<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------------------------------------
Commission File Number 1-13232
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 84-1259577
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1873 S. Bellaire Street, Suite 1700, Denver, Colorado 80222-4348
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 757-8101
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- - --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
<TABLE>
<S> <C>
The number of shares of Class A Common Stock outstanding as of October 31, 1998: 48,131,221
The number of shares of Class B Common Stock outstanding as of October 31, 1998: 162,500
</TABLE>
<PAGE> 2
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997 3
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flow for the Nine Months
Ended September 30, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements
(unaudited) 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 33
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 33
Item 4. Submission of Matters to a Vote of Security Holders 33
Item 5. Other Information 34
Item 6. Exhibits and Reports on Form 8-K 34
Signatures 37
</TABLE>
2
<PAGE> 3
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Balance Sheets
As of September 30, 1998 and December 31, 1997
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Real estate, net of accumulated depreciation of $330,365 and $153,285 $ 2,355,122 $ 1,503,922
Property held for sale 42,212 6,284
Investments in and notes receivable from unconsolidated subsidiaries 127,082 84,459
Investments in and notes receivable from unconsolidated real estate
partnerships 246,847 212,150
Cash and cash equivalents 43,681 37,088
Restricted cash 83,187 24,229
Accounts receivable 11,545 28,656
Deferred financing costs 21,835 12,793
Goodwill , net of accumulated amortization of $4,854 and $522 120,503 125,239
Other assets 69,935 65,690
----------- -----------
Total assets $ 3,121,949 $ 2,100,510
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $ 774,676 $ 681,421
Secured tax-exempt bond financing 399,925 74,010
Unsecured short-term financing 50,800 --
Secured short-term financing 50,000 53,099
----------- -----------
Total indebtedness 1,275,401 808,530
----------- -----------
Accounts payable, accrued and other liabilities 131,799 88,170
Resident security deposits and prepaid rents 13,171 10,213
----------- -----------
Total liabilities 1,420,371 906,913
----------- -----------
Commitments and contingencies -- --
Minority interests in other partnerships 42,086 36,335
Minority interest in AIMCO Operating Partnership 137,965 111,962
Stockholders' equity
Class A Common Stock, $.01 par value, 486,027,500 shares
authorized, 47,987,092 and 40,418,789 shares issued and outstanding 481 403
Class B Common Stock, $.01 par value, 262,500 shares authorized,
162,500 shares issued and outstanding 2 2
Class B Cumulative Convertible Preferred Stock, $.01 par value,
750,000 shares authorized, 750,000 shares issued and outstanding 75,000 75,000
Class C Cumulative Preferred Stock, $.01 par value, 2,760,000 shares
authorized, 2,400,000 shares issued and outstanding 60,000 60,000
Class D Cumulative Preferred Stock, $.01 par value, 4,600,000 shares
authorized, 4,200,000 shares issued and outstanding 105,000 --
Class G Cumulative Preferred Stock, $.01 par value, 4,140,000 shares
authorized, 4,050,000 shares issued and outstanding 101,250 --
Class H Cumulative Preferred Stock, $.01 par value, 2,300,000 shares
authorized, 2,000,000 shares issued and outstanding 50,000 --
Additional paid-in capital 1,236,962 977,601
Notes due on common stock purchases (43,647) (35,095)
Distributions in excess of earnings (63,521) (30,928)
Accumulated other comprehensive losses -- (1,683)
----------- -----------
Total stockholders' equity 1,521,527 1,045,300
----------- -----------
Total liabilities and stockholders' equity $ 3,121,949 $ 2,100,510
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
---------------------------------- -----------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues $ 104,436 $ 47,364 $ 265,700 $ 127,083
Property operating expenses (41,957) (19,577) (101,600) (50,737)
Owned property management expense (3,033) (1,610) (7,746) (4,344)
Depreciation (25,503) (8,802) (59,792) (23,848)
--------- --------- --------- ---------
Income from property operations 33,943 17,375 96,562 48,154
--------- --------- --------- ---------
SERVICE COMPANY BUSINESS
Management fees and other income 4,406 3,568 13,968 9,173
Management and other expenses (2,631) (2,386) (8,101) (5,029)
Corporate overhead allocation -- (147) (196) (441)
Other assets depreciation and amortization -- (75) (3) (236)
--------- --------- --------- ---------
Income from service company business 1,775 960 5,668 3,467
Minority interests in service company business -- 50 -- 48
--------- --------- --------- ---------
Company's share of income from service company
business 1,775 1,010 5,668 3,515
--------- --------- --------- ---------
General and administrative expenses (3,341) (624) (7,444) (1,408)
Interest expense (21,978) (12,755) (56,756) (33,359)
Interest income 6,894 3,117 18,244 4,458
Minority interest in other partnerships (536) (212) (1,052) (777)
Equity in losses of unconsolidated partnerships (396) (84) (5,078) (463)
Equity in earnings of unconsolidated subsidiaries 2,804 542 8,413 456
Amortization of goodwill (1,677) (237) (5,071) (711)
--------- --------- --------- ---------
Income from operations 17,488 8,132 53,486 19,865
Extraordinary item - early extinguishment of debt -- -- -- (269)
Gain on disposition of properties 257 (169) 2,783 (169)
--------- --------- --------- ---------
Income before minority interest in AIMCO Operating
Partnership 17,745 7,963 56,269 19,427
Minority interest in AIMCO Operating Partnership (1,163) (996) (4,425) (2,612)
--------- --------- --------- ---------
Net income $ 16,582 $ 6,967 $ 51,844 $ 16,815
========= ========= ========= =========
Net income attributable to preferred stockholders $ 7,670 $ 835 $ 16,320 $ 835
========= ========= ========= =========
Net income attributable to common stockholders $ 8,912 $ 6,132 $ 35,524 $ 15,980
========= ========= ========= =========
Net income $ 16,582 $ 6,967 $ 51,844 $ 16,815
Other comprehensive income:
Net unrealized gains on investment in securities -- 1,175 -- 1,175
--------- --------- --------- ---------
Comprehensive income $ 16,582 $ 8,142 $ 51,844 $ 17,990
========= ========= ========= =========
Basic earnings per common share $ 0.19 $ 0.25 $ 0.80 $ 0.77
========= ========= ========= =========
Diluted earnings per common share $ 0.19 $ 0.25 $ 0.79 $ 0.77
========= ========= ========= =========
Weighted average common shares outstanding 47,062 24,425 44,562 20,576
========= ========= ========= =========
Weighted average common shares and common share
equivalents outstanding 47,403 24,609 44,765 20,629
========= ========= ========= =========
Dividends paid per common share $ 0.5625 $ 0.4625 $ 1.125 $ 0.925
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, 1998 Sept. 30, 1997
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 51,844 $ 16,815
--------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 67,344 26,595
(Gain) loss on disposition of properties (2,783) 169
Minority interest in Operating Partnership 4,425 2,612
Minority interests in other partnerships 1,052 777
Equity in earnings of unconsolidated partnerships 5,078 463
Equity in earnings of unconsolidated subsidiaries (8,413) (456)
Extraordinary loss on early extinguishment of debt -- 269
Changes in operating assets and operating liabilities (67,722) 6,191
--------- ---------
Total adjustments (1,019) 36,620
--------- ---------
Net cash provided by operating activities 50,825 53,435
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate (63,839) (86,205)
Additions to real estate (47,878) (16,959)
Proceeds from sale of property held for sale 19,627 231
Additions to property held for sale (1,986) (139)
Purchase of general and limited partnership interests (27,016) (67,393)
Purchase of / additions to notes receivable (72,445) (39,918)
Proceeds from repayments of notes receivable 21,562 --
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries 513 38,000
Cash received in connection with Ambassador Merger 4,492 --
Contribution to unconsolidated subsidiaries (13,032) --
Purchase of NHP common stock -- (121,437)
Purchase of investments held for sale (4,935) (19,881)
Purchase of office equipment and leasehold improvements -- (1,113)
Redemption of OP Units (516) --
--------- ---------
Net cash used in investing activities (185,453) (314,814)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings 44,252 94,111
Principal repayments on secured notes payable (56,262) (4,451)
Principal repayments on secured tax-exempt bond financing (1,436) (1,056)
Repayments on secured short-term financing (30,693) (258,922)
Net borrowings on the Company's revolving credit facilities 33,237 140,680
Payment of loan costs, net of proceeds from interest rate hedge (5,727) 1,346
Proceeds from issuances of common and preferred stock 253,239 343,960
Repurchase of common stock (10,972) --
Principal repayments received on notes due from officers on
Class A Common Stock purchases 8,084 10,323
Payment of common stock dividends (73,322) (28,135)
Payment of distributions to minority interest in AIMCO Operating Partnership (8,702) (3,872)
Payment of preferred stock dividends (10,916) --
Payment of distributions to minority interest in other partnerships (1,549) --
Proceeds from issuance of High Performance Units 1,988 --
--------- ---------
Net cash provided by financing activities 141,221 293,984
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,593 32,605
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,088 13,170
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 43,681 $ 45,775
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Statements of Cash Flow
(In Thousands Except Share and Operating Partnership Unit Data)
1998 NON CASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF REAL ESTATE
<TABLE>
<S> <C>
Secured notes payable assumed in connection with purchase of real estate $ 80,238
Real estate purchased in exchange of 867,751 Partnership Common Units ("OP Units") of AIMCO Properties, L.P. 29,339
---------
$ 109,577
==========
</TABLE>
PURCHASE OF AMBASSADOR APARTMENTS, INC.
In May 1998, the Company acquired all of the common stock of Ambassador
Apartments, Inc., par value $.01 per share (The "Class A Common Stock")
("Ambassador"), in exchange for 6,578,833 shares of AIMCO's Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") with a recorded
value of $251.3 million (see Note 3).
The aggregate purchase price consisted of the following:
<TABLE>
<S> <C>
Real estate $ 713,596
Investment in real estate partnerships 2,290
Restricted cash 35,523
Accounts receivable 7,953
Deferred financing costs 4,359
Other assets 2,319
Secured notes payable 37,162
Secured tax-exempt bond financing 334,881
Unsecured short-term financing 31,550
Accounts payable, accrued and other liabilities 2,513
Resident security deposits and prepaid rents 8,898
Minority interests in other partnerships 5,752
Minority interest in AIMCO Operating Partnership 146
Stockholders' equity 251,274
</TABLE>
REDEMPTION OF OPERATING PARTNERSHIP UNITS
During the nine months ended September 30, 1998, 270,563 OP Units with recorded
values of $5,514 were redeemed in exchange for an equal number of shares of
Class A Common Stock.
PROPERTY HELD FOR SALE
During the nine months ended September 30, 1998, the Company entered into sales
agreements to sell four multifamily properties with a net book value of $42,106.
These assets were reclassified to property held for sale.
RECEIPT OF NOTES PAYABLE FROM OFFICERS
During the nine months ended September 30, 1998, the Company issued notes
receivable from officers for a total of $16,636 in connection with their
purchase of 406,072 shares of Class A Common Stock.
OTHER
During the nine months ended September 30, 1998, AIMCO Properties, L.P. issued
an additional 194,208 OP Units with a recorded value of $4,045 in connection
with the purchase of certain partnership interests.
During the nine months ended September 30, 1998, AIMCO obtained control of real
estate partnerships which became consolidated. The non-cash effects are as
follows:
<TABLE>
<S> <C>
Real estate $ 22,089
Secured notes payable 4,679
Investment in and notes receivable from real estate partnerships 16,683
Accounts payable, accrued and other liabilities 727
</TABLE>
6
<PAGE> 7
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Statements of Cash Flow (Continued)
(In Thousands Except Share and Operating Partnership Unit Data)
During the nine months ended September 30, 1998, AIMCO contributed certain
assets and liabilities to unconsolidated subsidiaries and unconsolidated
partnerships as follows:
<TABLE>
<S> <C>
Investment in unconsolidated subsidiaries $ 34,300
Investment in unconsolidated partnerships 3,361
Restricted cash 552
Accounts receivable 13,972
Other assets 18,719
Accounts payable, accrued and other liabilities 62,011
</TABLE>
1997 NON CASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF REAL ESTATE
<TABLE>
<S> <C>
Secured notes payable assumed in connection with purchase of real estate $ 63,446
Real estate purchased in exchange for 1,897,794 Operating Partnership Units 55,906
---------
$ 119,352
=========
</TABLE>
PURCHASE OF 53.3% INTEREST IN NHP INCORPORATED
In May 1997, the Company acquired 2,866,071 shares of NHP Incorporated's ("NHP")
common stock in exchange for 2,142,857 shares of AIMCO'S Class A Common Stock
with a recorded value of $57,321. Subsequent to the purchase, the Company
contributed the NHP common stock to AIMCO/NHP Holdings, Inc. ("ANHI"), an
unconsolidated subsidiary formed in April 1997, in exchange for all of the
shares of ANHI's nonvoting preferred stock, representing a 95% economic interest
in ANHI. Concurrent with this contribution, ANHI obtained a loan in the amount
of $72,600,
Concurrently with this contribution, ANHI obtained a loan in the amount of
$72,600, and used the proceeds from the loan to purchase 3,630,002 additional
shares of NHP common stock. In August and September 1997, AIMCO purchased
5,717,000 shares of NHP common stock from ANHI for an aggregate purchase price
of $114,397, and purchased an additional 434,049 shares OF NHP common stock from
third parties, pursuant to a stock purchase agreement. Upon the completion of
these transactions, AIMCO and ANHI owned a combined total of 6,930,122 shares of
NHP common stock, representing 53.3% of NHP's outstanding common stock as of
September 30, 1997.
PURCHASE OF GENERAL AND LIMITED PARTNERSHIP INTERESTS, CAPTIVE INSURANCE
SUBSIDIARY AND OTHER ASSETS
The historical cost of the assets and the liabilities assumed in connection with
the purchase of NHP Partners, Inc., NHP Partners Two Limited Partners and their
subsidiaries (the "NHP Real Estate Companies") were as follows:
<TABLE>
<S> <C>
Real estate, net $ 174,545
Investment in real estate partnerships 89,526
Restricted cash 6,051
Accounts receivable 12,743
Other assets 3,347
Secured notes payable (140,270)
Accounts payable, accrued and other liabilities (50,153)
Accrued management contract liability (106,615)
Resident security deposits and prepaid rent (1,025)
</TABLE>
REDEMPTION OF OPERATING PARTNERSHIP UNITS
During the nine months ended September 30, 1997, 558,601 OP Units with a
recorded value of $8,555 were redeemed in exchange for an equal number of shares
of Class A Common Stock.
PROPERTY HELD FOR SALE
In the third quarter of 1997, the Company entered into contracts to sell five
apartment communities with a net book value of $19,100. These assets were
reclassified to property held for sale.
7
<PAGE> 8
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Statements of Cash Flow (Continued)
(In Thousands Except Share and Operating Partnership Unit Data)
ISSUANCE OF NOTES RECEIVABLE DUE FROM OFFICERS
During the nine months ended September 30, 1997, the Company issued notes
receivable from officers for a total of $33,700 in connection with their
purchase of 1,125,000 shares of Class A Common Stock.
OTHER
During the nine months ended September 30, 1997, the Company reclassified $1,323
of other assets to real estate as a purchase price allocation adjustment. In
addition, the Company wrote off $4,065 of other assets allocable to limited
partners in partnerships controlled by the Company, to minority interests in
other partnerships.
During the nine months ended September 30, 1997, AIMCO Properties, L.P. issued
an additional 198,218 OP Units with a recorded value of $6,653 in connection
with the purchase of certain partnership interests in 1996.
During the nine months ended September 30, 1997, the Company recorded unrealized
gains on investments held for sale of $1,175.
8
<PAGE> 9
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements
September 30, 1998
(Unaudited)
NOTE 1 - ORGANIZATION
Apartment Investment and Management Company, a Maryland
corporation incorporated on January 10, 1994 ("AIMCO" and,
together with its subsidiaries and other controlled entities,
the "Company"), owns a majority of the ownership interests in
AIMCO Properties, L.P. (the "AIMCO Operating Partnership")
through its wholly owned subsidiaries, AIMCO-GP, Inc. and
AIMCO-LP, Inc. The Company held an approximate 89% interest
in the AIMCO Operating Partnership as of September 30, 1998.
AIMCO-GP, Inc. is the sole general partner of the AIMCO
Operating Partnership.
At September 30, 1998, AIMCO had 47,987,092 shares of Class A
Common Stock outstanding and the AIMCO Operating Partnership
had 6,156,415 Partnership Common Units ("OP Units")
outstanding, for a combined total of 54,143,507 shares and OP
Units outstanding.
As of September 30, 1998, the Company, through its
subsidiaries, owned or controlled 57,561 units in 207
apartment communities and had an equity interest in 75,050
units in 481 apartment communities. In addition, the Company
managed 67,929 units in 355 apartment communities for third
parties and affiliates, bringing the total owned and managed
portfolio to 200,540 units in 1,043 apartment communities.
The apartment communities are located in 42 states, the
District of Columbia and Puerto Rico.
NOTE 2 - BASIS OF PRESENTATION
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of AIMCO, the AIMCO Operating Partnership,
majority owned subsidiaries and controlled real estate
limited partnerships and limited liability companies.
Interests held by limited partners in real estate limited
partnerships and limited liability companies controlled by
the Company are reflected as Minority Interests in Other
Partnerships. All significant intercompany balances and
transactions have been eliminated in consolidation. The
assets of property-owning limited partnerships and limited
liability companies owned or controlled by AIMCO or the AIMCO
Operating Partnership are generally not available to pay
creditors or secure the obligations of AIMCO or the AIMCO
Operating Partnership.
Investments in Unconsolidated Subsidiaries
The Company has investments in numerous subsidiaries.
Investments in entities in which the Company does not have
control are accounted for under the equity method. Under the
equity method, the Company's pro-rata share of the earnings
or losses of the entity for the periods being presented is
included in equity in earnings from unconsolidated
subsidiaries.
Investments in and Notes Receivable from Real Estate
Partnerships
The Company owns general and limited partnership interests in
numerous partnerships that own multi-family apartment
properties. Investments in real estate partnerships in which
the Company does not have control are accounted for under the
equity method. Under the equity method, the Company's pro-rata
share of the earnings or losses of the entity for the periods
being presented is included in equity in losses of
unconsolidated partnerships.
9
<PAGE> 10
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS 130"), which provides
guidance with respect to the calculation and presentation of
comprehensive income. Comprehensive income includes all
transactions affecting stockholders' equity, including the
traditional measure of net income, and excluding
contributions from and distributions to stockholders. Under
SFAS 130, companies are required to present comprehensive
income and its components on the income statement and as a
component of stockholders' equity on the balance sheet. As
required, the Company adopted SFAS 130 as of January 1, 1998
and restated the components of stockholders' equity for the
prior periods presented.
