsequent Holders of
Registrable Securities agreeing to be bound by all of the terms and conditions
of this Agreement.
10.6 Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in two or more counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute
one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart by each of the parties hereto.
10.7 Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
17
<PAGE> 18
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
10.9 Consent to Jurisdiction; Waiver of Jury Trial. (a) Any
action, suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any federal court of the
Southern District of New York or any state court located in New York County,
State of New York, and each party agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of such court, that the action,
suit or proceeding is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. The parties irrevocably
submit to the exclusive jurisdiction of such court in any such action, suit or
proceeding. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against any party if given
personally or by registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt, postage prepaid, mailed
to such party as herein provided. Nothing herein contained shall be deemed to
affect the right of any party to serve process in any manner permitted by law
or to commence legal proceedings or otherwise proceed against any other party
in any other jurisdiction to enforce judgments obtained in any action, suit or
proceeding brought pursuant to this Section 10.9.
(b) Each of the parties hereby irrevocably waives trial by jury
in any action, suit, proceeding or counterclaim, whether at law or equity,
brought by either of them in connection with this Agreement or the transactions
contemplated hereby.
10.10 Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation under
this Agreement shall not affect or impair the validity, legality and
enforceability of the remaining provisions or obligations under this Agreement
or of such provision or obligation in any other jurisdiction.
10.11 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein, other than the
provisions of any other documents specifically referred to herein. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein, with respect to the registration rights granted by
the Company with respect to the Registrable Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
10.12 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to its reasonable costs and
expenses and any other available remedy.
18
<PAGE> 19
10.13 Construction. The Company and the Investor acknowledge
that each of them has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement with its legal
counsel and that this Agreement shall be construed as if jointly drafted by the
Company and the Investor.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
-------------------------------
Name: David M. Glickman
Title: Chairman of the Board
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
-------------------------------
Name: Matthew W. Kaplan
Title: Manager
19
<PAGE> 1
EXHIBIT 10.45
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PRIME RESIDENTIAL, L.P.
AMENDMENT NO. 1 dated as of September 20, 1994, by and among Prime
Residential, Inc., a Maryland corporation, in its capacity as general partner
(the "General Partner") of Prime Residential, L.P., a Delaware limited
partnership (the "Partnership"), and the limited partners listed on Exhibit A to
the Partnership's Amended and Restated Agreement of Limited Partnership dated as
of August 31, 1994 (the "Partnership Agreement").
RECITALS:
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Partnership Agreement.
On September 20, 1994, the General Partner issued and sold in the
aggregate 1,137,525 shares of Common Stock, par value $.01 per share (the
"Shares") to certain underwriters pursuant to the exercise by the underwriters
of their overallotment option in exchange for net proceeds of $17,105,376 (the
"Net Proceeds").
Section 4.3(b) of the Partnership Agreement restricts the General
Partner from issuing any Common Stock unless the General Partner contributes to
the Partnership the proceeds therefor, or consideration received therefrom, in
consideration for which the Partnership is obligated to issue additional Common
Units equal to the product of (i) the number of shares of Common Stock issued by
the General Partner, multiplied by (ii) a fraction the numerator of which is one
and the denominator of which is the Exchange Factor in effect on the date of
such contribution.
The General Partner has contributed the Net Proceeds to the Partnership
and the Partnership has issued additional Common Units in consideration therefor
in accordance with Section 4.3(b)(ii)(C) of the Partnership Agreement.
Section 14.7 of the Partnership Agreement authorizes the General
Partner to amend the Partnership Agreement without the Consent of the Partners
to reflect the issuance of Common Units pursuant to Section 4.3.
NOW THEREFORE, the General Partner, on behalf of all Partners, hereby
amends the Partnership Agreement as follows:
<PAGE> 2
1. Exhibit A to the Partnership Agreement is
hereby amended and restated in its entirety as set forth on
Exhibit A attached hereto to reflect the General Partner's
additional Capital Contribution to the Partnership of
$17,105,376 and the issuance to the General Partner of
1,137,525 Common Units.
2. Except as amended by this Amendment No. 1,
the Partnership Agreement remains unchanged and in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 1 as of the date and year first above written.
GENERAL PARTNER:
PRIME RESIDENTIAL, INC.,
By: /s/ David M. Glickman
- ------------------------------------
Name: David M. Glickman
Title: Chief Executive Officer
LIMITED PARTNERS:
THE PRIME GROUP, INC.