Earnings per Share
Earnings per share for the three and nine months ended
September 30, 1997 have been restated to comply with
Statement of Financial Accounting Standards No. 128, Earnings
Per Share (see Note 7).
Interim Information
The accompanying unaudited consolidated financial statements
of the Company as of September 30, 1998 and for the three and
nine months ended September 30, 1998 and 1997 have been
prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation
have been included and all such adjustments are of a
recurring nature.
The consolidated financial statements should be read in
conjunction with the audited consolidated financial
statements and notes thereto included in the Annual Report on
Form 10-K/A for the year ended December 31, 1997. It should
be understood that accounting measurements at interim dates
inherently involve greater reliance on estimates than at
year-end. The results of operations for the interim periods
presented are not necessarily indicative of the results for
the entire year.
Reclassification
Certain reclassifications have been made to prior period
financial statements to conform to the current period
presentation.
NOTE 3 - REAL ESTATE
In May 1998, AIMCO acquired, through a merger, Ambassador
Apartments, Inc. ("Ambassador"), resulting in the issuance of
up to 6,578,833 shares of Class A Common Stock. Ambassador
owned 52 apartment communities with a total of 15,728 units
located in Arizona, Colorado, Florida, Georgia, Illinois,
Tennessee and Texas, and managed one property containing 252
units for an unrelated third party.
In addition to the merger with Ambassador, during the nine
months ended September 30, 1998, the Company purchased 19
apartment communities containing 4,273 apartment units, as
described below:
10
<PAGE> 11
<TABLE>
<CAPTION>
Date Number
Acquired Property Location of Units
- - -------- -------- -------- --------
<S> <C> <C> <C>
1/98 Crossings at Bell Amarillo, TX 160
2/98 Steeplechase Tyler, TX 484
3/98 Casa Anita Phoenix, AZ 224
3/98 San Marina Phoenix, AZ 399
3/98 Cobble Creek Tuscon, AZ 301
3/98 Rio Cancion Tuscon, AZ 379
3/98 Sundown Village Tuscon, AZ 330
4/98 Arbor Station Montgomery, AL 264
4/98 Heather Ridge Arlington, TX 72
5/98 Landmark Albuquerque, NM 101
6/98 Citrus Grove Redlands, CA 198
6/98 Villa La Paz Sun City, CA 96
7/98 Sunset Village Oceanside,CA 114
7/98 Sunset Citrus Vista, CA 97
7/98 Rancho Escondido Escondido, CA 334
8/98 Atrium Plantation, FL 210
8/98 Colony Bradenton, FL 166
9/98 Fisherman's Landing Hillsborough County, FL 256
9/98 Sun Lake Brandon, FL 88
-----
4,273
=====
</TABLE>
The aggregate consideration paid by the Company of $886.1
million (including Ambassador) consisted of $153.2 million in
cash, 867,751 OP Units valued at $29.3 million, 6,578,833
shares of stock valued at $251.3 million and the assumption
of $452.3 million of secured long-term indebtedness. The cash
portions of the acquisitions were funded with borrowings
under the Company's revolving credit facilities.
During the nine months ended September 30, 1998, the Company
sold two apartment communities containing an aggregate of 702
apartment units for aggregate sales price of $18.3 million,
less selling costs of $0.3 million. The Company recognized
aggregate gains of $3.4 million on the sales. The Company used
the cash proceeds to pay down a portion of the outstanding
balance on the BOA Credit Facility (as defined in Note 9) and
to pay closing costs.
As of September 30, 1998, the Company's management has
indicated its intent to sell six properties. Accordingly,
these properties have been reclassified from real estate to
property held for sale on the consolidated balance sheet.
NOTE 4 - INTEREST RATE LOCK AGREEMENTS
From time to time, the Company enters into interest rate lock
agreements with major investment banking firms, in
anticipation of refinancing debt. Interest rate lock
agreements related to planned refinancing of identified
variable rate indebtedness are accounted for as anticipatory
hedges. Upon the refinancing of such indebtedness, any gain
or loss associated with the termination of the interest rate
lock agreement is deferred and recognized over the life of
the refinanced indebtedness. In order for the interest rate
lock to qualify as an anticipatory hedge, the following
criteria must be met: (a) the refinance being hedged exposes
the Company to interest rate risk; (b) the interest rate lock
is designated as a hedge; (c) the significant characteristics
and expected terms of the refinance are identified; and (d)
it is probable that the refinance will occur. The Company
believes that all four of the above qualifications have been
met for interest rate lock agreements previously entered
into. In the event that any of the above qualifications are
not met, the interest rate lock agreement will not qualify as
an anticipatory hedge, and any gain or loss realized on the
interest rate lock agreement will be recognized in the
current period's earnings.
11
<PAGE> 12
In August 1998, the Company entered into two interest rate
lock agreements having notional principal amounts of $125.0
million and $50.0 million, respectively, in anticipation of
refinancing certain floating rate indebtedness. The interest
rate lock agreements fixed the ten-year treasury rate at
5.35% and 5.625%, respectively. Based on the fair value of
the interest rate lock agreements at September 30, 1998, the
Company has a potential loss on the hedges of approximately
$9.5 million and $2.9 million, respectively. Management
anticipates that the debt will be refinanced during the first
quarter of 1999 and any gain or loss on the interest rate
lock agreement will be amortized to interest expense over the
term of the refinanced loan.
NOTE 5 - COMMITMENTS
High Performance Units
In January 1998, the Company sold an aggregate of 15,000 Class
I High Performance Partnership Units ("the "High Performance
Units") to a joint venture formed by fourteen members of
AIMCO's senior management, and to three of its independent
directors for $2.1 million in cash. The High Performance Units
have nominal value unless the Company's total return, defined
as dividend income plus share price appreciation, over the
three year period ending December 31, 2000, is at least 30%
and exceeds the industry average, as determined by a peer
group index, by at least 15% (the "Total Return"). At the
conclusion of the three year period, if the Company's Total
Return satisfies these criteria, the holders of the High
Performance Units will receive distributions and allocations
of income and loss from the AIMCO Operating Partnership in the
same amounts and at the same times as would holders of a
number of OP Units equal to the quotient obtained by dividing
the product of (i) (a) 15% of the amount by which the
Company's cumulative Total Return over the three year period
exceeds the greater of 115% of a peer group index or 30% (such
excess being the "Excess Return"), multiplied by (b) the
weighted average market value of the Company's outstanding
Class A Common Stock and OP Units, by (ii) the market value of
one share of Class A Common Stock at the end of the three year
period. The three year measurement period will be shortened in
the event of a change of control of the Company. Unlike OP
Units, the High Performance Units are not redeemable or
convertible into Class A Common Stock unless a change of
control of the Company occurs. Because there is substantial
uncertainty that the High Performance Units will have more
than nominal value due to the required Total Return over the
three year term, the Company has not recorded any value to the
High Performance Units. If the measurement period had ended
September 30, 1998, the Excess Return would have been $16.5
million and the value of the High Performance Units would have
been $2.5 million, and such High Performance Units would have
had no dilutive effect on net income per share.
NOTE 6 - STOCKHOLDERS' EQUITY
Issuance of Stock
<TABLE>
<CAPTION>
NET OPTION OF ANNUAL LIQUIDATION
SHARES PROCEEDS CO. REDEEM- DIVIDEND PREFERENCE
DATES ISSUED (MILLIONS) ABLE ON RATE RATE
----- ------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class D Feb., Feb.,
Preferred Stock 1998 4,200,000 $ 101.5 2003 $ 2.1875 $25 per share
Class G Jul., Jul.,
Preferred Stock 1998 4,050,000 $ 98.0 2008 $ 2.34375 $25 per share
Class H Aug., Aug.,
Preferred Stock 1998 2,000,000 $ 48.1 2003 $ 2.375 $25 per share
</TABLE>
On or after the above listed redemption dates, the Company
may redeem shares of Class D, G or H Preferred Stocks, in
whole or in part, at a cash redemption price equal to 100% of
the above listed Class D, G and H Liquidation Preferences
plus all accrued and unpaid dividends to the date fixed for
redemption.
During the nine months ended September 30, 1998, the Company
sold 442,126 shares of Class A Common Stock to certain
members of the Company's management, at an average price of
$36.90 per share. In payment for the stock, such members of
management executed notes payable to AIMCO totaling $16.3
million, which bear interest at a fixed rate of 7.0% per
annum, payable quarterly, and are due in ten years. The notes
are secured by the stock purchased and are recourse as to 25%
of the original amount borrowed. During the nine months ended
September 30, 1998, the Company received payments on notes
payable from the Company's management of $8.1 million.
12
<PAGE> 13
Warrants
On December 2, 1997, AIMCO issued warrants (the "Oxford
Warrants") exercisable to purchase up to an aggregate of
500,000 shares of Class A Common Stock at $41 per share. The
Oxford Warrants were issued to affiliates of Oxford Realty
Financial Group, Inc., a Maryland corporation ("Oxford"), in
connection with the amendment of certain agreements pursuant
to which the Company manages properties controlled by Oxford
or its affiliates. The actual number of shares of Class A
Common Stock for which the Oxford Warrants will be exercisable
is based on certain performance criteria with respect to the
Company's management arrangement with Oxford for each of the
five years ending December 31, 2001. The Oxford Warrants are
exercisable for six years after the determination of such
criteria for each of the five years. The Oxford Warrants were
valued at $1.2 million using the "Black-Scholes" model, which
was additional consideration paid to acquire the property
management contracts related to the properties controlled by
Oxford or its affiliates. The Oxford Warrants were issued in a
private transaction exempt from registration under the
Securities Act pursuant to Section 4(2).
Stock Repurchases
During the nine months ended September 1998, the Company
repurchased 299,600 shares of Class A Common Stock on the open
market for $11.0 million, or an average price of $36.68 per
share.
NOTE 7 - EARNINGS PER SHARE
The following table illustrates the calculation of basic and
diluted earnings per share for the three and nine months ended
September 30, 1998 and 1997 (in thousands, except per share
data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPT. 30, 1998 SEPT. 30, 1997
------------------ ------------------
<S> <C> <C>
Numerator:
Net income $ 16,582 $ 6,967
Preferred stock dividends (7,670) (835)
---------- ----------
Numerator for basic and diluted earnings per share -
income attributable to common stockholders $ 8,912 $ 6,132
========== ==========
Denominator:
Denominator for basic earnings per share - weighted
average number of shares of common stock outstanding 47,062 24,425
Effect of dilutive securities 341 184
---------- ----------
Denominator for dilutive earnings per share 47,403 24,609
========== ==========
Basic earnings per common share:
Operations $ 0.18 $ 0.26
Gain on disposition of properties 0.01 (0.01)
Extraordinary item -- --
---------- ----------
Total $ 0.19 $ 0.25
========== ==========
Diluted earnings per common share:
Operations $ 0.18 $ 0.26
Gain on disposition of properties 0.01 (0.01)
Extraordinary item -- --
---------- ----------
Total $ 0.19 $ 0.25
========== ==========
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, 1998 SEPT. 30, 1997
----------------- -----------------
<S> <C> <C>
Numerator:
Net income $ 51,844 $ 16,815
Preferred stock dividends (16,320) (835)
---------- ----------
Numerator for basic and diluted earnings per share -
income attributable to common stockholders $ 35,524 $ 15,980
========== ==========
Denominator:
Denominator for basic earnings per share - weighted
average number of shares of common stock outstanding 44,562 20,576
Effect of dilutive securities 203 53
---------- ----------
Denominator for dilutive earnings per share 44,765 20,629
========== ==========
Basic earnings per common share:
Operations $ 0.74 $ 0.79
Gain on disposition of properties 0.06 (0.01)
Extraordinary item -- (0.01)
---------- ----------
Total $ 0.80 $ 0.77
========== ==========
Diluted earnings per common share:
Operations $ 0.73 $ 0.79
Gain on disposition of properties 0.06 (0.01)
Extraordinary item -- (0.01)
---------- ----------
Total $ 0.79 $ 0.77
========== ==========
</TABLE>
NOTE 8 - PRO FORMA FINANCIAL STATEMENTS
During the nine months ended September 30, 1998, the Company
purchased Ambassador. During the nine months ended September
30, 1997, the Company purchased the NHP Real Estate Companies
and, through an unconsolidated subsidiary, purchased a 53.3%
interest in NHP Incorporated ("NHP"). The following unaudited
Pro Forma Consolidated Statements of Operations for the nine
months ended September 30, 1998 and 1997, have been prepared
as if the above described transactions had occurred at the
beginning of the period being reported on. The following Pro
Forma Financial Information is based, in part, on the
following historical financial statements: (i) the unaudited
financial data of the Company for the nine months ended
September 30, 1998 and 1997; (ii) the unaudited Consolidated
Financial Statements of Ambassador for the four months ended
April 30, 1998 and the nine months ended September 30, 1997;
(iii) the unaudited Consolidated Financial Statements of NHP
for the nine months ended September 30, 1997 (which have been
restated to reflect NHP's subsidiary, WMF Group Ltd., as a
discontinued operation), and (iv) the unaudited Combined
Financial Statements of the NHP Real Estate Companies for the
five months ended May 31, 1997.
The pro forma financial statements are not necessarily
indicative of what the Company's results of operations would
have been assuming the completion of the described
transactions at the beginning of the periods indicated, nor
does it purport to project the Company's results of
operations for any future period.
14
<PAGE> 15
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
1998 1997
---- ----
<S> <C> <C>
Rental property operations $109,315 $ 74,988
Company's share of income from service company business 5,668 1,999
Income before extraordinary item and minority interest in Operating
Partnership 57,159 17,938
-------- --------
Net income $ 55,240 $ 15,749
======== ========
Net income attributable to preferred stockholder $ 16,320 $ 835
======== ========
Net income attributable to common stockholders $ 38,920 $ 14,914
======== ========
Basic earnings per share $ 0.79 $ 0.53
======== ========
Diluted earnings per share $ 0.79 $ 0.53
======== ========
Weighted average common shares outstanding 49,178 28,151
======== ========
Weighted average common shares and common share equivalents
outstanding 49,381 28,204
======== ========
</TABLE>
NOTE 9 - SUBSEQUENT EVENTS
Insignia Merger
On October 1, 1998, AIMCO, through a merger, acquired all of
the multifamily business of Insignia Financial Group, Inc., a
Delaware Corporation ("Insignia") (the "Insignia Merger"). As
merger consideration, AIMCO issued to former Insignia
stockholders 8.4 million shares of its Series E Cumulative
Convertible Preferred Stock (the "Class E Preferred Stock")
and reserved an additional 0.5 million shares for options and
warrants, in the aggregate. In addition, approximately $531
million in outstanding debt and other liabilities of Insignia
and its subsidiaries became obligations of AIMCO and its
subsidiaries.
Holders of Class E Preferred Stock will be entitled to
receive the same cash dividends per share as holders of Class
A Common Stock. In addition, holders of Class E Preferred
Stock, on the record date for payment to be set by AIMCO's
board of directors, will be entitled to receive a special
dividend in an aggregate amount of $50 million (the "Special
Dividend"). After January 15, 1999, if any portion of the
Special Dividend or any other dividend has yet to be declared
and paid to the holders of Class E Preferred Stock, no
dividends may be declared or paid or set apart for payment by
AIMCO on the Class A Common Stock.
On the close of business on the day on which the Special
Dividend (or any remaining unpaid portion thereof) is paid to
the holders of the Class E Preferred Stock, each share of
Class E Preferred Stock will be automatically converted into
one share of Class A Common Stock without any action on the
part of AIMCO or the holders of such share of Class E
Preferred Stock (the "Conversion Date"). If AIMCO at any time
following the consummation of the Insignia Merger pays a
dividend or makes a distribution, subdivides, combines,
reclassifies, issues rights, options or warrants or makes any
other distribution in securities in relation to its
outstanding Class A Common Stock, then AIMCO will
contemporaneously do the same with respect to the Class E
Preferred Stock.
In addition to the issuance of the Class E Preferred Stock, on
October 1, 1998, AIMCO entered into a $300 million senior
unsecured interim term loan agreement with an affiliate of
Lehman Brothers, Inc. The term loan matures in one year and
bears interest at a rate per annum equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. The
Company used the proceeds to refinance existing indebtedness
outstanding of Insignia at the time of the merger.
15
<PAGE> 16
IPT Merger Agreement
As a result of the Insignia Merger, AIMCO currently owns
approximately 51% of the outstanding shares of beneficial
interest of Insignia Properties Trust, a Maryland REIT
("IPT"). As of September 30, 1998, IPT primarily owns general
and limited partnership interests in real estate limited
partnerships that own an aggregate of 339 Properties. AIMCO
and IPT have entered into a merger agreement, dated as of
October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT will merge into AIMCO (the "IPT Merger"). The IPT
Merger Agreement provides for IPT stockholders (other than
AIMCO) to receive, at AIMCO's option, approximately (i) $13.25
per IPT share in cash, (ii) $13.28 per IPT share in shares of
Class A Common Stock, or (iii) a combination of both. The IPT
Merger is expected to close in January 1999.
Issuance of Stock
In November 1998, the Company issued 1,000,000 shares of Class
J Cumulative Convertible Preferred Stock, par value $0.01 per
share ("Class J Preferred Stock") in a private placement for
$100.0 million. The holders of Class J Preferred Stock shall
be entitled to receive, when and as declared by the Board of
Directors , dividends equal to (i) 7% per annum of the per
share Liquidation Preference for the period beginning on and
including the Issue Date and lasting until November 15, 1998;
(ii) 8% per annum of the per share Liquidation Preference for
the period beginning on and including November 15, 1998 and
lasting until November 15, 1999; (iii) 9% per annum of the per
share Liquidation Preference for the period beginning on and
including November 15, 1999 and lasting until November 15,
2000; (iv) 9.5% per annum of the per share Liquidation
Preference thereafter. Such dividends shall be cumulative from
the Issue Date, whether or not in any Dividend Period or
Periods such dividends shall be declared or there shall be
funds of the Corporation legally available for the payment of
such dividends. AIMCO may convert any or all of the Class J
Preferred Stock into Class A Common Stock at a conversion
price of $40 (equivalent to a conversion rate of 2.5 shares of
Class A Common Stock for each share of Class J Preferred
Stock) (a) after November 6, 2002, if the market price of the
Class A Common Stock in the five most recent Trading Days is
equal to or greater than $40 or; (b) at any time on or prior
to November 6, 2002, if the Internal Rate of Return exceeds
12.5%.
Purchase of Properties:
Subsequent to September 30, 1998, the Company purchased one
multifamily property with a total of 219 units for total
consideration of $8.1 million, consisting of $8.1 million in
cash. The multifamily property is located in Arizona.
Dividend Declared
On October 22, 1998, the AIMCO Board of Directors declared a
cash dividend of $0.5625 per share of Class A Common Stock
for the quarter ended September 30, 1998, payable on November
13, 1998 to stockholders of record on November 6, 1998.
The Board of Directors also declared a cash dividend of
$0.225 per share on the Class E Preferred Stock for the
period from October 1, 1998 through November 6, 1998, the
record date for the Class E Preferred Stock. The dividend is
payable on November 13, 1998.
Revised Debt Agreement
On October 1, 1998, the Company amended and restated its
credit agreement with Bank of America National Trust and
Savings Association ("Bank of America") and BankBoston, N.A.
The credit agreement was further amended on November 6, 1998
(the "First Amendment"). The credit agreement now provides a
revolving credit facility of up to $100 million, including a
swing line of up to $30 million (collectively with the First
Amendment, the "BOA Credit Facility").
16
<PAGE> 17
The AIMCO Operating Partnership is the borrower under the BOA
Credit Facility, but all obligations thereunder are
guaranteed by AIMCO and certain subsidiaries. The annual
interest rate under the BOA Credit Facility is based on
either LIBOR or a base rate which is the higher of Bank of
America's reference rate or 0.5% over the federal funds rate,
plus, in either case, an applicable margin. The margin ranges
between 1.25% and 2.0% in the case of LIBOR-based loans, and
between negative 0.25% and positive 0.5% in the case of base
rate loans, depending upon a ratio of the Company's
consolidated unsecured indebtedness to the value of certain
unencumbered assets. The BOA Credit Facility matures on
September 30, 1999 unless extended, at the discretion of the
lenders. The BOA Credit Facility provides for the conversion
of the revolving facility into a three-year term loan. The
availability of funds to the Company under the BOA Credit
Facility is subject to certain borrowing base restrictions
and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial
covenants contained in the BOA Credit Facility require the
Company to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25
to 1.0 and a fixed charge coverage ratio of at least 1.6 to
1.0 through December 31, 1998, 1.7 to 1.0 from January 1,
1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the BOA Credit Facility limits the Company from
distributing more than 80% of its Funds From Operations (as
defined) (or such amounts as may be necessary for AIMCO to
maintain its status as a REIT) to holders of OP Units,
imposes minimum net worth requirements and provides other
financial covenants related to certain unencumbered assets.
17
<PAGE> 18
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
As of September 30, 1998, the Company owned or managed 200,540 apartment units,
comprised of 57,561 units in 207 apartment communities owned or controlled by
the Company (the "Owned Properties"), 75,050 units in 481 apartment communities
in which the Company has an equity interest (the "Equity Properties") and 67,929
units in 355 apartment communities which the Company manages for third parties
and affiliates (the "Managed Properties" and together with the Owned Properties
and the Equity Properties, the "AIMCO Properties"). The apartment communities
are located in 42 states, the District of Columbia and Puerto Rico.
The following discussion contains forward-looking statements that are subject to
significant risks and uncertainties. There are several important factors that
could cause actual results to differ materially from the results anticipated by
the forward-looking statements contained in the following discussion. Such
factors and risks include, but are not limited to: financing risks, including
the risk that the Company's cash flow from operations may be insufficient to
meet required payments of principal and interest on its debt; real estate risks,
including variations of real estate values and the general economic climate in
local markets and competition for tenants in such markets; acquisition and
development risks, including the failure of acquisitions to perform in
accordance with projections; and possible environmental liabilities, including
costs which may be incurred due to necessary remediation of contamination of
properties presently owned or previously owned by the Company. In addition, the
Company's continued qualification as a REIT involves the application of highly
technical and complex provisions of the Internal Revenue Code. Readers should
carefully review the financial statements and the notes thereto, as well as the
risk factors described in documents the Company files from time to time with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
NET INCOME
The Company recognized net income of $51.8 million for the nine months ended
September 30, 1998, compared to $16.8 million for the nine months ended
September 30, 1997. The increase in net income of $35.0 million, or 208%, was
primarily the result of a significant increase in the number of owned properties
and a significant increase in investments in unconsolidated subsidiaries and
real estate partnerships during 1997 (the "1997 Acquisitions"), and the
acquisition of Ambassador and the purchase of nineteen properties during the
first nine months of 1998 (the "1998 Acquisitions"). The increase in net income
was partially offset by the sale of five properties in 1997 (the "1997 Sold
Properties") and two properties in 1998 (the "1998 Sold Properties"), increased
real estate depreciation, increased goodwill amortization and increased interest
expense associated with indebtedness which was assumed or incurred in connection
with the acquisitions described above. These factors are discussed in more
detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Owned Properties totaled $265.7
million for the nine months ended September 30, 1998, compared to $127.1 million
for the nine months ended September 30, 1997,
18
<PAGE> 19
an increase of $138.6 million, or 109%. Rental and other property revenues
consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
Nine months ended Nine months ended
Sept. 30, 1998 Sept. 30, 1997
-------------- --------------
<S> <C> <C>
"Same store" properties $ 105,076 $ 100,670
1997 Acquisitions 101,034 15,299
1998 Acquisitions 53,314 --
1997 Sold Properties -- 2,491
1998 Sold Properties 952 2,497
Properties in lease-up after the completion of an
expansion or renovation 5,324 6,126
-------------- --------------
Total $ 265,700 $ 127,083
============== ==============
</TABLE>
Property operating expenses, consisting of on-site payroll costs, utilities (net
of reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, property taxes and
insurance, totaled $101.6 million for the nine months ended September 30, 1998,
compared to $50.7 million for the nine months ended September 30, 1997, an
increase of $50.9 million or 100%. Operating expenses consisted of the following
(dollars in thousands):
<TABLE>
<CAPTION>
Nine months ended Nine months ended
Sept. 30, 1998 Sept. 30, 1997
-------------- --------------
<S> <C> <C>
"Same store" properties $ 43,359 $ 44,887
1997 Acquisitions 39,420 1,486
1998 Acquisitions 16,381 --
1997 Sold Properties -- 1,154
1998 Sold Properties 500 1,101
Properties in lease-up after the completion of an
expansion or renovation 1,940 2,109
-------------- --------------
Total $ 101,600 $ 50,737
============== ==============
</TABLE>
Owned property management expenses, representing the costs of managing the Owned
Properties, totaled $7.7 million for the nine months ended September 30, 1998,
compared to $4.3 million for the nine months ended September 30, 1997, an
increase of $3.4 million, or 79%. The increase resulted from the acquisition of
properties in 1997 and 1998.
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $5.7 million
for the nine months ended September 30, 1998, compared to $3.5 million for the
nine months ended September 30, 1997. The increase in service company business
income of $2.2 million was due to increased management and other fees from the
acquisition of partnership interests and properties, and the acquisition of a
captive insurance subsidiary in connection with the acquisition of the NHP Real
Estate Companies in June 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $1.4 million for the nine
months ended September 30, 1997 to $7.4 million for the nine months ended
September 30, 1998, a 429% increase. The increase is primarily due to additional
corporate costs and additional employee salaries associated with the purchase of
NHP Real Estate Companies in June 1997 and the merger with Ambassador
Apartments, Inc. in May 1998. In addition, due to the growth of the Company,
several new departments have been added including
19
<PAGE> 20
legal, tax and tender coordination, as well as increased levels of personnel in
the accounting and finance departments.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing costs,
totaled $56.8 million for the nine months ended September 30, 1998, compared to
$33.4 million for the nine months ended September 30, 1997, an increase of $23.4
million, or 70%. The increase consists of the following (dollars in thousands):
<TABLE>
<S> <C>
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1997
Acquisitions $15,951
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the 1998
Acquisitions 7,073
Increase in interest expense on the Company's other
indebtedness 373
-------
Total increase $23,397
=======
</TABLE>
INTEREST INCOME
Interest income totaled $18.2 million for the nine months ended September 30,
1998, compared to $4.5 million for the nine months ended September 30, 1997. The
increase of $13.8 million is primarily due to interest earned on loans made by
the Company to partnerships in which the Company acts as the general partner.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997
The Company recognized net income of $16.6 million for the three months ended
September 30, 1998, compared to $7.0 million for the three months ended
September 30, 1997. The increase in net income of $9.6 million, or 137%, was
primarily the result of the 1997 Acquisitions and the 1998 Acquisitions. The
increase in net income was partially offset by the 1997 Sold Properties and the
1998 Sold Properties, increased real estate depreciation, increased goodwill
amortization and increased interest expense associated with indebtedness which
was assumed or incurred in connection with the acquisitions described above.
These factors are discussed in more detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Owned Properties totaled $104.4
million for the three months ended September 30, 1998, compared to $47.4 million
for the three months ended September 30, 1997, an increase of $57.0 million, or
120%. Rental and other property revenues consisted of the following (dollars in
thousands):
20
<PAGE> 21
<TABLE>
<CAPTION>
Three months ended Three months ended
Sept. 30, 1998 Sept. 30, 1997
-------------- --------------
<S> <C> <C>
"Same store" properties $ 35,302 $ 33,998
1997 Acquisitions 33,341 9,292
1998 Acquisitions 33,773 --
1997 Sold Properties -- 1,291
1998 Sold Properties 202 839
Properties in lease-up after the completion of an
expansion or renovation 1,818 1,944
-------------- --------------
Total $ 104,436 $ 47,364
============== ==============
</TABLE>
Property operating expenses, consisting of on-site payroll costs, utilities (net
of reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, property taxes and
insurance, totaled $42.0 million for the three months ended September 30, 1998,
compared to $19.5 million for the three months ended September 30, 1997, an
increase of $22.5 million or 115%. Operating expenses consisted of the following
(dollars in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
Sept. 30, 1998 Sept. 30, 1997
-------------- --------------
<S> <C> <C>
"Same store" properties $ 15,305 $ 15,824
1997 Acquisitions 13,979 2,043
1998 Acquisitions 11,842 --
1997 Sold Properties -- 602
1998 Sold Properties 126 401
Properties in lease-up after the completion of an
expansion or renovation 705 707
-------------- --------------
Total $ 41,957 $ 19,577
============== ==============
</TABLE>
Owned property management expenses, representing the costs of managing the Owned
Properties, totaled $3.0 million for the three months ended September 30, 1998,
compared to $1.6 million for the three months ended September 30, 1997, an
increase of $1.4 million, or 88%. The increase resulted from the acquisition of
properties in 1997 and 1998.
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $1.8 million
for the three months ended September 30, 1998, compared to $1.0 million for the
three months ended September 30, 1997. The increase in service company business
income of $0.8 million was due to increased management and other expenses from
the acquisition of partnership interests, and properties, and the acquisition of
a captive insurance subsidiary in connection with the acquisition of the NHP
Real Estate Companies in June 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $0.6 million for the three
months ended September 30, 1997 to $3.3 million for the three months ended
September 30, 1998, a 450% increase. The increase is primarily due to additional
corporate costs and additional employee salaries associated with the purchase of
NHP Real Estate Companies in June 1997 and the merger with Ambassador
Apartments, Inc. in May 1998. In addition, due to the growth of the Company,
several new departments have been added including legal, tax and tender
coordination, as well as increased levels of personnel in the accounting and
finance departments.
21
<PAGE> 22
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing costs,
totaled $22.0 million for the three months ended September 30, 1998, compared to
$12.8 million for the three months ended September 30, 1997, an increase of $9.2
million, or 72%. The increase consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1997
Acquisitions $ 5,352
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the 1998
Acquisitions 3,593
Increase in interest expense on the Company's other
indebtedness 278
--------
Total increase $ 9,223
========
</TABLE>
INTEREST INCOME
Interest income totaled $6.9 million for the three months ended September 30,
1998, compared to $3.1 million for the three months ended September 30, 1997.
The increase of $3.8 million is primarily due to interest earned on loans made
by the Company to partnerships in which the Company acts as the general partner.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to meet its short-term liquidity requirements, including
property acquisitions, tender offers, refinancing of short-term debt, funds
needed to purchase shares of Insignia under the Call Agreements, the merger with
IPT and funds needed for the Special Dividend, with long-term, fixed rate, fully
amortizing debt, secured or unsecured short-term indebtedness (including
indebtedness under the BOA Credit Facility, the WMF Credit Facility and the
Interim Term Loan Agreement), the issuance of debt securities, OP Units or
equity securities in public offerings or private placements, and cash generated
from operations. In April 1997, the Company filed a shelf registration statement
with the SEC that registered $1.0 billion of securities for sale on a delayed or
continuous basis. The shelf registration statement was declared effective in May
1997. As of September 30, 1998, the Company had issued common and preferred
stock thereunder and received gross proceeds of approximately $731.8 million.
At September 30, 1998, the Company had $43.7 million in cash and cash
equivalents. In addition, the Company had $83.2 million of restricted cash
primarily consisting of reserves and impounds held by lenders for capital
expenditures, property taxes and insurance. The Company's principal demands for
liquidity include normal operating activities, payments of principal and
interest on outstanding debt, capital improvements, acquisitions of or
investments in properties, dividends paid to its stockholders and distributions
paid to minority limited partners in the AIMCO Operating Partnership. The
Company considers its cash provided by operating activities, and funds available
under its credit facilities, to be adequate to meet short-term liquidity
demands. The Company utilizes its revolving credit facilities for general
corporate purposes and to fund investments on an interim basis.
On October 1, 1998, the Company amended and restated its credit agreement with
Bank of America National Trust and Savings Association ("Bank of America") and
BankBoston, N.A. The credit agreement now provides a revolving credit facility
of up to $100 million, including a swing line of up to $30 million (the "BOA
Credit Facility"). The Company had outstanding borrowings under the BOA Credit
Facility of $50.8 million as of September 30, 1998 (See Note 9).
In February 1998, the AIMCO Operating Partnership, as borrower, and AIMCO and
certain single asset wholly-owned subsidiaries of the AIMCO Operating
Partnership (the "Owners"), as guarantors, entered into a five-year, $50 million
secured revolving credit facility agreement (the "WMF Credit Facility") with
Washington Mortgage Financial Group, Ltd. ("Washington Mortgage"), which
provides for the conversion of all or a portion of such revolving credit
facility to a term facility. The Company had outstanding borrowings under the
WMF Credit Facility of $50.0 million as of September 30, 1998.
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<PAGE> 23
In October 1998, AIMCO entered into a $300 million interim term loan agreement
with an affiliate of Lehman Brothers, Inc. The term loan matures in one year and
bears interest at a rate per annum equal to the greatest of (a) the Prime Rate
in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. The
Company is subject to certain customary restrictions, including compliance with
financial and other covenants thereunder. The Company used the proceeds to
refinance existing outstanding indebtedness of Insignia at the time of the
merger.
From time to time, the Company has offered to acquire and, in the future, may
offer to acquire the interests held by third party investors in certain limited
partnerships for which the Company acts as general partner. Any such
acquisitions will require funds to pay the purchase price for such interests.
Cash payments made in connection with such acquisitions totaled $27.0 million
for the nine months ended September 30, 1998.
In November 1998, the Company issued 1,000,000 shares of Class J Cumulative
Convertible Preferred Stock, par value $0.01 per share ("Class J Preferred
Stock") in a private placement for $100.0 million. The holders of Class J
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors , dividends equal to (i) 7% per annum of the per share Liquidation
Preference for the period beginning on and including the Issue Date and lasting
until November 15, 1998; (ii) 8% per annum of the per share Liquidation
Preference for the period beginning on and including November 15, 1998 and
lasting until November 15, 1999; (iii) 9% per annum of the per share Liquidation
Preference for the period beginning on and including November 15, 1999 and
lasting until November 15, 2000; (iv) 9.5% per annum of the per share
Liquidation Preference thereafter. Such dividends shall be cumulative from the
Issue Date, whether or not in any Dividend Period or Periods such dividends
shall be declared or there shall be funds of the Corporation legally available
for the payment of such dividends. AIMCO may convert any or all of the Class J
Preferred Stock into Class A Common Stock at a conversion price of $40
(equivalent to a conversion rate of 2.5 shares of Class A Common Stock for each
share of Class J Preferred Stock) (a) after November 6, 2002, if the market
price of the Class A Common Stock in the five most recent Trading Days is equal
to or greater than $40 or; (b) at any time on or prior to November 6, 2002, if
the Internal Rate of Return exceeds 12.5%.
CAPITAL EXPENDITURES
The Company expects to incur initial capital expenditures (spending to increase
a property's revenue potential including renovations, developments and
expansions) of approximately $71.4 million during the year ended December 31,
1998 on all Owned and Equity Properties. For the nine months ended September 30,
1998, the Company has spent $33.0 million for capital replacements and initial
capital expenditures. The Company reserves $300 per apartment unit per annum for
capital replacements, which totaled $10.9 million for the nine months ended
September 30, 1998. Initial capital expenditures and capital enhancements will
be funded with cash from operating activities and borrowings under the Company's
revolving credit facilities.
23
<PAGE> 24
FUNDS FROM OPERATIONS
The Company measures its economic profitability based on Funds From Operations
("FFO"). The Company's management believes that FFO provides investors with an
understanding of the Company's ability to incur and service debt and make
capital expenditures. The Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT") defines FFO as net income (loss), computed
in accordance with generally accepted accounting principles ("GAAP"), excluding
gains and losses from debt restructuring and sales of property, plus real estate
related depreciation and amortization (excluding amortization of financing
costs), and after adjustments for unconsolidated partnerships and joint
ventures. The Company calculates FFO in a manner consistent with the NAREIT
definition, which includes adjustments for minority interest in the AIMCO
Operating Partnership, plus amortization of management company goodwill, the
non-cash, deferred portion of the income tax provision for unconsolidated
subsidiaries and less the payment of dividends on perpetual preferred stock. FFO
should not be considered as an alternative to net income or net cash flows from
operating activities, as calculated in accordance with GAAP, as an indication of
the Company's performance or as a measure of liquidity. FFO is not necessarily
indicative of cash available to fund future cash needs. In addition, there can
be no assurance that the Company's basis for computing FFO is comparable with
that of other real estate investment trusts.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
24
<PAGE> 25
For the three and nine months ended September 30, 1998 and 1997, the Company's
FFO was as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income before minority interest in Operating
Partnership $ 17,745 $ 7,963 $ 56,269 $ 19,427
Extraordinary item - early extinguishment of
debt -- -- -- 269
(Gain) losses on disposition of properties (257) 169 (2,783) 169
Real estate depreciation, net of minority 24,477 7,802 56,900 21,052
interest in other partnerships
Amortization of goodwill 2,350 237 7,077 711
Equity in earnings of other partnerships:
Real estate depreciation 8,248 2,084 17,379 2,781
Equity in earnings of unconsolidated
subsidiaries:
Real estate depreciation -- 1,426 -- 2,689
Deferred taxes 1,843 1,290 6,134 2,164
Amortization of recoverable amount of
management contracts and goodwill 1,113 280 4,201 430
Class C Preferred Stock dividend (1,365) -- (4,043) --
Class D Preferred Stock dividend (2,322) -- (5,655) --
Class G Preferred Stock dividend (1,978) -- (1,978) --
Class H Preferred Stock dividend (620) -- (620) --
------------ ------------ ------------ ------------
Funds From Operations (FFO) $ 49,234 $ 21,251 $ 132,881 $ 49,692
============ ============ ============ ============
Weighted average common shares, common share
equivalents, preferred stock convertible
into common stock and OP Units
outstanding 55,986 29,679 53,007 24,347
============ ============ ============ ============
</TABLE>
For the nine months ended September 30, 1998 and 1997, net cash flows were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash provided by operating activities $ 50,825 $ 53,435
Cash flow used in investing activities (185,453) (314,814)
Cash flow provided by financing activities 141,221 293,984
========== ==========
</TABLE>
25
<PAGE> 26
CONTINGENCIES
HUD Approvals and Enforcement
A significant number of affordable units included in the AIMCO Properties are
subject to regulation by the U.S. Department of Housing and Urban Development
("HUD"). Under its regulations, HUD reserves the right approve the owner and
the manager of HUD-insured and HUD-assisted properties, as well as their
"principals" (e.g., general partners, shareholders with a 10% or greater
interest, officers and directors) in connection with the acquisition of a
property or the award of a management contract. This approval process is
commonly referred to as "2530 Clearance." HUD monitors the performance of
properties with HUD-insured mortgage loans. HUD also monitors compliance with
applicable regulations, and takes performance and compliance into account in
approving the acquisition management of additional HUD-assisted properties. In
the event of instances of unsatisfactory performance or regulatory violations,
the HUD office with jurisdiction over the applicable property has the authority
to enter a "flag" into the computerized 2530 Clearance system. If one or more
flags have been entered, a decision whether to grant 2530 Clearance is then
subject to review by HUD's Multifamily Participation Review Committee in
Washington, D.C. (the "2530 Committee"). As a result of certain mortgage
defaults and unsatisfactory ratings received by NHP Incorporated (a company
acquired by AIMCO in December 1997) ("NHP") in years prior, HUD believes that
the 2530 Committee must review any application for 2530 clearance filed by the
Company. As of September 30, 1998, one flag was in the 2530 system with
respect to the Company in connection with a subpoena received by NHP in October
1997 from the Inspector General of HUD.