PRIME GROUP LIMITED PARTNERSHIP
RICHARD F. CAVENAUGH
LG TRUST
DAVID M. GLICKMAN
ADAM D. PETERSON
PRIME GROUP IV, L.P.
By: Prime Residential, Inc. as
Attorney in Fact for the Limited
Partners pursuant to Section 2.6
of the Partnership Agreement
By: /s/ David M. Glickman
--------------------------------
Name: David M. Glickman
Title: Chief Executive Officer
2
<PAGE> 3
EXHIBIT A
PARTNERSHIP UNITS
(as of September 20, 1994)
<TABLE>
<CAPTION>
NUMBER OF
COMMON UNITS TOTAL
NUMBER OF OTHER THAN NUMBER
INITIAL INITIAL OF COMMON
GENERAL PARTNER COMMON UNITS COMMON UNITS UNITS
- --------------- ------------ ------------ ---------
<S> <C> C> <C>
Prime Residential, Inc. - 8,958,525 8,958,525
Initial Capital
Contribution of
General Partner:
$110,592,149
Additional Capital
Contribution of
General Partner:
$ 17,105,376
Total Capital
Contribution of
General Partner:
$127,697,525
LIMITED PARTNERS
- ----------------
1. The Prime Group, Inc. 359,375 - 359,375
2. Prime Group Limited
Partnership 2,953 - 2,953
3. Richard F. Cavenaugh 17,280 - 17,280
4. LG Trust - 84,375 84,375
5. David M. Glickman 156,250* - 156,250*
6. Adam D. Peterson - 15,625 15,625
7. Prime Group IV, L.P. 328,125** - 328,125**
-------
Total Common Units Held 963,983
by Limited Partners -------
TOTAL COMMON UNITS 9,922,508
=========
</TABLE>
* Includes 2,683 and 153,567 Initial Common Units, respectively, that The
Prime Group, Inc. and Prime Group Limited Partnership transferred to David M.
Glickman immediately following the Completion of the Offering. All of these
Common Units transferred to David M. Glickman constitute Initial Common Units.
** Represents 328,125 Initial Common Units transferred by Prime Group Limited
Partnership to Prime Group IV, L.P. immediately following the Completion of the
Offering. All of those Common Units transferred to Prime Group IV, L.P.
constitute Initial Common Units.
A-1
<PAGE> 1
EXHIBIT 10.46
AMENDMENT NO. 2
TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PRIME RESIDENTIAL, L.P.
AMENDMENT NO. 2 dated as of June 21, 1996, by and among
Ambassador Apartments, Inc. (formerly Prime Residential, Inc.), a Maryland
corporation and the sole general partner (the "General Partner") of Prime
Residential, L.P., a Delaware limited partnership (the "Partnership"), and the
limited partners of the Partnership listed on the signature page hereto (the
"Limited Partners"), to the Limited Partnership Agreement dated as of August
31, 1994, as amended as of September 20, 1994 (the "Partnership Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Partnership Agreement.
WHEREAS, the General Partner has changed its name to Ambassador
Apartments, Inc.;
WHEREAS, the General Partner desires to change the name of the
Partnership to Ambassador Apartments, L.P.;
WHEREAS, Section 14.7 of the Partnership Agreement requires
that any amendment to the Partnership Agreement be made only by a written
instrument signed by the General Partner and a Majority-in-Interest of the
Partners; and
WHEREAS, the General Partner constitutes a Majority-in-Interest
of the Partners;
NOW, THEREFORE, the Partnership Agreement is hereby amended as
follows:
1. Section 2.2 of the Partnership Agreement is hereby deleted in
its entirety and the following substituted therefor:
"2.2 Name. The business of the Partnership shall be
conducted under the name of Ambassador Apartments, L.P. or such other
name as the General Partner may select, and all transactions of the
Partnership, to the extent permitted by applicable law, shall be
carried on and completed in such name.
2. All references in the Partnership Agreement to "Prime
Residential, L.P." shall refer to Ambassador Apartments, L.P., and all
references in the Partnership Agreement to "Prime Residential, Inc." shall
refer to Ambassador Apartments, Inc."
<PAGE> 2
3. Except as amended by this Amendment No. 2, the Partnership
Agreement remains unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 2 as of the date and year first above written.
GENERAL PARTNER:
AMBASSADOR APARTMENTS, INC.
(formerly Prime Residential, Inc.)
By: /s/ Adam D. Peterson
------------------------------
Name: Adam D. Peterson
Title: Senior Vice President
LIMITED PARTNERS:
THE PRIME GROUP, INC.
RICHARD F. CAVENAUGH
LG TRUST
DAVID M. GLICKMAN
ADAM D. PETERSON
PRIME GROUP IV, L.P.
MICHAEL W. RESCHKE
EDWARD J. JOHN
RAY R. GRINVALDS
WARREN H. JOHN
ROBERT J. RUDNIK
By: AMBASSADOR APARTMENTS, INC.,
formerly Prime Residential, Inc.,
as Attorney in Fact for the Limited
Partners pursuant to Section 2.6
of the Partnership Agreement
By: /s/ Adam D. Peterson
-------------------------------
Name: Adam D. Peterson
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.47
AMENDMENT NO. 3 TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMBASSADOR APARTMENTS, L.P.
Amendment No. 3 dated as of August 16, 1996, by and among
Ambassador Apartments, Inc., a Maryland corporation, in its capacity as general
partner (the "General Partner") of Ambassador Apartments, L.P., a Delaware
limited partnership (the "Partnership"), and the limited partners listed on
Exhibit A to the Partnership's Amended and Restated Agreement of Limited
Partnership dated as of August 31, 1994, as amended by Amendment No. 1 thereto
dated as of September 20, 1994 and as amended by Amendment No. 2 thereto dated
as of June 21, 1996 (the "Partnership Agreement").
RECITALS:
Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Partnership Agreement.
As of the date hereof, the General Partner issued and sold
1,351,351 shares of its Class A Senior Cumulative Convertible Preferred Stock
(the "Preferred Shares") to Five Arrows Realty Securities LLC, a limited
liability company organized under the laws of the State of Delaware (the
"Investor"), pursuant to an Investment Agreement, dated as of August 15, 1996,
among the General Partner, the Partnership and the Investor (the "Investment
Agreement"), in exchange for $25,000,000 in cash (the "Purchase Price").
Section 4.3(b) of the Partnership Agreement restricts the
General Partner from issuing Preferred Shares unless the General Partner
contributes to the Partnership the proceeds therefor, or consideration received
therefrom, in consideration for which the Partnership is obligated to issue
interests in the Partnership with the same terms and conditions, including
dividend, dividend priority and liquidation preference, as are applicable to
the Preferred Shares.
The General Partner has contributed to the Partnership the net
proceeds from the issuance of the Preferred Shares and the Partnership has
issued Class A Preferred Units (as defined herein) in consideration therefor in
accordance with Section 4.3(b)(ii)(b) of the Partnership Agreement.
Section 14.7 of the Partnership Agreement authorizes the
General Partner to amend the Partnership Agreement without the consent of the
Limited Partners to reflect the issuance of the Class A Preferred Units
pursuant to Section 4.3.
NOW THEREFORE, the General Partner, on behalf of all Partners,
hereby amends the Partnership Agreement as follows:
<PAGE> 2
1. Exhibit A to the Partnership Agreement is hereby
amended and restated in its entirety as set forth on Exhibit A attached hereto
to reflect the General Partner's additional Capital Contribution to the
Partnership of $25,000,000 and the issuance to the General Partner of 1,351,351
Class A Preferred Units.
2. Section 1.1 of the Partnership Agreement is hereby
amended by adding the following defined terms in alphabetical order:
"Class A Articles Supplementary" shall mean the
Articles Supplementary classifying 1,351,351 shares of
preferred stock as Class A Senior Cumulative Convertible
Preferred Stock of the General Partner and 1,351,351 shares of
Excess Stock as Excess Class A Preferred Stock of the Company.
"Class A Preferred Units" shall mean the Partnership
Units designated as Class A Preferred Units under this
Agreement, acquired by the General Partner in exchange for its
additional capital contributions and having the rights
described in this Agreement. The number of Class A Preferred
Units outstanding, and the allocation of Class A Preferred
Units to each Partner, is as set forth opposite its or his
name in Exhibit A.
"Class A Priority Distribution" means, with respect
to any fiscal quarter of the Partnership an amount equal to
the dividends payable for such quarter on the Class A
Preferred Shares. "Preferred Shares" shall mean the shares of
the General Partner designated in the Class A Articles
Supplementary as Class A Senior Cumulative Convertible
Preferred Stock.