The Inspector General's subpoena requested documents relating to any arrangement
whereby NHP or any of its affiliates provides or has provided compensation to
owners of HUD multifamily projects in exchange for or in connection with
property management of a HUD project. The Company believes that other owners
and managers of HUD projects have received similar subpoenas. Documents
relating to certain of the Company's acquisitions of property management rights
for HUD projects, may be responsive to the subpoena. The Company is in the
process of complying with the subpoena and has provided certain documents to the
Inspector General, without conceding that they are responsive to the subpoena.
The Company believes that its operations are in compliance, in all material
respects, with all laws, rules and regulations relating to HUD-assisted or
HUD-insured properties. Effective February 13, 1998, counsel for the Company
and the U.S. Attorney for the Northern District of California entered into a
Tolling Agreement related to certain civil claims the government may have
against the Company. Although no action has been initiated against the Company
or, to the Company's knowledge, any owner of a HUD property managed by the
Company, if any such action is taken in the future, it could ultimately affect
existing arrangements with respect to HUD projects or otherwise have a material
adverse effect on the Company's results of operations.
HUD also has the authority to suspend or deny property owners and managers from
participation in HUD programs with respect to additional assistance within a
geographic region through imposition of a Limited Denial of Participation
("LDP") by any HUD office or nationwide for violations of HUD regulatory
requirements. In June 1997, the St. Louis HUD field office issued an LDP to NHP
as a result of a physical inspection and mortgage default at one property owned
and managed by NHP-related companies. Although the LDP expired by its terms in
June 1998, the Company entered into a settlement agreement with HUD which
includes aggregate payments to HUD of approximately $533,000 and resolution of
all issues involving four properties in the St. Louis metropolitan area. Because
an LDP is prospective, existing HUD agreements were not, and are not affected.
The Company believes that the national office will continue to apply the
clearance process to large management portfolios such as the Company's with
discretion and flexibility. While there can be no assurance, the Company
believes that the unsatisfactory reviews and the mortgage defaults will not have
a material impact on its results of operations or financial condition. However,
on September 29, 1998, the 2530 Committee deferred action on three of the
Company's 2530 applications for up to 120 days pending receipt of further
information regarding the HUD Inspector General's inquiry with AIMCO regarding
past practices of NHP. If HUD were to disapprove the Company as property
manager for one or more affordable properties, the Company's ability to obtain
property management revenues from new affordable properties may be impaired.
26
<PAGE> 27
Possible Environmental Liabilities
Under Federal, state and local environmental laws and regulations, a current or
previous owner or operator of real property may be required to investigate and
clean up a release of hazardous substances at such property, and may, under such
laws and common law, be held liable for property damage and other costs incurred
by third parties in connection with such releases. The liability under certain
of these laws has been interpreted to be joint and several unless the harm is
divisible or there is a reasonable basis for allocation of responsibility. The
failure to remediate the property properly may also adversely affect the owner's
ability to sell or rent the property or to borrow using the property as
collateral. In connection with its ownership, operation or management of the
AIMCO Properties, the Company could be potentially liable for environmental
liabilities or costs associated with its properties or properties it may in the
future acquire or manage.
Certain Federal, state and local laws and regulations govern the removal,
encapsulation or disturbance of asbestos-containing materials ("ACMs") when
those materials are in poor condition or in the event of building remodeling,
renovation or demolition; impose certain worker protection and notification
requirements and govern emissions of and exposure to asbestos fibers in the air.
These laws also impose liability for a release of ACMs and may enable third
parties to seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the ownership,
operation or management of properties, the Company could be potentially liable
for those costs. There are ACMs at certain of the Owned Properties, and there
may be ACMs at certain of the other AIMCO Properties. The Company has developed
and implemented operations and maintenance programs, as appropriate, that
establish operating procedures with respect to the ACMs at most of the Owned
Properties, and intends to develop and implement, as appropriate, such programs
at AIMCO Properties that do not have such programs.
Certain of the Company's Owned Properties, and some of the other AIMCO
Properties, are located on or near properties that contain or have contained
underground storage tanks or on which activities have occurred which could have
released hazardous substances into the soil or groundwater. There can be no
assurances that such hazardous substances have not been released or have not
migrated, or in the future will not be released or will not migrate, onto the
AIMCO Properties.
All of the Owned Properties were subject to Phase I or similar environmental
audits by independent environmental consultants prior to acquisition. The
audits did not reveal, nor is the Company aware of, any environmental liability
relating to such properties that would have a material adverse effect on the
Company's business, assets or results of operations. However, such audits
involve a number of judgments and it is possible that such audits did not reveal
all environmental liabilities or that there are material environmental
liabilities of which the Company is unaware. In addition, the Managed
Properties may not have been subject to Phase I or similar environmental audits
by independent environmental consultants. While the Company is not aware of any
environmental liability that it believes would have a material adverse effect on
its business, financial condition or results of operations relating to the
Managed Properties, for which audits are not available, there can be no
assurance that material environmental liabilities of which the Company is
unaware do not exist at such properties.
In October 1997, NHP received a letter ("the EPA Letter") from the U.S.
Department of Justice ("DOJ") which stated that the U.S. Environmental
Protections Agency ("EPA") has requested that the DOJ file a lawsuit against NHP
alleging, among other things, that NHP violated the Clean Air Act, the National
Recycling and Emissions Reduction Programs and associated regulations in
connection with the employment of certain unlicensed personnel, maintenance and
disposal of certain refrigerants, and record-keeping practices at two
properties. A settlement in principle between NHP and the EPA has been reached
whereby NHP agreed to pay a fine of less than $100,000, permit the EPA to audit
the maintenance records and technical staffing at 40 NHP properties and continue
to provide training to all maintenance workers with respect to the disposal of
refrigerants. A formal settlement agreement is expected to be executed in
27
<PAGE> 28
1998. It is possible that the future EPA audits agreed to in the settlement
could result in additional allegations by EPA of violations at the properties
audited. However, based on the terms of the settlement in principle with the
EPA, the Company anticipates that the fines, if any, resulting from any such
violations will be nominal.
Uncertainties Regarding Status of Federal Subsidies
The Company owns and/or manages approximately 52,000 units that are subsidized
under Section 8 of the United States Housing Act of 1937, as amended ("Section
8"). These subsidies are generally provided pursuant to project-based Housing
Assistance Payment Contracts ("HAP Contracts") between HUD and the owners of the
properties or, with respect to a limited number of units managed by the Company,
pursuant to vouchers received by tenants. On October 27, 1997, the President of
the United States signed into law the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act,
the mortgage financing and HAP Contracts of certain properties assisted under
Section 8, with rents above market levels and financed with HUD-insured mortgage
loans, will be restructured by reducing subsidized rents to market levels,
thereby reducing subsidy levels, and lowering required debt service payments as
needed to ensure financial viability at the reduced rents and subsidy levels.
The 1997 Housing Act retains project-based subsidies for most properties
(properties in rental markets with limited supply, properties serving the
elderly and certain other properties).
The 1997 Housing Act phases out project-based subsidies on selected properties
serving families not located in the rental markets with limited supply,
converting each such subsidy to a tenant-based subsidy. Under a tenant based
system, rent vouchers would be issued to qualified tenants who then could elect
to reside at a property of their choice, provided the tenant has the financial
ability to pay the difference between the selected property's monthly rent and
the value of the voucher, which would be established based on HUD's regulated
fair market rent for the relevant geographical areas. The 1997 Housing Act
provides that properties will begin the restructuring process in Federal fiscal
year 1999 (beginning October 1, 1998), and that HUD will issue final regulations
implementing the 1997 Housing Act on or before October 27, 1998. Congress has
elected to renew HAP Contracts expiring before October 1, 1998 for one-year
terms, generally at existing rents, so long as the properties remain in
compliance with the HAP Contracts. While the Company does not expect the
provisions of the 1997 Housing Act to result in a significant number of tenants
relocating from properties managed by the Company, there can be no assurance
that the provisions will not significantly affect the Company's management
portfolio. Furthermore, there can be no assurance that other changes in Federal
housing subsidy will not occur. Any such changes could have an adverse effect
on the Company's property management revenues.
HIGH PERFORMANCE UNITS
In January 1998, the Company agreed to sell 15,000 Class I High Performance
Partnership Units ("the "high Performance Units") to a partnership owned by
fourteen members of AIMCO's senior management, and to three of its independent
directors for $2.1 million in cash. The High Performance Units have nominal
value unless the Company's total return, defined as dividend income plus
share price appreciation, over the three year period ending December 31, 2000,
is at least 30% and exceeds the industry average, as determined by a peer group
index, by at least 15% (the "Total Return"). At the conclusion of the three year
period, if the Company's Total Return satisfies these criteria, the holders of
the High Performance Units will receive distributions and allocations of income
and loss from the AIMCO Operating Partnership in the same amounts and at the
same times as would holders of a number of OP Units equal to the quotient
obtained by dividing (i) the product of (a) 15% of the amount by which the
Company's cumulative Total Return over the three year period exceeds the greater
of 115% of a peer group index or 30% (such excess being the "Excess Return"),
multiplied by (b) the Weighted average market value of the Company's outstanding
Common Stock and OP Units, by (ii) the market value of one share of Class A
Common Stock at the end of the three year period. The three year measurement
period will be shortened in the event of a change of control of the Company.
Unlike OP Units, the High
28
<PAGE> 29
Performance Units are not redeemable or convertible into Class A Common Stock
unless a change of control of the Company occurs. Because there is substantial
uncertainty that the High Performance Units will have more than nominal value
due to the required Total Return over the three year term, the Company has not
recorded any value to the High Performance Units. If the measurement period
would have ended September 30, 1998, the Excess Return would have been $16.5
million and the value of the High Performance Units would have been $2.5
million, and such High Performance Units would represent no dilutive effect on
net income per share.
YEAR 2000 READINESS DISCLOSURE
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Over the past twenty months, the Company has determined that it will be required
to modify or replace significant portions of its software and certain hardware
so that those systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications or replacements of existing
software and certain hardware, the Year 2000 Issue can be mitigated. However, if
such modifications and replacements are not made, or are not completed timely,
the Year 2000 Issue could have a material impact on the operations of the
Company.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing, and implementation. To date, the
Company has fully completed its assessment of all information systems that could
be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each is
detailed below.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT, INCLUDING TIMETABLE FOR
COMPLETION OF EACH REMAINING PHASE
Computer Hardware
During 1997, AIMCO identified all of the computer systems at risk and formulated
a plan to repair or replace each of the affected systems. The Company has
replaced its mainframe system, including the creation of new applications, at a
total cost of approximately $1.1 million. In August 1998, the Year-2000
compliant system became fully functional. In addition to the mainframe, PC-based
network servers and routers and desktop PCs were analyzed for compliance. AIMCO
has begun to replace each of the non-compliant network connections and desktop
PCs and, as of September 30, 1998, is approximately 85% complete with this
effort. The total cost to replace the PC-based network servers and routers and
desktop PCs is expected to be approximately $1.2 million, of which $886,000 has
been incurred to date. The remaining network connections and desktop PCs are
expected to be upgraded to Year-2000 compliant systems by March 31, 1999.
Computer Software
As for software, AIMCO utilizes a combination of off-the-shelf commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types
29
<PAGE> 30
of programs were studied and implementation plans written and executed with the
intent of repairing or replacing any non-compliant software programs.
In 1997, when AIMCO merged with NHP Incorporated, the core financial system used
by NHP was Year-2000 compliant. During 1998, AIMCO integrated all of its core
financial systems to this compliant system for general ledger and financial
reporting purposes. In 1997, AIMCO determined that the software used for
property management and rent collection was not Year-2000 compliant. During
1998, AIMCO has implemented a Year-2000 compliant system at each of its 926
property sites, including owned and managed, at a cost of $700,000. Since then,
AIMCO has acquired 75 properties and has also merged with Insignia Financial
Group ("IFG"). IFG owned or managed 140 properties. As properties are acquired,
AIMCO converts the existing property management and rent collection systems to
AIMCO's Year-2000 compliant systems. The estimated additional costs to convert
such systems at all recently acquired properties, including those acquired in
the merger with IFG, is $200,000, and the implementation and testing process is
expected to be completed by March 31, 1999.
The final software area is the office software and server operating systems.
AIMCO has upgraded all non-compliant office software systems on each PC and has
upgraded 93% of the server operating systems. The remaining server operating
systems are planned to be upgraded to be Year-2000 compliant by December 1998.
Operating Equipment
AIMCO has operating equipment, primarily at the property sites, which needed to
be evaluated for Year-2000 compliance. In September 1997, AIMCO began taking a
census and inventorying embedded systems issues in September 1997. At that time,
management chose to focus its attention mainly upon security systems, elevators,
heating-ventilation-air-conditioning systems (HVAC), telephone systems and
switches, and sprinkler systems. While this area is the most difficult to fully
research adequately, management has not yet found any major non-compliance
issues that put AIMCO at risk financially or operationally. We intend to have a
third-party conduct an audit of these systems and report their findings by
December 1998.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of September 30, 1998, we have evaluated
approximately 86% of the operating equipment for Year-2000 compliance. The total
cost incurred as of September 30, 1998 to replace or repair the operating
equipment was approximately $70,000. We estimate the cost to replace or repair
any remaining operating equipment is approximately $325,000, and we expect to be
completed by April 30th, 1999. We continue to have "awareness campaigns"
throughout the organization designed to raise awareness and report any possible
compliance issues regarding operating equipment within our enterprise.
NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR
2000
AIMCO is currently actively conducting surveys of its banking and vendor
relationships to assess risks regarding their Year-2000 readiness. AIMCO has
banking relationships with three major financial institutions, all of which have
indicated their compliance efforts will be complete before May 1999. AIMCO has
updated data transmission standards with two of the three financial
institutions. AIMCO's contingency plan in this regard is to move accounts from
any institution that cannot be certified 2000 compliant by June 1, 1999.
The Company does not rely heavily on any single vendor for goods and services
and does not have significant suppliers and subcontractors who share information
systems with the Company (external agents). To date, the Company is not aware of
any external agent with a Year 2000 issue that would materially impact the
Company's results of operations, liquidity, or capital resources. However, the
Company has no means of ensuring that external agents will be Year 2000 ready.
Management does not believe that the inability of external agents to complete
their Year 2000 resolution process in a timely
30
<PAGE> 31
will have a material impact on the financial position or results of operations
of the Company. However, the effect of non-compliance by external agents is not
readily determinable.
COSTS TO ADDRESS YEAR 2000
The total cost of the Year 2000 project is estimated at $3.4 million and is
being funded through operating cash flows. To date, the Company has incurred
approximately $2.8 million ($0.4 million expensed and $2.4 million capitalized
for new systems and equipment), related to all phases of the Year 2000 project.
Of the total remaining project costs, approximately $0.4 million is attributable
to the purchase of new software and operating equipment, which will be
capitalized. The remaining $0.2 million relates to repair of hardware and
software and will be expensed as incurred.
RISKS ASSOCIATED WITH THE YEAR 2000
Management believes it has an effective program in place to resolve the Year
2000 issue in a timely manner. As noted above, the Company has not yet completed
all necessary phases of the Year 2000 program. In the event that the Company
does not complete any additional phases, certain worst case scenarios could
occur. The worst case scenarios include elevators, security and HVAC systems
that read incorrect dates and operate with incorrect schedules (e.g., elevators
will operate on Monday as if it were Sunday). Although such a change is annoying
to residents, it is not business critical. In addition, disruptions in the
economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. The Company could be subject to litigation for
computer systems failure, for example, equipment shutdown or failure to properly
date business records. The amount of potential liability and lost revenue cannot
be reasonably estimated at this time.
CONTINGENCY PLANS ASSOCIATED WITH THE YEAR 2000
The Company has contingency plans for certain critical applications and is
working on such plans for others. These contingency plans involve, among other
actions, manual workarounds and selecting new relationships for such activities
as banking relationships and elevator operating systems.
INFLATION
Substantially all of the leases at the Company's apartment properties are for a
period of six months or less, allowing, at the time of renewal, for adjustments
in the rental rate and the opportunity to re-lease the apartment unit at the
prevailing market rate. The short-term nature of these leases generally serves
to minimize the risk to the Company of the adverse effect of inflation and the
Company does not believe that inflation has had a material adverse impact on its
revenues.