3. Section 6.2(a) of the Partnership Agreement is hereby
amended and restated in its entirety as follows:
(a) Except for distributions pursuant to Section 8.2 in
connection with the dissolution and liquidation of the Partnership, and subject
to the provisions of Sections 6.2(b), (c), (d), (e) and (f), the General
Partner shall cause the Partnership to distribute, from time to time as
determined by the General Partner, but in any event not less frequently than
quarterly, all Net Cash Flow, to the Partners, in accordance with the following
priorities: (i) to the holders of the Class A Preferred Units, any Class A
Priority Distribution as provided for in Section 6.2(a)(ii) with respect to a
prior quarter that has not been distributed on Class A Preferred Units then
outstanding, (ii) to the holders of the Class A Preferred Units, the Class A
Priority Distribution due with respect to such quarter on Class A Preferred
Units then outstanding, and (iii) to each of the Partner's in accordance with
each Partner's respective Common Unit Percentage.
2
<PAGE> 3
4. Section 8.2 of the Partnership Agreement is hereby amended
and restated in its entirety as follows:
8.2 Distribution on Dissolution and Liquidation.
In the event of the dissolution and liquidation of the
Partnership for any reason, the assets of the Partnership shall
be liquidated for distribution in the following rank and order:
(a) Payment of creditors of the Partnership (other
than Partners) in the order of priority as provided by law;
(b) Establishment of reserves as determined by the
Liquidating Trustee to provide for contingent liabilities, if
any;
(c) Payment of debts of the Partnership to
Partners, if any, in the order of priority provided by law; and
(d) To the holders of Class A Preferred Units in an
amount equal to $18.50 per Class A Preferred Unit then
outstanding plus any accrued and unpaid Class A Priority
Distributions with respect thereto.
(e) To the Partners to the extent of and in
proportion to the positive balances in their respective Capital
Accounts after giving effect to (i) all allocations of Net
Income and Net Loss for all periods, including the period in
which such distribution occurs, and (ii) all contributions and
distributions for all prior periods (other than those
adjustments made pursuant to this Section 8.2(e)).
Whenever the Liquidating Trustee reasonably determines that any reserves
established pursuant to paragraph (b) above are in excess of the
reasonable requirements of the Partnership, the amount determined to be
excess shall be distributed to the Partners in accordance with
paragraphs (c), (d) and (e) above.
5. Exhibit E to the Partnership Agreement is hereby amended and
restated in its entirety as set forth on Exhibit E attached hereto.
6. The Partnership Agreement is hereby amended by adding thereto
Sections 4.9, 4.10 and 4.11 as follows:
"4.9 Redemption of Preferred Shares by General
Partner. In the event the General Partner redeems or otherwise
acquires and cancels Preferred Shares pursuant to the Class A
Articles Supplementary, the Partnership will redeem from the
General Partner an equal number of Class A Preferred Units at a
price equal to the consideration paid by the General Partner
with respect to the Preferred Shares redeemed and will amend
Exhibit A hereto to reflect such redemption.
3
<PAGE> 4
4.10 Conversion of Preferred Shares into Common
Stock. In the event any Preferred Shares are converted into
shares of Common Stock pursuant to the Class A Articles
Supplementary, an equal number of Class A Preferred Units shall
be converted into Common Units such that each such Class A
Preferred Unit converted shall be converted into a number of
Common Units equal to (x) the number of shares of Common Stock
into which each such Preferred Share was converted divided by
(y) the Exchange Factor in effect on the date of such
conversion, and the General Partner will amend Exhibit A hereto
to reflect such conversion.
4.11 Redemption of Excess Class A Preferred by the
General Partner. In the event the General Partner redeems
Excess Class A Preferred (as defined in the Class A Articles
Supplementary) pursuant to the Class A Articles Supplementary,
the Partnership will redeem from the General Partner an equal
number of Class A Preferred Units at a price equal to the
consideration paid by the General Partner with respect to the
Excess Class A Preferred redeemed and will amend Exhibit A
hereto to reflect such redemption."
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 3 as of the date and year first above written.
GENERAL PARTNER:
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
--------------------------------
Name: David M. Glickman
Title: Chief Executive Officer
LIMITED PARTNERS:
THE PRIME GROUP, INC.
RICHARD F. CAVENAUGH
LG TRUST
DAVID M. GLICKMAN
ADAM D. PETERSON
PRIME GROUP IV, L.P.
EDWARD J. JOHN
MICHAEL W. RESCHKE
RAY R. GRINUALDS
ROBERT J. RUDNICK
WARREN H. JOHN
By: Ambassador Apartments, Inc.
as Attorney in Fact for the Limited
Partners pursuant to Section 2.6
of the Partnership Agreement
By: /s/ David M. Glickman
----------------------------------
Name: David M. Glickman
Title: Chief Executive Officer
5
<PAGE> 6
EXHIBIT A PARTNERSHIP UNITS (AS OF AUGUST 16, 1996)
<TABLE>
<CAPTION>
NUMBER OF
COMMON UNITS
NUMBER OF OTHER THAN TOTAL NUMBER OF
INITIAL INITIAL NUMBER OF CLASS A
GENERAL PARTNER COMMON UNITS COMMON UNITS COMMON UNITS PREFERRED UNITS
- ------------------------------ --------------- -------------- ------------- ------------------
<S> <C> <C> <C> <C>
Prime Residential, Inc. 8,958,525 8,958,525 1,351,351
Initial Capital Contribution
of General Partner:
$110,592,149
Additional Capital
Contribution of General
Partner as of
September 20, 1994:
$17,105,376
Additional Capital
Contribution of General
Partner as of
August 12, 1996
$24,500,000
Total Capital
Contribution of
General Partner:
$152,197,525
LIMITED PARTNERS
- ----------------
1. The Prime Group, Inc. 359,375 359,375
2. Richard F. Cavenaugh 17,280 17,280
3. LG Trust 84,375 84,375
4. David M. Glickman 156,250* 156,250*
5. Adam D. Peterson 15,625 15,625
6. Prime Group IV, L.P 244,166** 244,166**
7. Edward J. John 52,839*** 52,839***
8. Michael W. Reschke 29,505*** 29,505***
9. Ray R. Grinvalds 1,568*** 1,568***
10. Robert J. Rudnik 1,500*** 1,500***
11. Warren H. John 1,500*** 1,500***
Total Common Units Held by Limited
Partners 963,983
---------
TOTAL COMMON UNITS 9,922,508
---------
TOTAL CLASS A
PREFERRED UNITS 1,351,351
</TABLE>
6
<PAGE> 7
* Includes 2,683 and 153,567 Initial Common Units, respectively, that The
Prime Group, Inc. and Prime Group Limited Partnership transferred to David
M. Glickman immediately following the Completion of the Offering. All
Common Units transferred to David M. Glickman constitute Initial Common
Units.
** Represents 328,125 Initial Common Units transferred by Prime Group
Limited Partnership to Prime Group IV, L.P. immediately following the
Completion of the Offering. All of these Common Units transferred to
Prime Group IV, L.P. constitute Initial Common Units.
*** Represents Initial Common Units transferred by Prime Group Limited
Partnership and/or Prime Group IV, L.P. in February 1996. All such Common
Units constitute Initial Common Units.
7
<PAGE> 8
EXHIBIT E
ALLOCATIONS
1. Allocation of Net Income And Net Loss.
(a) Net Income. Except as otherwise provided in this Exhibit E, Net
Income (or items thereof) for any fiscal year or other applicable period shall
be allocated to the Partners as follows:
(i) first, 100% to the Partners in proportion to the Net Loss
previously allocated to them under Section 1(b)(iii), until the Net
Income allocated to the Partners under this Section 1(a)(i) equals
the aggregate Net Loss allocated to the Partners under Section
1(b)(iii) (net of any prior allocation under this Section 1(a)(i)).
(ii) second, 100% to the holders of Class A Preferred Units pro
rata according to and to the extent of their respective Unallocated
Priority Distributions.
(iii) third, to the Partners according to their respective Common
Unit Percentages.
(b) Net Loss. Except as otherwise provided in this Exhibit E, Net Loss (or
items thereof) for any fiscal year or other applicable period shall be
allocated to the Partners as follows:
(i) first, among the Partners in proportion to the Net Income
previously allocated to them under Section 1(a)(iii), until the Net
Loss allocated to each Partner under this Section 1(b)(i) equals
the aggregate Net Income allocated to such Partner under Section
1(a)(iii) (net of any prior allocations under this Section
1(b)(i)).
(ii) second, among the holders of Class A Preferred Units in
proportion to the Net Income previously allocated to them under
Section 1(a)(ii), until the Net Loss allocated to each holder under
this Section 1(b)(ii) equal the aggregate Net Income allocated to
such holder under Section 1(a)(ii) (net of any prior allocations
under this Section 1(b)(ii)).
(iii) third, to the Partners according to the respective Common
Unit Percentages.