31
<PAGE> 32
LITIGATION
In connection with the Company's offers to purchase interests in limited
partnerships that own properties, the Company and its affiliates are sometimes
subject to legal actions, including allegations that such activities may involve
breaches of fiduciary duties to the limited partners of such partnerships or
violations of the relevant partnership agreements. The Company believes it
complies with its fiduciary obligations and relevant partnership agreements, and
does not expect such legal actions to have a material adverse effect on the
consolidated financial condition or results of operations of the Company and its
subsidiaries taken as a whole. The Company may incur costs in connection with
the defense or settlement of such litigation, which could adversely affect the
Company's desire or ability to complete certain transactions and thereby have a
material adverse effect on the Company and its subsidiaries.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
32
<PAGE> 33
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
<TABLE>
<CAPTION>
NET CO. OPT. ANNUAL LIQUIDATION
SHARES PROCEEDS REDEEM- DIVIDEND PREFERENCE
DATES ISSUED (MILLIONS) ABLE ON RATES RATE
----- ------ ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class D Feb., Feb.,
Preferred Stock 1998 4,200,000 $101.5 2003 $ 2.1875 $25 per share
Class G Jul., Jul.,
Preferred Stock 1998 4,050,000 $ 98.0 2008 $ 2.34375 $25 per share
Class H Aug., Aug.,
Preferred Stock 1998 2,000,000 $ 48.1 2003 $ 2.375 $25 per share
</TABLE>
On or after the above listed redemption dates, the Company may redeem
shares of Class D, G or H Preferred Stocks, in whole or in part, at a cash
redemption price equal to 100% of the above listed Class D, G and H
Liquidation Preferences plus all accrued and unpaid dividends to the date
fixed for redemption.
The Class G Preferred Stock net proceeds of $98.0 million were used to
repay $83.0 million of outstanding indebtedness under the BOA Credit
Facility, to fund acquisitions and for general corporate purposes.
The Class H Preferred Stock net (together with Class D Preferred Stock and
Class G Preferred Stock, "Class D, G and H Preferred Stocks"), proceeds of
$48.1 million were used to repay indebtedness under the BOA Credit
Facility.
The Class D, G and H Preferred Stocks (a) rank prior to Class A Common
Stock, Class B Common Stock, and Class E Preferred Stock, if any, and any
other class or series of capital stock of AIMCO if the holders of the
Classes D, G and H Preferred Stocks are to be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution, and
winding-up in preference or priority to the holders of shares of such class
or series ("Class D, G and H Junior Stocks"), (b) rank on parity with Class
B Preferred Stock, Class C Preferred Stock, and Class J Preferred Stock and
will rank on a parity with any other class or series of capital stock of
AIMCO if the holders of such class of stock or series and the Class D, G
and H Preferred Stocks shall be entitled to the receipt of dividends and of
amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per
share or liquidation preferences, without preference or priority one over
the other ("Class D, G and H Parity Stocks") and (c) ranks junior to any
class or series of capital stock of AIMCO if the holders of such class or
series shall be entitled to receipt of dividends or amounts distributable
upon liquidation, dissolution or winding up in preference or priority to
the holders of the Class D, G and H Preferred Stocks ("Class D, G and H
Senior Stocks").
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its special meeting of stockholders on September 17, 1998. At
the meeting, the stockholders approved the Insignia Merger set forth below:
33
<PAGE> 34
The Company held its special meeting of stockholders on September 14, 1998. At
the meeting, the stockholders approved the Insignia Merger set forth below:
1. Proposal to approve and adopt the Amended and Restated Agreement and Plan
of Merger, dated as of May 26, 1998, by and among AIMCO, AIMCO Properties,
L.P., Insignia and Insignia/ESG Holdings, Inc. pursuant to which Insignia
will be merged with and into AIMCO, with AIMCO being the surviving
corporation in the merger (the "Merger").
VOTES FOR VOTES AGAINST INSTRUCTED
---------- ------------- ----------
37,595,737 368,318 94,929
2. Proposal to approve and adopt a proposal to amend AIMCO's Articles of
Incorporation as amended and supplemented from time to time, to provide
that, upon effectiveness of the Merger, the 6 1/2% Convertible Subordinate
Debentures due 2016 issued by Insignia will become convertible into the
same consideration received by holders of Insignia's common stock,
pursuant to the Insignia Merger (the "Amendment").
VOTES FOR VOTES AGAINST ABSTAIN
---------- ------------- -------
37,685,020 272,876 101,079
ITEM 5. OTHER INFORMATION
The Securities and Exchange Commission recently amended certain rules
under the Securities Exchange Act of 1934 regarding the use of a
company's discretionary proxy voting authority with respect to
stockholders proposals submitted to the Company for consideration and
the Company's next annual meeting.
Stockholder proposals submitted to the Company outside the processes of
Rule 14a-8 (i.e., the procedures for placing a stockholder's proposal
in the Company's proxy materials) with respect to the Company's 1999
annual meeting of stockholders will be considered untimely if received
by the Company after February 22, 1999. Accordingly, the proxy with
respect to the Company's 1999 annual meeting of stockholders will
confer discretionary authority to vote on any stockholder proposals
received by the Company after February 22, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed with this report (1):
Exhibit
Number Description
- - ------ -----------
2.1 Amended and Restated Agreement and Plan of Merger, dated as of May 26,
1998, by and among Apartment Investment and Management Company, AIMCO
Properties, L.P., Insignia Financial Group, Inc., and Insignia/ESG
Holdings, Inc. (Exhibit 2.1 to the
34
<PAGE> 35
Company's Registration Statement on Form S-4, filed August 5, 1998, is
incorporated herein by this reference)
2.2 Agreement and Plan of Merger, dated as of October 1, 1998, by and
between Apartment Investment and Management Company, and Insignia
Properties Trust (Exhibit 2.1 to the Company's Current Report on Form
8-K, dated October 1, 1998, is incorporated herein by this reference)
2.3 Amended and Restated Indemnification Agreement, dated as of May 26,
1998, by and between Apartment Investment and Management Company and
Insignia/ESG Holdings, Inc. (Exhibit 2.2 to the Company's Registration
Statement on Form S-4, filed August 5, 1998, is incorporated herein by
this reference)
3.1 Charter of Apartment Investment and Management Company
3.2 Amended and Restated Bylaws of Apartment Investment and Management
Company (Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1997, is incorporated herein
by this reference)
10.1 Amended and Restated Credit Agreement (Unsecured Revolver-to-Term
Facility) dated as of October 1, 1998, among AIMCO Properties, L.P.,
Bank of America and BankBoston, N.A. (Exhibit 10.1 to the Company's
Current Report on Form 8-K, dated October 1, 1998, is incorporated
herein by this reference)
10.2 Promissory Note, dated October 1, 1998, in the principal amount of
$65,000,000, issued by AIMCO Properties, L.P. to Bank of America
(Exhibit 10.2 to the Company's Current Report on Form 8-K, dated
October 1, 1998, is incorporated herein by this reference)
10.3 Promissory Note, dated October 1, 1998, in the principal amount of
$35,000,000, issued by AIMCO Properties, L.P. to Bank of America
(Exhibit 10.3 to the Company's Current Report on Form 8-K, dated
October 1, 1998, is incorporated herein by this reference)
10.4 Swing Line Promissory Note, dated October 1, 1998, in the principal
amount of $30,000,000, issued by AIMCO Properties, L.P. to Bank of
America (Exhibit 10.4 to the Company's Current Report on Form 8-K,
dated October 1, 1998, is incorporated herein by this reference)
10.5 Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of
October 1, 1998, by Apartment Investment and Management Company, AIMCO
Holdings QRS, Inc., AIMCO/OTC QRS, Inc., AIMCO Holdings, L.P.,
AIMCO-GP, Inc., AIMCO-LP, Inc., AIMCO Properties Finance Corp., AIMCO
Somerset, Inc., Ambassador II, L.P., Ambassador X, L.P., Ambassador IV,
Inc., Ambassador V, Inc., Ambassador Florida Partners Inc., and A.J.
Two, Inc.
10.6 Payment Guaranty of Preferred Stock Subsidiaries, dated as of October
1, 1998, by Property Asset Management Services, Inc., Property Asset
Management Services, L.P., NHP Management Company and Property Asset
Management Services-California, L.L.C.
35
<PAGE> 36
10.7 Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of
October 29, 1998, by CPF XIV/St. Charleston, Inc., CPF XIV/Torrey
Pines, Inc., CPF XIV/Sun River, Inc., CPF XIV/Lakeside Place, Inc.,
ConCap CCP/IV Stratford Place Properties, Inc., ConCap CCP/IV River's
Edge Properties, Inc., PRA, Inc. and National Property Investors, Inc.
10.8 Third Amended and Restated Agreement of Limited Partnership of AIMCO
Properties, L.P., dated as of July 29, 1994, as amended and restated as
of October 1, 1998
10.9 First Amendment to the Third Amended and Restated Agreement of Limited
Partnership of AIMCO Properties, L.P., dated as of November 6, 1998
10.10 Shareholders Agreement, by and among Apartment Investment and
Management Company, Andrew L. Farkas, James A. Aston and Frank M.
Garrison, dated October 1, 1998 (Exhibit 10.4 to the Company's Schedule
13D filed on October 15, 1998, is incorporated herein by reference)
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter for which this report is filed, the Company filed
Amendment No. 3 on July 2, 1998, Amendment No. 4 on August 6, 1998,
Amendment No. 5 on September 4, 1998 and Amendment No. 6 on September
25, 1998 to its Current Report on Form 8-K, dated March 17, 1998,
relating to the proposed merger of Insignia Financial Group, Inc. with
and into Apartment Investment and Management Company; and on September
3, 1998, its Current Report on Form 8-K, dated September 2, 1998,
relating to the competition of its financing of Insignia Financial
Group, Inc.
36
<PAGE> 37
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
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.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Date: November 16, 1998 /s/ Troy D. Butts
-----------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
(duly authorized officer and principal
financial officer)
37
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------ -----------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., Insignia Financial Group, Inc., and Insignia/ESG Holdings, Inc. (Exhibit 2.1 to
the Company's Registration Statement on Form S-4, filed August 5, 1998, is incorporated herein by this reference)
2.2 Agreement and Plan of Merger, dated as of October 1, 1998, by and between Apartment Investment and Management Company, and
Insignia Properties Trust (Exhibit 2.1 to the Company's Current Report on Form 8-K, dated October 1, 1998, is incorporated
herein by this reference)
2.3 Amended and Restated Indemnification Agreement, dated as of May 26, 1998, by and between Apartment Investment and
Management Company and Insignia/ESG Holdings, Inc. (Exhibit 2.2 to the Company's Registration Statement on Form S-4, filed
August 5, 1998, is incorporated herein by this reference)
3.1 Charter of Apartment Investment and Management Company
3.2 Amended and Restated Bylaws of Apartment Investment and Management Company (Exhibit 3.2 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1997, is incorporated herein by this reference)
10.1 Amended and Restated Credit Agreement (Unsecured Revolver-to-Term Facility) dated as of October 1, 1998, among AIMCO
Properties, L.P., Bank of America and BankBoston, N.A. (Exhibit 10.1 to the Company's Current Report on Form 8-K, dated
October 1, 1998, is incorporated herein by this reference)
10.2 Promissory Note, dated October 1, 1998, in the principal amount of $65,000,000, issued by AIMCO Properties, L.P. to Bank of
America (Exhibit 10.2 to the Company's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this
reference)
10.3 Promissory Note, dated October 1, 1998, in the principal amount of $35,000,000, issued by AIMCO Properties, L.P. to Bank of
America (Exhibit 10.3 to the Company's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this
reference)
10.4 Swing Line Promissory Note, dated October 1, 1998, in the principal amount of $30,000,000, issued by AIMCO Properties, L.P.
to Bank of America (Exhibit 10.4 to the Company's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein
by this reference)
10.5 Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of October 1, 1998, by Apartment Investment and Management
Company, AIMCO Holdings QRS, Inc., AIMCO/OTC QRS, Inc., AIMCO Holdings, L.P., AIMCO-GP, Inc., AIMCO-LP, Inc., AIMCO
Properties Finance Corp., AIMCO Somerset, Inc., Ambassador II, L.P., Ambassador X, L.P., Ambassador IV, Inc., Ambassador V,
Inc., Ambassador Florida Partners Inc., and A.J. Two, Inc.
10.6 Payment Guaranty of Preferred Stock Subsidiaries, dated as of October 1, 1998, by Property Asset Management Services, Inc.,
Property Asset Management Services, L.P., NHP Management Company and Property Asset Management Services-California, L.L.C.
10.7 Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of October 1, 1998, by CPF XIV/St. Charleston, Inc., CPF
XIV/Torrey Pines, Inc., CPF XIV/Sun River, Inc., CPF XIV/Lakeside Place, Inc., ConCap CCP/IV Stratford Place Properties,
Inc., ConCap CCP/IV River's Edge Properties, Inc., PRA, Inc. and National Property Investors, Inc.
10.8 Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of July 29, 1994, as
amended and restated as of October 1, 1998
10.9 First Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of
November 6, 1998
10.10 Shareholders Agreement, by and among Apartment Investment and Management Company, Andrew L. Farkas, James A. Aston and
Frank M. Garrison, dated October 1, 1998 (Exhibit 10.4 to the Company's Schedule 13D filed on October 15, 1998, is
incorporated herein by reference)
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ARTICLES OF RESTATEMENT
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation, having
its principal office in Baltimore City, Maryland (hereinafter referred to as the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation desires to and does hereby restate its Charter as
currently in effect. The Charter as currently in effect is found in Articles of
Amendment and Restatement dated July 13, 1994 and filed on July 15, 1994 (as
corrected by Certificate of Correction dated November 6, 1997 and filed on
November 6, 1997), Articles of Amendment dated July 27, 1994 and filed July 28,
1994 at 11:33 a.m. (as corrected by Certificate of Correction dated November 6,
1997 and filed on November 6, 1997), Articles of Amendment dated July 27, 1994
and filed July 28, 1994 at 11:35 a.m. (as corrected by Certificate of Correction
dated November 6, 1997 and filed on November 6, 1997), Articles Supplementary
dated May 20, 1997 and filed May 21, 1997, and Articles Supplementary dated
August 1, 1997 and filed August 4, 1997. The Charter of the Corporation is
hereby restated in its entirety as follows:
ARTICLE I
NAME
The name of the corporation (the "Corporation") is Apartment Investment and
Management Company.
ARTICLE II
PURPOSE
The purpose for which the Corporation is formed is to engage in any lawful
act or activity for which corporations may be organized under the general laws
of the State of Maryland authorizing the formation of corporations as now or
hereafter in force.
ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The PrenticeHall Corporation System, Maryland, 11 East
Chase Street, Baltimore, Maryland 21202. The name and address of the resident
agent of the Corporation in the State of Maryland is The PrenticeHall
Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202.
The resident agent is a Maryland corporation located in the State of Maryland.
<PAGE> 2
ARTICLE IV
STOCK
SECTION 1. AUTHORIZED SHARES
1.1 CLASS AND NUMBER OF SHARES. The total number of shares of stock that
the Corporation from time to time shall have authority to issue is 160,750,000
shares of capital stock having a par value of $.01 per share, amounting to an
aggregate par value of $1,607,500, consisting of 150,000,000 shares initially
classified as Class A Common Stock having a par value of $.01 per share ("Class
A Common Stock"), 750,000(1) shares initially classified as Class B Common Stock
having a par value of $.01 per share (the "Class B Common Stock") (the Class A
Common Stock and Class B Common Stock being referred to collectively herein as
the "Common Stock") and 10,000,000(2) shares initially classified as Preferred
Stock having a par value of $.01 per share ("Preferred Stock").
1.2 CHANGES IN CLASSIFICATION AND PREFERENCES. The Board of Directors by
resolution or resolutions from time to time may classify and reclassify any
unissued shares of capital stock by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of capital stock, including, but not limited to,
ownership restrictions consistent with the Ownership Restrictions with respect
to each such class or subclass of capital stock, and the number of shares
constituting each such class or subclass, and to increase or decrease the number
of shares of any such class or subclass.
SECTION 2. NO PREEMPTIVE RIGHTS. No holder of shares of stock of the
Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any additional shares of the stock of the Corporation or any other
security of the Corporation that it may issue or sell.
SECTION 3. COMMON STOCK.
3.1 DIVIDEND RIGHTS. The holders of shares of Common Stock shall be entitled
to receive such dividends as may be declared by the Board of Directors of the
Corporation out of funds legally available therefor.
3.2 RIGHTS UPON LIQUIDATION. Subject to the preferential rights of Preferred
Stock, if any, as may be determined by the Board of Directors pursuant to
Section 1 of this Article IV, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of
the Corporation, each holder of shares of Common Stock shall be entitled to
receive, ratably with each other holder of Common Stock, that portion of the
assets of the Corporation available for distribution to its shareholders as the
number of shares of the Common Stock held by such holder bears to the total
number of shares of Common Stock then outstanding.
3.3 VOTING RIGHTS. The holders of shares of Common Stock shall be entitled
to vote on all matters (on which a holder of shares of Common Stock shall be
entitled to vote) at the meetings of the shareholders of the Corporation, and
shall be entitled to one vote for each share of Common Stock entitled to vote at
such meeting.
3.4 RESTRICTION ON OWNERSHIP AND TRANSFERS. The Beneficial Ownership and
Transfer of Common Stock shall be subject to the restrictions set forth in this
Section 3.4 of this Article IV.
3.4.1 RESTRICTIONS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section
3.4.8 of this Article IV, from and after the date of the Initial Public
Offering, no Person (other than the Initial Holder or a Look-Through Entity)
shall Beneficially Own shares of Common Stock in excess of the Ownership Limit,
the Initial Holder shall not Beneficially Own shares of Common Stock in excess
of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own
shares of Common Stock in excess of the Look-Through Ownership Limit.
(1) See Article SIXTH.
(2) See Article SEVENTH.
<PAGE> 3
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 3.4.8 of this Article IV, from and after the date of the Initial Public
Offering (and subject to Section 3.4.12 of this Article IV), any Transfer
(whether or not such Transfer is the result of transactions entered into through
the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system) that, if effective, would result in any Person
(other than the Initial Holder or a Look-Through Entity) Beneficially Owning
shares of Common Stock in excess of the Ownership Limit shall be void AB INITIO
as to the Transfer of such shares of Common Stock that would be otherwise
Beneficially Owned by such Person in excess of the Ownership Limit, and the
intended transferee shall acquire no rights in such shares of Common Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided
in Section 3.4.8 of this Article IV, from and after the date of the Initial
Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer
(whether or not such Transfer is the result of transactions entered into through
the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system) that, if effective, would result in the Initial
Holder Beneficially Owning shares of Common Stock in excess of the Initial
Holder Limit shall be void AB INITIO as to the Transfer of such shares of Common
Stock that would be otherwise Beneficially Owned by the Initial Holder in excess
of the Initial Holder limit, and the Initial Holder shall acquire no rights in
such shares of Common Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 3.4.8 of this Article IV from and after the date of the
Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated interdealer quotation system) that, if effective, would result in any
Look-Through Entity Beneficially Owning shares of Common Stock in excess of the
Look-Through Ownership limit shall be void AB INITIO as to the Transfer of such
shares of Common Stock that would be otherwise Beneficially Owned by such
Look-Through Entity in excess of the Look-Through Ownership Limit and such
Look-Through Entity shall acquire no rights in such shares of Common Stock.