Notwithstanding the foregoing, to the extent that any Net Loss (or items
thereof) allocated to a Partner under this Section 1(b) would cause such
Partner (hereinafter, a "Restricted Partner") to
1
<PAGE> 9
have an Adjusted Capital Account Deficit, or increase the amount of an existing
Adjusted Capital Account Deficit, as of the end of the fiscal year or other
applicable period to which such net Loss relates, such Net Loss shall not be
allocated to such Restricted Partner and instead shall be allocated to the
other Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance
with each Permitted Partner's Common Unit Percentage. Later allocation of Net
Income shall be made in manner to offset, to the extent possible, the prior
special allocation of Net Loss to Permitted Partners so that the end result is
as if no special allocation of Net Loss has been made.
(c) Transfer in Contemplation of Liquidation. If upon a transfer or
disposition of assets in liquidation of the Partnership (for purposes of this
subparagraph (c), "liquidation" shall begin no earlier than the date on which
the Company adopts a resolution stating its intention to liquidate) and after
giving effect to the foregoing allocation of this paragraph 1. the Capital
Account balance of the General Partner is less than an amount (hereinafter, the
"General Partner Liquidation Amount") equal to the product of the aggregate of
the combined balance in all Partners' Capital Accounts multiplied by the
General Partner's Common Unit Percentage, then, to the extent possible (and
subject to (x) the last sentence of subparagraph (b) of this paragraph 1. and
(y) the REIT Requirements) the General Partner shall allocate Net Income or Net
Loss (or items thereof) among the Partners in a manner sufficient to bring the
General Partner's Capital Account balance equal to the General Partner
Liquidation Amount. Any amount of Net Loss (or items thereof) allocated to the
Limited Partners as a group pursuant to this subparagraph (c) shall be
allocated pro rata in accordance with each Limited Partner's respective Common
Unit Percentage.
(d) Rules of Construction.
(1) Capital Account Increases. For purposes of making allocations
pursuant to subparagraph 1 (c) of this Exhibit E, a Partner's Capital Account
balance shall be deemed to be-increased by such Partner's share of any
Partnership Minimum Gain and Partner Minimum Gain remaining at the close of the
fiscal period in respect of which such allocations are being made.
(2) Change in Unit Percentages. In the event any Partner's Common Unit
Percentage changes during a fiscal year for any reason, including without
limitation, the transfer of any interest in the Partnership, the tax
allocations contained in this Exhibit E shall be applied as necessary to
reflect the varying interests of the Partners during such year. Without
limiting the preceding sentence, if Class A Preferred Units are converted in
Common Units pursuant to Section 4.10, any allocations of Net Income and Net
Loss (i) to the newly issued Common Units shall take effect (x) on the last day
of the preceding quarter in which such Class A Preferred Units were converted
into Common Units if such date is after the record date for the Regular
Quarterly Dividend (as defined in the Class A Articles Supplementary) for the
payment of a dividend on the Common Stock for the quarter in which the
conversion takes place or (y) on the last day of quarter second preceding the
quarter in which such Class A Preferred Units were converted into Common Units
if such date is prior to the record date for the Regular Quarterly Dividend (as
defined in the Class A Articles Supplementary) for the payment of a dividend on
the Common Stock for the quarter in which the conversion takes place, and (ii)
to Preferred Shares which are converted shall cease on the day prior to the
date the allocation of Net Income and Net Loss takes effect for the newly
issued Common Units as described in the preceding clause.
2
<PAGE> 10
2. Special Allocations. Notwithstanding any provisions of paragraph 1 of
this Exhibit E, the following special allocations shall be made.
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as
otherwise provided in Section 1.704-2(f) of the Regulations, if there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain to the extent
required by Regulations Section 1,704-2(f), The items to be so allocated shall
be determined in accordance with Sections 1.704-2(f) and (i) of the
Regulations, This subparagraph 2(a) is intended to comply with the minimum gain
chargeback requirement in said section of the Regulations and shall be
interpreted consistently therewith. Allocations pursuant to this subparagraph
2 (a) shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1,704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.7042(i)(5) of
the Regulations, shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1,704-2(i) of the Regulations. The items to be so
allocated shall be determined in accordance with Sections 1.7042(i)(4) and
(j)(2) of the Regulations. This subparagraph 2(b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse
Debt contained in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2 (b) shall
be made in proportion to the respective amounts required to be allocated to
each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly receives
any adjustments, allocations or distributions described in Sections 1. 704 - I
(b) (2) (ii) (d) (4), (5) or (6) of the Regulations, and such Partner has an
Adjusted Capital Account Deficit, items of Partnership income (including gross
income) and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly
as possible as required by the Regulations. This subparagraph 2(c) is intended
to constitute a "qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently therewith.
(d) Gross Income Allocation. There shall be specially allocated to the
General Partner an amount of Partnership income and gain during each
Partnership fiscal year or portion thereof, before any other allocations are
made hereunder, which is equal to the excess, if any, of the cumulative
distributions of cash made to the General Partner under Section 6.2(d) over the
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cumulative allocations of Partnership income and gain to the General
Partner pursuant to this Section 2(d) of this Exhibit E.
(e) Other Chargeback of Impermissible Negative Capital Account. To the
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership fiscal year, each such Partner shall be specially allocated items
of Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
paragraph 2 (e) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit in excess of such sum after all other
allocations provided for in this Exhibit E have been tentatively made as if
this paragraph 2(e) were not in the Agreement.
(f) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Common Unit Percentages.
(g) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
fiscal year or other applicable period with respect to a Partner Nonrecourse
Debt shall be specially allocated to the Partner that bears the economic risk
of loss for such Partner Nonrecourse Debt (as determined under Sections
1.7042(b)(4) and 1.704-2(i)(l) of the Regulations).
(h) Precontribution Gain.
(1) Method. The Partnership shall use the remedial allocation method
contained in Section 1.704-3T(d) of the Regulations to take into account any
variation between the adjusted basis and the fair market value of the
Contributed Assets at the time of the contribution. By executing this
Agreement, each Partner hereby agrees to report income, gain, loss and
deduction on such Partner's federal income tax return in a manner that is
consistent with the remedial allocation method with respect to the Contributed
Assets. With respect to any asset, other than the Contributed Assets,
contributed to the Partnership by a Partner, the Partnership shall use any
permissible method contained in the Regulations promulgated under Section
704(c) of the Code selected by the General Partner, in its sole discretion, to
take into account any variation between the adjusted basis of such asset and
the fair market value of such asset as of the time of the contribution. Each
Partner hereby agrees to report income, gain, loss and deduction on such
Partner's federal income tax return in a manner consistent with the method used
by the Partnership.
(2) 704 (c) Allocations Attributable to Existing Property Subsidiaries. In
the event that, during any fiscal year or other applicable period, any Existing
Property Subsidiary allocates to the Partnership any Precontribution Gain or
Loss, each Partner who, pursuant to Article IV of this Agreement, contributed
to the capital of the Partnership the Contributed Partnership Interest to which
a distributive share of Precontribution Gain or Loss is allocated shall be
allocated Precontribution Gain or Loss in accordance with its respective
interest in such Precontribution Gain or Loss. For purposes hereof ,
"Pre-contribution Gain or Loss, " shall mean, with respect to each asset owned
by an Existing Property Subsidiary, that unrealized taxable gain or loss, as
the case may be, attributable to the difference between (a) the fair market
value of such asset on the date at which the Contributed Partnership Interests
are contributed to the capital of the Partnership pursuant to Article IV of
this agreement, over (b) the adjusted tax basis of such assets
4
<PAGE> 12
on the date of such contribution; provided, however, that the amount of
any Precontribution Gain or Loss associated with an asset shall be adjusted to
account for (i) allocations made in accordance with the provisions of
subparagraph 3(c) of this Exhibit E and (ii) any adjustment made to the
adjusted tax basis of such asset at the time of the contribution pursuant to
Section 743 (b) of the Code, and provided further, that the amount of any
Precontribution Gain or Loss shall not, in any event, exceed that amount of
gain or lose actually allocated to the Partnership by the Property Subsidiary
as a result of the sale or other disposition of such asset.
(i) Intent of Allocations. The parties intend that the tax allocation
provisions of this Exhibit B shall result in final Capital Account balances of
the Partners that are in proportion to the Partners' respective Common Unit
Percentages (so that, when liquidating distributions are made in accordance
with such final Capital Account Balances under Article VIII of the Partnership
Agreement, such distributions will be able to be made in proportion to the
Partners' respective Common Unit Percentages). Accordingly, the Partners
intend that the tax allocation provisions of this Exhibit R shall be applied
(and amended) by the General Partner if and to the extent necessary to produce
such final Capital Account balances even if such application or amendment
requires special allocations of gross income and/or gross deductions, for any
fiscal period. This subparagraph shall control notwithstanding any
reallocation of taxable income, taxable lose, or items thereof by the Internal
Revenue Service or any other taxing authority.