(E) TRANSFERS RESULTING IN OWNERSHIP BY FEWER THAN 100 PERSONS.
Except as provided in Section 3.4.8 of this Article IV, from and after the date
of the Initial Public Offering (and subject to Section 3.4.12 of this Article
IV), any Transfer (whether or not such Transfer is the result of transactions
entered into through the facilities of the NYSE or other securities exchange or
an automated interdealer quotation system) that, if effective, would result in
the Common Stock being Beneficially Owned by less than 100 Persons (determined
without reference to any rules of attribution) shall be void AB INITIO as to the
Transfer of such shares of Common Stock that would be otherwise Beneficially
Owned by the transferee and the intended transferee shall acquire no rights in
such shares of Common Stock.
(F) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the
date of the Initial Public Offering, any Transfer that, if effective would
result in the Corporation being "closely held" within the meaning of Section
856(h) of the Code, or would otherwise result in the Corporation failing to
qualify as a REIT (including, without limitation, a Transfer or other event that
would result in the Corporation owning (directly 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)
shall be void AB INITIO as to the Transfer of shares of Common Stock that would
cause the Corporation (i) to be "closely held" within the meaning of Section
856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may
be, and the intended transferee shall acquire no rights in such shares of Common
Stock.
(G) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of
Common Stock that is null and void under Sections 3.4.1(B), (C), (D), (E) or (F)
of this Article IV because it would, if effective, result in (i) the ownership
of Common Stock in excess of the Initial Holder Limit, the Ownership Limit, or
the Look-Through Ownership Limit, (ii) the Common Stock being Beneficially Owned
by less than 100 Persons (determined without reference to any rules of
attribution), (iii) the Corporation being "closely held" within the meaning of
Section 856(h) of the Code or (iv) the Corporation otherwise failing to qualify
as a REIT, shall not adversely affect the validity of the Transfer of any other
share of Common Stock in the same or any other related transaction.
3.4.2 REMEDIES FOR BREACH. If the Board of Directors or a committee
thereof shall at any time determine
<PAGE> 4
in good faith that a Transfer or other event has taken place in violation of
Section 3.4.1 of this Article IV or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership of any shares of Common Stock in
violation of Section 3.4.1 of this Article IV (whether or not such violation is
intended), the Board of Directors or a committee thereof shall be empowered to
take any action as it deems advisable to refuse to give effect to or to prevent
such Transfer or other event, including, but not limited to, refusing to give
effect to such Transfer or other event on the books of the Corporation, causing
the Corporation to redeem such shares at the then current Market Price and upon
such terms and conditions as may be specified by the Board of Directors in its
sole discretion (including, but not limited to, by means of the issuance of
longterm indebtedness for the purpose of such redemption), demanding the
repayment of any distributions received in respect of shares of Common Stock
acquired in violation of Section 3.4.1 of this Article IV or instituting
proceedings to enjoin such Transfer or to rescind such Transfer or attempted
Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in
the case of events other than a Transfer, Beneficial Ownership) in violation of
Section 3.4.1 of this Article IV, regardless of any action (or nonaction) by the
Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall
automatically result in the transfer described in Section 3.4.3 of this Article
IV; PROVIDED, FURTHER, that the provisions of this Section 3.4.2 shall be
subject to the provisions of Section 3.4.12 of this Article IV; PROVIDED,
FURTHER, that neither the Board of Directors nor any committee thereof may
exercise such authority in a manner that interferes with any ownership or
transfer of Common Stock that is expressly authorized pursuant to Section
3.4.8(d) of this Article IV.
3.4.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions
contained in this Article IV, at any time after the date of the Initial Public
Offering there is a purported Transfer (an "EXCESS TRANSFER") (whether or not
such Transfer is the result of transactions entered into through the facilities
of the NYSE or other securities exchange or an automated interdealer quotation
system) or other change in the capital structure of the Corporation (including,
but not limited to, any redemption of Preferred Stock) or other event such that
(a) any Person (other than the Initial Holder or a Look-Through Entity) would
Beneficially Own shares of Common Stock in excess of the Ownership Limit, or (b)
the Initial Holder would Beneficially Own shares of Common Stock in excess of
the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would
Beneficially Own shares of Common Stock in excess of the Look-Through Ownership
Limit (in any such event, the Person, Initial Holder or Look-Through Entity that
would Beneficially Own shares of Common Stock in excess of the Ownership Limit,
the Initial Holder Limit or the Look-Through Entity Limit is referred to as a
"PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 3.4.8 of
this Article IV, such shares of Common Stock in excess of the Ownership Limit,
the Initial Holder Limit or the Look-Through Ownership Limit, as the case may
be, (rounded up to the nearest whole share) shall be automatically transferred
to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of
one or more Charitable Beneficiaries. Such transfer to the Trustee shall be
deemed to be effective as of the close of business on the business day prior to
the date of the Excess Transfer, change in capital structure or another event
giving rise to a potential violation of the Ownership Limit, the Initial Holder
Limit or the Look-Through Entity Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with either the Corporation or
any Prohibited Transferee. The Trustee may be an individual or a bank or trust
company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Common Stock held
by the Trustee shall be issued and outstanding shares of capital stock of the
Corporation. Except to the event provided in Section 3.4.3(E), the Prohibited
Transferee shall have no rights in the Common Stock held by the Trustee, and the
Prohibited Transferee shall not benefit economically from ownership of any
shares held in trust by the Trustee, shall have no rights to dividends and shall
not possess any rights to vote or other rights attributable to the shares held
in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting
rights and rights to dividends with respect to shares of Common Stock held in
the Trust, which rights shall be exercised for the benefit of the Charitable
Beneficiary. Any dividend or distribution paid prior to the discovery by the
Corporation that the shares of Common Stock have been transferred to the Trustee
shall be repaid to the Corporation upon demand, and any dividend or distribution
declared but unpaid shall be rescinded as void AB INITIO with respect to such
shares of Common Stock. Any dividends or distributions so disgorged or rescinded
shall be paid over to the Trustee and held
<PAGE> 5
in trust for the Charitable Beneficiary. Any vote cast by a Prohibited
Transferee prior to the discovery by the Corporation that the shares of Common
Stock have been transferred to the Trustee will be rescinded as AB INITIO and
shall be recast in accordance with the desires of the Trustee acting for the
benefit of the Charitable Beneficiary. The owner of the shares at the time of
the Excess Transfer, change in capital structure or other event giving rise to a
potential violation of the Ownership Limit, Initial Holder Limit or Look-Through
Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the
Trustee to vote the shares of Common Stock for the benefit of the Charitable
Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may transfer
the shares held in the Trust to a person, designated by the Trustee, whose
ownership of the shares will not violate the Ownership Restrictions. If such a
transfer is made, the interest of the Charitable Beneficiary shall terminate and
proceeds of the sale shall be payable to the Prohibited Transferee and to the
Charitable Beneficiary as provided in this Section 3.4.3(E). The Prohibited
Transferee shall receive the lesser of (1) the price paid by the Prohibited
Transferee for the shares or, if the Prohibited Transferee did not give value
for the shares (through a gift, devise or other transaction), the Market Price
of the shares on the day of the event causing the shares to be held in the Trust
and (2) the price per share received by the Trustee from the sale or other
disposition of the shares held in the Trust. Any proceeds in excess of the
amount payable to the Prohibited Transferee shall be payable to the Charitable
Beneficiary. If any of the transfer restrictions set forth in this Section
3.4.3(E) or any application thereof is determined in a final judgment to be
void, invalid or unenforceable by any court having jurisdiction over the issue,
the Prohibited Transferee may be deemed, at the option of the Corporation, to
have acted as the agent of the Corporation in acquiring the Common Stock as to
which such restrictions would, by their terms, apply, and to hold such Common
Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Common Stock transferred to the Trustee shall be deemed to have been offered for
sale to the Corporation, or its designee, at a price per share equal to the
lesser of (i) the price per share in the transaction that resulted in such
transfer to the Trust (or, in the case of a devise or gift, the Market Price at
the time of such devise or gift) and (ii) the Market Price on the date the
Corporation, or its designee, accepts such offer. The Corporation shall have the
right to accept such offer for a period of 90 days after the later of (i) the
date of the Excess Transfer or other event resulting in a transfer to the Trust
and (ii) the date that the Board of Directors determines in good faith that an
Excess Transfer or other event occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the
Trustee, the Corporation shall designate one or more nonprofit organizations to
be the Charitable Beneficiary of the interest in the Trust relating to such
Prohibited Transferee if (i) the shares of Common Stock held in the Trust would
not violate the Ownership Restrictions in the hands of such Charitable
Beneficiary and (ii) each Charitable Beneficiary is an organization described in
Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
3.4.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to
acquire shares of Common Stock in violation of Section 3.4.1 of this Article IV,
or any Person that is a Prohibited Transferee such that stock is transferred to
the Trustee under Section 3.4.3 of this Article IV, shall immediately give
written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted Transfer or other
event on the Corporation's status as a REIT. Failure to give such notice shall
not limit the rights and remedies of the Board of Directors provided herein in
any way.
3.4.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the date of the
Initial Public Offering certain record and Beneficial Owners and transferees of
shares of Common Stock will be required to provide certain information as set
out below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than
5% (or such other percentage between 0.5% and 5%, as provided in the applicable
regulations adopted under the Code) of the number of Outstanding shares of
Common Stock shall, within 30 days after January 1 of each year, give written
notice to the Corporation stating the name and address of such record or
Beneficial Owner, the number of shares of Common Stock Beneficially Owned, and a
full description of how such shares are held. Each such record or Beneficial
Owner
<PAGE> 6
of Common Stock shall, upon demand by the Corporation, disclose to the
Corporation in writing such additional information with respect to the
Beneficial Ownership of the Common Stock as the Board of Directors, in its sole
discretion, deems appropriate or necessary to (i) comply with the provisions of
the Code regarding the qualification of the Corporation as a REIT under the Code
and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as applicable. Each shareholder of record,
including without limitation any Person that holds shares of Common Stock on
behalf of a Beneficial Owner, shall take all reasonable steps to obtain the
written notice described in this Section 3.4.5 from the Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is
a Beneficial Owner of shares of Common Stock and any Person (including the
shareholder of record) that is holding shares of Common Stock for a Beneficial
Owner, and any proposed transferee of shares, shall provide such information as
the Corporation, in its sole discretion, may request in order to determine the
Corporation's status as a REIT, to comply with the requirements of any taxing
authority or other governmental agency, to determine any such compliance or to
ensure compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit, and shall provide a statement or affidavit to the
Corporation setting forth the number of shares of Common Stock already
Beneficially Owned by such shareholder or proposed transferee and any related
persons specified, which statement or affidavit shall be in the form prescribed
by the Corporation for that purpose.
3.4.6 REMEDIES NOT LIMITED. Nothing contained in this Article IV shall limit
the authority of the Board of Directors to take such other action as it deems
necessary or advisable (subject to the provisions of Section 3.4.12 of this
Article IV) (i) to protect the Corporation and the interests of its shareholders
in the preservation of the Corporation's status as a REIT and (ii) to insure
compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit.
3.4.7 AMBIGUITY. In the case of an ambiguity in the application of any of
the provisions of Section 3.4 of this Article IV, or in the case of an ambiguity
in any definition contained in Section 4 of this Article IV, the Board of
Directors shall have the power to determine the application of the provisions of
this Article IV with respect to any situation based on its reasonable belief,
understanding or knowledge of the circumstances.
3.4.8 EXCEPTIONS. The following exceptions shall apply or may be established
with respect to the limitations of Section 3.4.1 of this Article IV.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt
of a ruling from the Internal Revenue Service or an opinion of tax counsel or
other evidence or undertaking acceptable to it, may waive the application, in
whole or in part, of the Ownership Limit to a Person subject to the Ownership
Limit, if such person is not an individual for purpose of Section 542(a) of the
Code and is a corporation, partnership, estate or trust; PROVIDED, HOWEVER, that
in no event may any such exception cause such Person's ownership, direct or
indirect (without taking into account such Person's ownership of interests in
any partnership of which the Corporation is a partner), to exceed 9.8% of the
number of Outstanding shares of Common Stock. In connection with any such
exemption, the Board of Directors may require such representations and
undertakings from such Person and may impose such other conditions as the Board
deems necessary, in its sole discretion, to determine the effect, if any, of the
proposed Transfer on the Corporation's status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of
this Article IV, the pledge by the Initial Holder of all or any portion of the
Common Stock directly owned at any time or from time to time shall not
constitute a violation of Section 3.4.1 of this Article IV and the pledgee shall
not be subject to the Ownership Limit with respect to the Common Stock so
pledged to it either as a result of the pledge or upon foreclosure.
(C) UNDERWRITERS. For a period of 270 days following the purchase of
Common Stock by an underwriter that (i) is a corporation or a partnership and
(ii) participates in an offering of the Common Stock, such underwriter shall not
be subject to the Ownership Limit with respect to the Common Stock purchased by
it as a part of or in connection with such offering and with respect to any
Common Stock purchased in connection with market making activities.
<PAGE> 7
(D) OWNERSHIP AND TRANSFERS BY THE CMO TRUSTEE. The Ownership Limit
shall not apply to the initial holding of Common Stock by the "CMO Trustee" (as
that term is defined in the "Glossary" to the Prospectus) for the benefit of "HF
Funding Trust" (as that term is defined in the "Glossary" to the Prospectus), to
any subsequent acquisition of Common Stock by the CMO Trustee in connection with
any conversion of Preferred Stock or to any transfer or assignment of all or any
part of the legal or beneficial interest in the Common Stock to the CMO Trustee,
"ESA" (as that term is defined in the "Glossary" to the Prospectus), any entity
controlled by ESA, or any direct or indirect creditor of HF Funding Trust
(including without limitation any reinsurer of any obligation of HF Funding
Trust) or any acquisition of Common Stock by any such person in connection with
any conversion of Preferred Stock.
3.4.9 LEGEND. Each certificate for Common Stock shall bear the following
legend: "The shares of Common Stock represented by this certificate are subject
to restrictions on transfer. No person may Beneficially Own shares of Common
Stock in excess of the Ownership Restrictions, as applicable, with certain
further restrictions and exceptions set forth in the Corporation's Amended and
Restated Certificate of Incorporation ("Certificate"). Any Person that attempts
to Beneficially Own shares of Common Stock in excess of the applicable
limitation must immediately notify the Corporation. All capitalized terms in
this legend have the meanings ascribed to such terms in the Corporation's
Certificate, 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
shareholder that so requests. If the restrictions on transfer are violated, the
shares of Common Stock represented hereby will be either (i) void in accordance
with the Certificate or (ii) automatically transferred to a Trustee of a Trust
for the benefit of one or more Charitable Beneficiaries."
3.4.10 SEVERABILITY. If any provision of this Article IV or any application
of any such provision is determined in a final and unappealable judgment to be
void, invalid or unenforceable by any Federal or state court having jurisdiction
over the issues, the validity and enforceability 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.
3.4.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article IV to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit in the event of a
change in law.
3.4.12 SETTLEMENT. Nothing in this Section 3.4 of this Article IV shall be
interpreted to preclude the settlement of any transaction entered into through
the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system.
SECTION 4. DEFINITIONS. The terms set forth below shall have the meanings
specified below when used in this Article IV or in Article V of these Articles
of Amendment and Restatement.(3)
4.1 BENEFICIAL OWNERSHIP. The term "BENEFICIAL OWNERSHIP" shall mean, with
respect to any Person, ownership of shares of Common Stock equal to the sum of
(i) the shares of Common Stock directly owned by such Person, (ii) the number of
shares of Common Stock indirectly owned by such Person (if such Person is an
"individual" as defined in Section 542(a)(2) of the Code) taking into account
the constructive ownership rules of Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Common Stock
that such Person is deemed to beneficially own pursuant to Rule 13d3 under the
Exchange Act or that is attributed to such Person pursuant to Section 318 of the
Code, as modified by Section 856(d)(5) of the Code, PROVIDED that when applying
this definition of Beneficial Ownership to the Initial Holder, clause (iii) of
this definition, and clause (b) of the definition of "Person" shall be
disregarded. The terms "BENEFICIAL OWNER,"
(3) See Article FOURTH
<PAGE> 8
"BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative
meanings.
4.2 CHARITABLE BENEFICIARY. The term "CHARITABLE BENEFICIARY" shall mean one
or more beneficiaries of the Trust as determined pursuant to Section 3.4.3 of
this Article IV, each of which shall be an organization described in Section
170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
4.3 CODE. The term "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time to time,
as the same may be amended, and any successor thereto, as interpreted by any
applicable regulations or other administrative pronouncements as in effect from
time to time.
4.4 COMMON STOCK. The term "COMMON STOCK" shall mean all shares now or
hereafter authorized of any class of Common Stock of the Corporation and any
other capital stock of the Corporation, however designated, authorized after the
Issue Date, that has the right (subject always to prior rights of any class of
Preferred Stock) to participate in the distribution of the assets and earnings
of the Corporation without limit as to per share amount.
4.5 EXCESS TRANSFER. The term "EXCESS TRANSFER" has the meaning set forth in
Section 3.4.3(A) of this Article IV.
4.6 EXCHANGE ACT. The term "EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended.
4.7 INITIAL HOLDER. The term "INITIAL HOLDER" shall mean Terry Considine.
4.8 INITIAL HOLDER LIMIT. The term "INITIAL HOLDER LIMIT" shall mean 15% of
the number of Outstanding shares of Common Stock applied, in the aggregate, to
the Initial Holder. From the date of the Initial Public Offering, the secretary
of the Corporation, or such other person as shall be designated by the Board of
Directors, shall upon request make available to the representative(s) of the
Initial Holder and the Board of Directors, a schedule that sets forth the
thencurrent Initial Holder Limit applicable to the Initial Holder.
4.9 INITIAL PUBLIC OFFERING. The term "INITIAL PUBLIC OFFERING" shall mean
the first underwritten public offering of Class A Common Stock registered under
the Securities Act of 1933, as amended, on a registration statement on Form S11
filed with the Securities and Exchange Commission.
4.10 LOOK-THROUGH ENTITY. The term "LOOK-THROUGH ENTITY" shall mean a Person
that is either (i) described in Section 401(a) of the Code as provided under
Section 856(h)(3) of the Code or (ii) registered under the Investment Company
Act of 1940.
4.11 LOOK-THROUGH OWNERSHIP LIMIT. The term "LOOK-THROUGH OWNERSHIP LIMIT"
shall mean 15% of the number of Outstanding shares of Common Stock.