(j) Section 754 Adjustment. To the extent an adjustment to the adjusted
tax basis of any asset of the Partnership pursuant to Section 734 (b) of the
Code or Section 743 (b) of the Code is required, pursuant to Section 1,
704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or loss
shall be specially allocated among the Partners in a manner consistent with the
manner in which each of their respective Capital Accounts are required to be
adjusted pursuant to such section of the Regulations.
3. Tax Allocations.
(a) Items of Income or Loss. Except as is otherwise provided in this
Exhibit E. an allocation of Partnership Net Income or Net Loss to a Partner
shall be treated as an allocation to such Partner of the same share of each
item of income, gain, loss, deduction and item of tax-exempt income or Section
705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to
Regulations Section 1.704-l(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) Section 1245/1250 Recapture. If any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain were
allocated. This subparagraph 3(b) shall not alter the amount of Net
5
<PAGE> 13
Income (or items thereof) allocated among the Partners, but merely the
character of such Net Income (or items thereof). For purposes hereof, in order
to determine the proportionate allocations of depreciation and amortization
deductions for each fiscal year or other applicable period, such deductions
shall be deemed allocated on the same basis as Net Income and Net Loss for such
respective period.
(c) Allocations Respecting Section 704(C) and Revaluations. If any asset
has a Gross Asset Value which is different from the Partnership's adjusted
basis for such asset for federal income tax purposes because the Partnership
has revalued such asset pursuant to Regulations Section 1. 704-1(b)(2)(iv)(f) ,
the allocations Of Tax Items shall be made in accordance with the principles of
Section 704(c) of the Code and the Regulations and the methods of allocation
promulgated thereunder. The intent of this subparagraph 3 (c) and subparagraph
2 (h) (2) above is that each Partner who contributed to the capital of the
Partnership a Contributed Asset will bear, through reduced allocations of
depreciation, increased allocations of gain or other items. and the tax
detriments associated with any Precontribution Gain. This subparagraph 3(c)
and subparagraph 2 (h) (2) are to be interpreted consistently with such intent.
(d) Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
(as defined in Regulations Section 1,752-3(a)(3)), the Partners' respective
interests in Partnership profits shall be determined in accordance with each
Partner's Common Unit Percentage.
(e) References to Regulations. Any reference in this Exhibit E or the
Agreement to a provision of proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(f) Successor Partners. For purposes of this Exhibit E, a transferee of a
Partnership Interest shall be deemed to have been allocated the Net Income, Net
Loss and other items of Partnership income, gain, loss, deduction and credit
allocable to the transferred Partnership Interest that previously have been
allocated to the transferor Partner pursuant to this Agreement.
4. Definitions. For purposes of this Exhibit E, the following terms shall have
the meanings set forth below:
"Allocated Priority Distribution" with respect to each holder of a Class A
Preferred Unit means (i) the aggregate amount of Net Income previously
allocated to such holder pursuant to Section 1(a)(ii) of Exhibit E less (ii)
the aggregate amount of all Net Loss previously allocated to such holder
pursuant to Section 1(b)(ii) of Exhibit E.
"Unallocated Priority Distributions" with respect to each holder of a
Class A Preferred Unit means the excess, if any, of (i) such holder's Class A
Priority Distribution over (ii) such holder's Allocated Priority Distribution.
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EXHIBIT 99.3
AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
PRIME RESIDENTIAL, L.P.
It is hereby certified that:
FIRST: The name of the limited partnership (hereinafter
called the "Partnership") is Prime Residential, L.P. and was first formed on
April 15, 1994.
SECOND: Pursuant to provisions of Section 17-210, Title 6,
Delaware Code, the Certificate of Limited Partnership is amended and restated
as follows:
I. The name of the limited partnership (the "Partnership")
is Ambassador Apartments, L.P.
II. The address of the Partnership's registered office in
Delaware is 1013 Centre Road, Wilmingon (Newcastle County), Delaware 19805.
Corporation Services Company is the Partnership's registered agent for
service of process at that address.
III. The name and business address of the sole General
Partner is as follows:
Name Address
Ambassador Apartments, Inc. 77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
The undersigned, the general partner of the Partnership,
executed this Amended and Restate Certificate of Limited Partnership on this
21st day of June, 1996.
AMBASSADOR APARTMENTS, INC.
By: /s/ Adam D. Peterson
----------------------
Name: Adam D. Peterson
Title: Secretary