4.12 MARKET PRICE. The term "MARKET PRICE" on any date shall mean the
Closing Price on the Trading Day immediately preceding such date. The term
"CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if the Common Stock is not listed or
admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common 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 overthecounter 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 the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Common
Stock selected by the Board of Directors of the Company. The term "TRADING DAY"
shall mean a day on which the principal national securities exchange on which
the Common Stock is listed or admitted to trading is open for the transaction of
business or, if the Common Stock is not listed or admitted to trading on any
national securities
<PAGE> 9
exchange, shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
4.13 NYSE. The term "NYSE" shall mean the New York Stock Exchange, Inc.
4.14 OUTSTANDING. The term "OUTSTANDING" shall mean issued and outstanding
shares of Common Stock of the Corporation, PROVIDED that for purposes of the
application of the Ownership Limit, the Look-Through Ownership Limit or the
Initial Holder Limit to any Person, the term "OUTSTANDING" shall be deemed to
include the number of shares of Common Stock that such Person alone, at that
time, could acquire pursuant to any options or convertible securities.
4.15 OWNERSHIP LIMIT. The term "OWNERSHIP LIMIT" shall mean, for any Person
other than the Initial Holder or a Look-Through Entity, 8.7% of the number of
the Outstanding shares of Common Stock of the Corporation.
4.16 OWNERSHIP RESTRICTIONS. The term "OWNERSHIP RESTRICTIONS" shall mean
collectively the Ownership Limit as applied to Persons other than the Initial
Holder or Look-Through Entities, the Initial Holder Limit as applied to the
Initial Holder and the Look-Through Ownership Limit as applied to Look-Through
Entities.
4.17 PERSON. The term "PERSON" shall mean (A) an individual, corporation,
partnership, estate, trust (including a trust qualifying under Section 401(a) or
501(c) of the Code), association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity, and (B) also
includes a group as that term is used for purposes of Section 13(d)(3) of the
Exchange Act.
4.18 PROHIBITED TRANSFEREE. The term "PROHIBITED TRANSFEREE" has the meaning
set forth in Section 3.4.3(A) of this Article IV.
4.19 REIT. The term "REIT" shall mean a "real estate investment trust" as
defined in Section 856 of the Code.
4.20 TRANSFER. The term "TRANSFER" shall mean any sale, transfer, gift,
assignment, devise or other disposition of a share of Common Stock (including
(i) the granting of an option or any series of such options or entering into any
agreement for the sale, transfer or other disposition of Common Stock or (ii)
the sale, transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Common Stock), whether voluntary or
involuntary, whether of record or Beneficial Ownership, and whether by operation
of law or otherwise (including, but not limited to, any transfer of an interest
in other entities that results in a change in the Beneficial Ownership of shares
of Common Stock). The term "TRANSFERS" and "TRANSFERRED" shall have correlative
meanings.
4.21 TRUST. The term "TRUST" shall mean the trust created pursuant to
Section 3.4.3 of this Article IV.
4.22 TRUSTEE. The term "TRUSTEE" shall mean the Person unaffiliated with
either the Corporation or the Prohibited Transferee that is appointed by the
Corporation to serve as trustee of the Trust.
4.23 PROSPECTUS. The term "PROSPECTUS" shall mean the prospectus that forms
a part of the registration statement filed with the Securities and Exchange
Commission in connection with the Initial Public Offering, in the form included
in the registration statement at the time the registration statement becomes
effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently
supplemented or amended for use in connection with the Initial Public Offering,
"PROSPECTUS" shall refer to such prospectus as so supplemented or amended.
<PAGE> 10
ARTICLE V
GENERAL REIT PROVISIONS
SECTION 1. TERMINATION OF REIT STATUS. The Board of Directors shall take no
action to terminate the Corporation's status as a REIT until such time as (i)
the Board of Directors adopts a resolution recommending that the Corporation
terminate its status as a REIT, (ii) the Board of Directors presents the
resolution at an annual or special meeting of the shareholders and (iii) such
resolution is approved by the vote of a majority of the shares entitled to be
cast on the resolution.
SECTION 2. EXCHANGE OR MARKET TRANSACTIONS. Nothing in Article IV or this
Article V shall preclude the settlement of any transaction entered into through
the facilities of the NYSE or other national securities exchange or an automated
interdealer quotation system. The fact that the settlement of any transaction is
permitted shall not negate the effect of any other provision of this Article V
or any provision of Article IV, and the transferee, including but not limited to
any Prohibited Transferee, in such a transaction shall remain subject to all the
provisions and limitations of Article IV and this Article V.
SECTION 3. SEVERABILITY. If any provision of Article IV or this Article V 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.
SECTION 4. WAIVER. The Corporation shall have authority at any time to waive
the requirement that the Corporation redeem shares of Preferred Stock if, in the
sole discretion of the Board of Directors, any such redemption would jeopardize
the status of the Corporation as a REIT for federal income tax purposes.
ARTICLE VI
BOARD OF DIRECTORS
SECTION 1. MANAGEMENT. The business and the affairs of the Corporation
shall managed under the direction of its Board of Directors.
SECTION 2. NUMBER. The number of directors that will constitute the
entire Board of Directors shall be fixed by, or in the manner provided in, the
Bylaws but shall in no event be less than three. Any increases or decreases in
the size of the board shall be apportioned equally among the classes of
directors to prevent stacking in any one class of directors. There are
currently six directors in office whose names are as follows: Terry Considine,
Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and
John D. Smith.(4)
SECTION 3. INTENTIONALLY DELETED.
SECTION 4. VACANCIES. Except as otherwise provided in these Articles of
Amendment and Restatement(5), newly created directorships resulting from any
increase in the number of directors may be filled by the majority vote of the
Board of Directors, and any vacancies on the Board of Directors resulting from
death, resignation, removal or other cause shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even if less than
a quorum of the Board of Directors, or, if applicable, by a sole remaining
director. Any director elected in accordance with the preceding sentence shall
hold office until the next annual meeting of the Corporation at which time a
successor shall be elected to fill the remaining term of the position filled by
such director.
SECTION 5. REMOVAL. Except as otherwise provided in these Articles of
Amendment and Restatement(6), any director may be removed from office only for
cause and only by the affirmative vote of twothirds of the aggregate number of
votes then entitled to be cast generally in the election of directors. For
purposes of this Section 5, "CAUSE"
(4) See Article THIRD.
(5) See Article FOURTH.
(6) See Article FOURTH.
<PAGE> 11
shall mean the willful and continuous failure of a director to substantially
perform the duties to the Corporation of such director (other than any such
failure resulting from temporary incapacity due to physical or mental illness)
or the willful engaging by a director in gross misconduct materially and
demonstrably injurious to the Corporation.
SECTION 6. BYLAWS. The Board of Directors shall have power to adopt, amend,
alter, change and repeal any Bylaws of the Corporation by vote of the majority
of the Board of Directors then in office. Any adoption, amendment, alteration,
change or repeal of any Bylaws by the shareholders of the Corporation shall
require the affirmative vote of a majority of the aggregate number of votes then
entitled to be cast generally in the election of directors. Notwithstanding
anything in this Section 6 to the contrary, no amendment, alteration, change or
repeal of any provision of the Bylaws relating to the removal of directors or
repeal of the Bylaws shall be effected without the vote of twothirds of the
aggregate number of votes entitled be cast generally in the election of
Directors.
SECTION 7. POWERS. The enumeration and definition of particular powers of
the Board of Directors included elsewhere in these Articles of Amendment and
Restatement(7) shall in no way be limited or restricted by reference to or
inference from the terms of any other clause of this or any other Article of
these Articles of Amendment and Restatement(8), or construed as excluding or
limiting, or deemed by inference or otherwise in any manner to exclude or limit,
the powers conferred upon the Board of Directors under the Maryland General
Corporation Law ("MGCL") as now or hereafter in force.
ARTICLE VII
LIMITATION OF LIABILITY
No director or officer of the Corporation shall be liable to the Corporation
or its shareholders for money damages to the maximum extent that Maryland law in
effect from time to time permits limitation of the liability of directors and
officers. Neither the amendment nor repeal of this Article VII, nor the adoption
or amendment or any other provision of the charter or Bylaws of the Corporation
inconsistent with this Article VII, shall apply to or affect in any respect the
applicability of the preceding sentence with respect to any act or failure to
act that occurred prior to such amendment, repeal or adoption.
(7) See Article FOURTH.
(8) See Article FOURTH.
<PAGE> 12
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by Maryland
law, as applicable from time to time, all persons who at any time were or are
directors or officers of the Corporation for any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) relating to any action alleged to have been taken or omitted in
such capacity as a director or an officer. The Corporation shall pay or
reimburse all reasonable expenses incurred by a present or former director or
officer of the Corporation in connection with any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) in which the present or former director or officer is a party, in
advance of the final disposition of the proceeding, to the fullest extent
permitted by, and in accordance with the applicable requirements of, Maryland
law, as applicable from time to time. The Corporation may indemnify any other
persons permitted but not required to be indemnified by Maryland law, as
applicable from time to time, if and to extent indemnification is authorized and
determined to be appropriate, in each case in accordance with applicable law, by
the Board of Directors, the majority of the shareholders of the Corporation
entitled to vote thereon or special legal counsel appointed by the Board of
Directors. No amendment of these Articles of Amendment and Restatement(9) of the
Corporation or repeal of any of its provisions shall limit or eliminate any of
the benefits provided to directors and officers under this Article VIII in
respect of any act or omission that occurred prior to such amendment or repeal.
ARTICLE IX
WRITTEN CONSENT OF SHAREHOLDERS
Any corporate action upon which a vote of shareholders is required or
permitted may be taken without a meeting or vote of shareholders with the
unanimous written consent of shareholders entitled to vote thereon.
ARTICLE X
AMENDMENT
The Corporation reserves the right to amend, alter or repeal any provision
contained in this charter upon (i) adoption by the Board of Directors of a
resolution recommending such amendment, alteration, or repeal, (ii) presentation
by the Board of Directors to the shareholders of a resolution at an annual or
special meeting of the shareholders and (iii) approval of such resolution by the
affirmative vote of the holders of a majority (or, as applicable, a twothirds
vote) of the aggregate number of votes entitled to be case generally in the
election of directors. All rights conferred upon shareholders herein are subject
to this reservation.
ARTICLE XI
EXISTENCE
The Corporation is to have a perpetual existence.
ARTICLE XII
CLASS B COMMON STOCK
GENERAL. The holders of the Class B Common Stock shall have the same rights
and privileges as, and shall be subject to the same restrictions and limitations
contained in the Charter as apply to, the holders of the Class A Common Stock,
except as set forth below.
SECTION 1. DEFINITIONS. Capitalized terms used in these Articles
Supplementary(10) shall have the meanings ascribed to them in the Charter or
elsewhere in these Articles Supplementary, except that the terms set forth below
shall have the meanings specified below when used in this Article.
(9) See Article FOURTH.
(10) See Article FOURTH.
<PAGE> 13
"ADJUSTED FUNDS FROM OPERATIONS" shall have the same meaning as the
term "Adjusted Funds from Operations" used in the Prospectus and shall be
calculated in the manner specified in the Prospectus and based on generally
accepted accounting principles. Adjusted Funds from Operations shall be
determined from the Corporation's financial statements audited and certified by
an independent public accountant.
"ADJUSTED FUNDS FROM OPERATIONS PER SHARE" when used with respect to
any period shall mean the Adjusted Funds from Operations for such period DIVIDED
by the sum of (a) the number of shares of the Class A Common Stock outstanding
on the last day of such period (excluding any shares of the Class A Common Stock
into which shares of the Class B Common Stock shall have been converted as a
result of the conversion of shares of the Class B Common Stock on the last day
of such period) and (b) the number of shares of the Class A Common Stock
issuable to acquire units of limited partnership that (i) may be tendered for
redemption in any limited partnership in which the Corporation serves as general
partner and (ii) are outstanding on the last day of such period.
"AVERAGE MARKET PRICE" for a period shall mean the average of the
Closing Prices for a share of the Class A Common Stock for the Trading Days in
such period.
"CAUSE" shall mean the termination of employment of an individual with
an Employer as a result of (a) the performance by such individual of any
activity involving fraud or dishonesty, (b) the conviction of the individual of
a felony or a crime involving moral turpitude, (c) the failure or refusal of
such individual to reasonably or satisfactorily perform any material duties or
responsibilities reasonably required of such individual by an Employer, (d) the
gross negligence or willful neglect or malfeasance by the individual in the
performance or nonperformance of such individual's duties or responsibilities to
the Employer, or (e) any unauthorized act or omission by such individual that is
injurious in any material respect to the financial condition or business
reputation of any Employer.
"CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(a) An acquisition (other than directly from the Corporation) of any
voting securities of the Corporation (the "VOTING SECURITIES") by any "person"
(as the term "person" is used for purposes of Section 13(d) or Section 14(d) of
the Securities Exchange Act of 1934, as amended (the "1934 ACT")) immediately
after which such person has "beneficial ownership" (within the meaning of Rule
13d3 promulgated under the 1934 Act) ("BENEFICIAL OWNERSHIP") of 20% or more of
the combined voting power of the Corporation's then outstanding Voting
Securities; PROVIDED, HOWEVER, in determining whether a Change in Control has
occurred. Voting Securities that are acquired in a NonControl Acquisition (as
hereinafter defined) shall not constitute an acquisition that would cause a
Change in Control. "NONCONTROL ACQUISITION" shall mean an acquisition by (1) an
employee benefit plan (or a trust forming a part thereof) maintained by (a) the
Corporation or (b) any corporation, partnership or other Person of which a
majority of its voting power or its equity securities or equity interest is
owned directly or indirectly by the Corporation or in which the Corporation
serves as a general partner or manager (a "SUBSIDIARY"), (2) the Corporation or
any Subsidiary, or (3) any Person in connection with a NonControl Transaction
(as hereinafter defined);
(b) The individuals who are named in the Prospectus as constituting the
Board of Directors of the Corporation following the Initial Public Offering (the
"INCUMBENT BOARD") cease for any reason to constitute at least twothirds
(2/3rds) of the Board of Directors; PROVIDED, HOWEVER, that if the election, or
nomination for election by the Corporation's stockholders, of any new director
was approved by a vote of at least twothirds (2/3rds) of the Incumbent Board,
such new director shall be considered as a member of the Incumbent Board;
PROVIDED, FURTHER, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened "election contest" (as described in Rule 14a11
promulgated under the 1934 Act) (an "ELECTION CONTEST") or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors (a "PROXY CONTEST") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(c) Approval by stockholders of the Corporation of:
(1) A merger, consolidation, share exchange or reorganization
involving the Corporation, unless
<PAGE> 14
(A) the stockholders of the Corporation, immediately before such
merger, consolidation, share exchange or reorganization, own, directly or
indirectly immediately following such merger, consolidation, share exchange or
reorganization, at least 80% of the combined voting power of the outstanding
voting securities of the corporation that is the successor in such merger,
consolidation, share exchange or reorganization (the "SURVIVING CORPORATION") in
substantiality the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation, share exchange or reorganization,
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation, share exchange or reorganization constitute at least twothirds
(2/3rds) of the members of the board of directors of the Surviving Corporation,
and
(C) no Person (other than the corporation or any subsidiary, any
employee benefit plan (or any trust forming a part thereof) maintained by the
Corporation, the Surviving Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation, share exchange or
reorganization had Beneficial Ownership of 15% or more of the then outstanding
Voting Securities) has Beneficial Ownership of 15% or more of the combined
voting power of the Surviving Corporation's then outstanding voting securities
(a transaction described in clauses (i) through (iii) is referred to herein as a
"NONCONTROL TRANSACTION");
(2) A complete liquidation or dissolution of the Corporation,
or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (a "SUBJECT PERSON") acquired Beneficial Ownership of
more than the permitted amount of the outstanding Voting Securities as a result
of the acquisition of Voting Securities by the Corporation that, by reducing the
number of Voting Securities outstanding, increases the proportional number of
shares Beneficially Owned by such Subject Person, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Corporation, and after such share
acquisition by the Corporation, such subject Person becomes the Beneficial Owner
of any additional Voting Securities that increases the percentage of the then
outstanding Voting Securities Beneficially Owned by such Subject Person, then a
Change in Control shall occur.
"CLOSING PRICE" on any date shall mean the last sale price, regular
way, or, in case that no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NYSE or, if shares of the Class A Common
Stock are not listed or admitted to trading on the NYSE, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which shares of the
Class A Common Stock are listed or admitted to trading or, if shares of the
Class A Common Stock are 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 overthecounter 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 shares of the Class A Common Stock are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in shares of the
Class A Common Stock selected by the Board of Directors of the Corporation.
"CONVERTIBLE CLASS B SHARES" shall mean Eligible Class B Shares that
shall have become subject to automatic conversion into shares of the Class A
Common Stock, subject to Article IV, Section 3.4 of the Charter, pursuant to
Sections 3 and 4 of this Article.
"DISABILITY" shall mean the mental or physical illness or disability of
an individual that substantially impairs the ability of the individual to
perform substantially all of his duties as an employee of an Employer in a
satisfactory manner for a period in excess of ninety (90) days in any
consecutive 12month period.
"ELIGIBLE CLASS B SHARES" shall mean the following percentages
(subject to modification as provided
<PAGE> 15
in Section 3(c) of this Article) of the Outstanding Class B Shares as of the
Year-End Testing Dates indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
CLASS B SHARES
YEAR-END TESTING DATE
-----------------------------------------------------------
<S> <C>
December 31, 1994 10.0000%
December 31, 1995 22.2222%
December 31, 1996 28.5714%
December 31, 1997 50.0000%
December 31, 1998 100.0000%
</TABLE>
"EMPLOYER" shall mean (a) the Corporation, (b) any partnership in which
the Corporation serves as a general partner, (c) any corporation directly or
indirectly controlled by or under common control with the Corporation, (d) any
partnership or company in which any of the foregoing may own, directly or
indirectly, an equity interest or (e) any limited liability company in which any
of the foregoing may be a member.
"INITIAL HOLDER" shall refer to each person holding Outstanding Class B
Shares on the date of the closing of the Initial Public Offering, whether such
Outstanding Class B Shares result from designation of outstanding common stock
or from new issuance by the Corporation.
"OP UNITS" shall mean units of limited partnership interest in the
Operating Partnership.
"OPERATING PARTNERSHIP" shall mean AIMCO Properties, L.P., a Delaware
limited partnership in which the Corporation holds a general partnership
interest.
"OUTSTANDING CLASS B SHARES" shall mean issued and outstanding shares
of the Class B Common Stock of the Corporation, excluding any Convertible Class
B Shares that have been converted into shares of the Class A Common Stock.
"PROSPECTUS" shall mean the prospectus that forms a part of the
registration statement filed with the Securities and Exchange Commission in
connection with the Initial Public Offering, in the form included in the
registration statement at the time the registration statement becomes effective;
PROVIDED, HOWEVER, that, if such prospectus is subsequently supplemented or
amended for use in connection with the Initial Public Offering, "PROSPECTUS"
shall refer to such prospectus as so supplemented or amended.
"TRADING DAY" shall mean a day on which the principal national
securities exchange on which shares of the Class A Common Stock are listed or
admitted to trading is open for the transaction of business or, if shares of the
Class A Common Stock are not listed or admitted to trading on any national
securities exchange, "TRADING DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"YEAREND TESTING DATE" shall mean each of December 31, 1994, December
31, 1995, December 31, 1996, December 31, 1997 and December 31, 1998; PROVIDED,
HOWEVER, that December 31, 1999 shall be substituted in place of December 31,
1998 each place such earlier date appears in this Article if, as of December 31,
1998, either the Annual Growth Target requirement or the Compounded Cumulative
Growth Target requirement set forth in Section 3(a) of this Article in respect
of the YearEnd Testing Date of December 31, 1998 is not satisfied as of December
31, 1998.
SECTION 2. RESTRICTIONS ON DIVIDENDS AND VOTING RIGHTS.
(a) NO DIVIDENDS. No dividends shall accrue or be paid on any
shares of the Class B Common Stock.
(b) No Voting Rights; Exception for Convertible Class B Shares. Holders
of shares of the Class B Common Stock shall not have the right to vote on any
matter, including, but not limited to, the election of
<PAGE> 16
directors, the merger of the Corporation, the sale or other disposition of the
Corporation's assets, or the dissolution or liquidation of the Corporation;
PROVIDED, HOWEVER, that holders of Convertible Class B Shares shall have the
right to one (1) vote per share on all matters for which holders of shares of
the Class A Common Stock shall have the right to vote.
SECTION 3. CONVERTIBILITY OF OUTSTANDING CLASS B SHARES.
(a) IN GENERAL. The Eligible Class B Shares as of a Year-End Testing
Date shall automatically become Convertible Class B Shares according to the
Adjusted Funds from Operations Per Share and the Average Market Values of a
share of the Class A Common Stock for the periods indicated, provided that (i)
the "Annual Growth Target" requirement set forth below in this Section 3(a) is
satisfied, (ii) the "Compounded Cumulative Growth Target" requirement set forth
below in this Section 3(a) is satisfied AND (iii) the "MARKET VALUE" requirement
set forth in Section 3(b) of this Article is satisfied; PROVIDED, HOWEVER, that,
if in any calendar year an applicable Annual Growth Target requirement is not
satisfied, the Eligible Class B Shares becoming Convertible Class B Shares in
the following calendar year or years shall include, as a carryforward from year
to year, the Eligible Class B Shares otherwise applicable to the first year
provided that in the later year (which need not immediately follow the first
year) the Annual Growth Target requirement, the Cumulative Compounded Growth
Target requirement and the Market Value requirement for such later year are all
satisfied:
<TABLE>
<CAPTION>
YEAR-END TESTING COMPOUNDED CUMULATIVE
DATE. ANNUAL GROWTH TARGET GROWTH TARGET
- - -------------------------------------------------------------------------------
<S> <C> <C>
December 31, 1994 Adjusted Funds from Adjusted Funds from
Operations Per Share for the Operations Per Share for
period beginning on the the period beginning on the
Initial Public Offering and Initial Public Offering and
ending on the YearEnd ending on the YearEnd
Testing Date is at least Testing Date is at least
$0.864 $0.864
December 31, 1995 ANNUALIZED Adjusted Funds ANNUALIZED Adjusted Funds
from Operations Per Share from Operations Per Share
for the period beginning on for the period beginning on
the Initial Public Offering the Initial Public Offering
and ending on the YearEnd and ending on the YearEnd
Testing Date is at least Testing Date is at least
$2.161 $2.161
December 31, 1996 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
YearEnd Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the YearEnd
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.345
ending on the previous
YearEnd Testing Date
December 31, 1997 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
YearEnd Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the YearEnd
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.544
ending on the previous
YearEnd Testing Date
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C>
December 31, 1998 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
YearEnd Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the YearEnd
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.760
ending on the previous
YearEnd Testing Date
</TABLE>
(b) MARKET VALUE REQUIREMENT. The Market Value requirement shall be
satisfied as to any Year-End Testing Date if the Average Market Value of a share
of the Class A Common Stock shall equal or exceed the amount set forth in the
following table for any 90 calendar day period (whether or not a calendar
quarter or an exact three month period) beginning on any day (whether or not a
Trading Day) on or after October 1 immediately preceding the applicable YearEnd
Testing Date:
<TABLE>
<CAPTION>
YEAR-END TESTING DATE AVERAGE MARKET PRICE
-----------------------------------------------
<S> <C> <C>
December 31, 1994 $19.030
December 31, 1995 $20.648
December 31, 1996 $22.403
December 31, 1997 $24.307
December 31, 1998 $26.373
</TABLE>
By way of illustration, the Market Value requirement for the Year-End Testing
Date of December 31, 1996 would be satisfied if the Average Market Value of a
share of the Class A Common Stock equaled or exceeded $22.403 for (i) the 90day
period beginning on October 1, 1986 and ending on December 30, 1996, (ii) the
90day period beginning on April 17, 1997 and ending on July 16, 1997 OR (iii)
the 90day period beginning on November 20, 1997 and ending on February 18, 1998.
(c) MODIFICATIONS TO ELIGIBILITY AND CONVERTIBILITY SCHEDULES.
Notwithstanding the provisions of Section 3(a) of this Article, in or as to any
calendar year the Corporation's Board of Directors shall have the authority,
upon consideration of factors and financial performance criteria that it shall
in its sole and absolute discretion consider relevant, to declare a greater or
lesser percentage of (i) Outstanding Class B Shares as of a YearEnd Testing Date
to be Eligible Class B Shares and (ii) Eligible Class B Shares to be Convertible
Class B Shares; PROVIDED, HOWEVER, that no such declaration shall decrease the
number of Eligible Class B Shares or Convertible Class B Shares held by any
person without such person's consent.
SECTION 4. CONDITIONAL CONVERSION OF CLASS B COMMON STOCK.
(a) CONVERSION OF CONVERTIBLE CLASS B SHARES. Subject to Section 4(c)
of this Article and to the limitations set forth in Article IV, Section 3.4 of
the Charter, upon becoming a Convertible Class B Share, each Convertible Class B
Share shall be converted automatically into the number of shares of the Class A
Common Stock that results from dividing $18.50 by the Conversion Price in effect
at the time of conversion (the "CONVERSION PRICE"). Subject to the limitations
set forth in Article IV, Section 3.4 of the Charter, such conversion shall occur
and be effective as of the applicable YearEnd Testing Date or, if later, the
satisfaction of the Market Price requirement set forth in Section 3(b) of this
Article. The initial Conversion Price shall be $18.50 per share and shall be
subject to adjustment as provided in Section 7 of this Article.
(b) CONVERSION UPON OCCURRENCE OF OTHER EVENTS. Notwithstanding the
foregoing provisions of this Section 4, but nevertheless subject to the
limitations set forth in Article IV, Section 3.4 of the Charter:
(1) all Outstanding Class B Shares (whether or not Eligible Class
B Shares) that have not previously converted into shares of the Class A Common
Stock shall convert automatically upon any Change in Control of the Corporation.
<PAGE> 18
(2) all Outstanding Class B Shares (whether or not Eligible Class
B Shares) held by an Initial Holder and any transferee of such Initial Holder
shall convert automatically into shares of the Class A Common Stock on the date
on which employment of such Initial Holder by an Employer is terminated by the
Employer (and not voluntarily by such Initial Holder) for any reason other than
Cause if following termination such Initial Holder is no longer employed as an
employee by any Employer, and
(3) the Board of Directors of the Corporation may, by resolution
duly adopted by the Board of Directors (and, if there shall be a duly
constituted compensation committee of the Board of Directors at the time, only
with the approval of the compensation committee), accelerate the conversion of
Outstanding Class B Shares (whether or not Eligible Class B Shares) into shares
of the Class A Common Stock at such time and in such amount as it may determine
to be appropriate from time to time.
The conversion of any Outstanding Class B Share pursuant to this Section 4(b)
shall be into the number of shares of the Class A Common Stock that results from
dividing $18.50 by the Conversion Price then in effect.
(c) IDENTIFICATION OF CLASS B COMMON STOCK CONVERTED. Whenever shares
of the Class B Common Stock are converted into shares of the Class A Common
Stock pursuant to Section 4(a), Section 4(b)(1) or Section 4(b)(3) of this
Article, the shares converted shall be allocated among all the record holders of
such shares of the Class B Common Stock in proportion to their record ownership.
(d) DELAYED CONVERSION. If the conversion of any shares of Class B
Common Stock into shares of the Class A Common Stock shall be limited or
restricted by reason of the provisions of Article IV, Section 3.4 of the
Charter, such shares shall automatically be so converted at such later time, if
any, and to such extent as such limitations and restrictions do not apply.
(e) NO FRACTIONAL SHARES. No fractional shares of the Class A Common
Stock shall be issued upon conversion of any shares of the Class B Common Stock.
Rather, the Corporation shall pay to the record holder cash for such fractional
shares at a rate equal to the Conversion Price per share.
SECTION 5. MANDATORY REPURCHASE OR STOCKHOLDER PURCHASE OF OUTSTANDING
CLASS B SHARES.
(a) REPURCHASE FOLLOWING THE FIFTH YEAREND TESTING DATE. Subject to the
limitations set forth in Article IV, Section 3.4 of the Charter, each
Outstanding Class B Share (whether or not an Eligible Class B Share) that has
not converted into shares of the Class A Common Stock in respect of the YearEnd
Testing Date of December 31, 1998 shall be subject to mandatory repurchase by
the Corporation at a price of $.10 per Outstanding Class B Share. Such mandatory
repurchase shall close upon the determination, no earlier than March 31, 2000,
that such Outstanding Class B Share is not convertible into shares of the Class
A Common Stock pursuant to Section 3 of this Article.
(b) INITIAL HOLDER PURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT.
Subject to the limitations set forth in Article IV, Section 3.4 of the Charter,
each Outstanding Class B Share (whether or not an Eligible Class B Share), other
than a Convertible Class B Share, held by the Initial Holder of such Outstanding
Class B Share, or by any holder who acquired such Outstanding Class B Share
directly or indirectly from such Initial Holder, that has neither converted nor
become convertible into shares of the Class A Common Stock or prior to either
(i) the date of termination of employment of such Initial Holder by an Employer
for Cause or (ii) the date of such Initial Holder's voluntary termination of
employment with an Employer shall be subject to mandatory purchase, at the time
of such termination of employment, by the other Initial Holders that are at that
time employed by an Employer. The purchase price shall be $.10 per Outstanding
Class B Share. The purchase of such Outstanding Class B Shares shall be made, by
the Initial Holders that are at that time employed by an Employer, proportionate
to the following percentages:
<TABLE>
<CAPTION>
INITIAL HOLDER PERCENTAGE
---------------------------------------
<S> <C> <C>
Terry Considine 68.33%
Peter K. Kompaniez 13.50%
Steven D. Ira 13.67%
Robert P. Lacy 4.50%
</TABLE>
<PAGE> 19
(c) REPURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT FOLLOWING
CONVERSION. Subject to the limitations set forth in Article IV, Section 3.4 of
the Charter, each share of the Class A Common Stock, whether held by an Initial
Holder of any other person who acquired such share of the Class A Common Stock
directly or indirectly from an Initial Holder, into which an Outstanding Class B
Share was originally converted pursuant to Section 4 of this Article shall be
subject to mandatory repurchase by the Corporation, at a price of $.10 per share
of the Class A Common Stock, upon such Initial Holder's termination of
employment with an Employer, other than (i) by reason of death, disability or a
Change in Control or (ii) the involuntary termination of employment of such
Initial Holder by an Employer without Cause, within 12 months following such
conversion of an Outstanding Class B Share into such share of the Class A Common
Stock; PROVIDED, HOWEVER, that nothing in this Section 5(c) shall be interpreted
or applied to preclude the settlement of any transaction entered into through
the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system.
(d) DELAYED REPURCHASE OR PURCHASE. If either the limitations or
restrictions of Article IV, Section 3.4 of the Charter shall apply to (i) a
mandatory repurchase under Section 5(a) or Section 5(c) of this Article or (ii)
a mandatory purchase by the Initial Holders under Section 5(b) of this Article,
or if the Corporation cannot then lawfully effect a repurchase of its shares,
then the repurchase or purchase, as the case may be, shall be deferred until,
and then only to the extent that, such repurchase or purchase can be lawfully
effected within such limitations and restrictions.
(e) PROCEDURES UPON REPURCHASE OR PURCHASE. Any repurchase of
Outstanding Class B Shares as provided by Section 5(a) or Section 5(c) of this
Article shall be effected by delivery by the Corporation to the record holder of
such Outstanding Class B Shares of a certified or cashier's check in the amount
of the aggregate repurchase price. Upon such payment by the Corporation in
repurchase of Outstanding Class B Shares, the certificates evidencing such
repurchased Outstanding Class B Shares shall be canceled. Any purchase of
Outstanding Class B Shares as provided by Section 5(b) of this Article shall be
effected by delivery of the Initial Holders then employed by an Employer to the
record holder of such Outstanding Class B Shares of a certified or cashier's
check in the amount of the aggregate purchase price.
(f) CHANGE IN CONTROL. The provisions of Sections 5(a), 5(b) and 5(c)
of this Article shall not apply following any Change in Control.
SECTION 6. REDUCTION IN AUTHORIZED SHARES. The number of authorized shares
of the Class B Common Stock shall be reduced automatically by (a) the number of
shares of the Class B Common Stock converted into shares of the Class A Common
Stock pursuant to Section 4 of this Article and (b) the number of shares of the
Class B Common Stock repurchased by the Corporation pursuant to Section 5(a) or
Section 5(c) of this Article.
SECTION 7. ADJUSTMENTS. The Conversion Price and the number of shares of the
Class A Common Stock issuable upon the conversion of each share of the Class B
Common Stock shall be subject to adjustment from time to time as provided in
this Section 7.
(a) ADJUSTMENT UPON CERTAIN EVENTS. In case that the Corporation shall
at any time after the date of the Initial Public Offering (i) pay a dividend in
shares of the Class A Common Stock or make a distribution in shares of the Class
A Common Stock, (ii) subdivide the outstanding shares of the Class A Common
Stock, (iii) combine the outstanding Class A Common Stock into a smaller number
of shares of the Class A Common Stock, or (iv) issue any shares of its capital
stock or other securities by reclassification of the Class A Common Stock, the
Conversion Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that each holder of shares
of the Class B Common Stock converted after such time shall be entitled to
receive the aggregate number and kind of the Class A Common Stock or other
securities of the Corporation that, if such shares of the Class B Common Stock
had been converted immediately prior to such time, he would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, combination or reclassification. Such adjustment
shall
<PAGE> 20
be made successively whenever any event listed above shall occur.
(b) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. If after the Initial
Public Offering the Corporation issues any rights, options or warrants to all
holders of its Class A Common Stock entitling them for a period expiring within
60 days after the record date mentioned below to purchase shares of the Class A
Common Stock (or securities convertible into or exchangeable for shares of the
Class A Common Stock) at a price per share less than the current market price
per share on that record date, the Conversion Price shall be adjusted in
accordance with the formula:
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock outstanding
on the record date.
N equals the number of additional shares of the Class A Common Stock
offered or initially issuable upon conversion or exchange of the
convertible or exchangeable securities offered.
P equals the offering price or conversion price or exchange per share
of the additional shares.
M equals the current market price per share of the Class A Common
Stock on the record date.
The adjustment shall be made successively whenever any such rights, options or
warrants are issued and shall become effective immediately after the record date
for the determination of stockholders entitled to receive the rights, options or
warrants. If all of the shares of the Class A Common Stock or securities
convertible into or exchangeable for shares of the Class A Common Stock subject
to such rights, options or warrants have not been issued when such rights,
options or warrants expire, then the Conversion Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares of the Class A Common Stock actually issued upon the exercise
of such rights, options or warrants or initially issuable based upon the number
of convertible securities or exchangeable securities actually issued upon the
exercise of such rights or warrants.
(c) DISTRIBUTION OF ASSETS AND DEBT SECURITIES. If after the Initial
Public Offering the Corporation distributes to all holders of its Class A Common
Stock any of its assets or debt securities or any rights or warrants to purchase
debt securities, assets or other securities of the Corporation (including shares
of the Class A Common Stock), the Conversion Price shall be adjusted in
accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current
Conversion Price.
M equals the current market price per share of the Class A Common
Stock on the record date mentioned below.
F equals the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of the Class
A Common Stock. The Board of Directors shall determine, in good
faith, such fair market value, which determination shall be
conclusive.
This Section 7(c) does not apply to any rights, options or warrants referred to
in Section 7(b) of this Article.
This Section 7(c) does not apply to cash dividends or cash distributions paid in
respect of the Class A Common Stock for any period if the cash dividends or cash
distributions paid in respect of the Class A Common Stock and OP Units for that
period, when added to the amount of all other cash dividends or cash
distributions paid in respect to the Class A Common Stock and OP Units for the
twelve (12) month period ending on the last day of such period, does not exceed
100% of Cash Available for Distribution for such twelve (12) month period. "CASH
AVAILABLE FOR DISTRIBUTION" shall mean "Funds from Operations" (as that term is
defined in the "Glossary" of the Prospectus but computed at the Operating
Partnership level) minus (i) the amount of any dividend on Preferred Stock
accrued during such twelve (12) month period, whether or not declared or paid,
and (ii) an annual reserve for capital replacements of $300 per apartment unit
for the weighted average number of apartment units owned by the Corporation
during such twelve (12) month period. By way of example, Cash Available for
Distribution for the twelve (12) month
<PAGE> 21
period ending June 15, 1995 as set forth in the Prospectus is projected on a PRO
FORMA basis to be $18,476,000.
(d) ISSUANCE OF DISCOUNTED SHARES. If after the Initial Public Offering
the Corporation issues shares of the Class A Common Stock for a consideration
per share less than the current market price per share, on the date that the
Corporation fixes the offering price of such additional shares, the Conversion
Price shall be adjusted in accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock outstanding
immediately prior to the issuance of such additional shares.
P equals the aggregate consideration received for the issuance of
such additional shares.
M equals the current market price per share of the Class A Common
Stock on the date of issuance of such additional shares.
S equals the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance.
This Section 7(d) does not apply to (i) any of the transactions described in
Section 7(b) or Section 7(c) of this Article, (ii) the conversion or exchange of
shares of the Class B Common Stock or other securities convertible into or
exchangeable for shares of the Class A Common Stock, (iii) shares of the Class A
Common Stock issued by the Corporation upon, and as consideration for, the
purchase of OP Units, (iv) shares of the Class A Common Stock issued to the
Corporation's employees (other than upon the exercise of options of the type
referred to in clause (v) below) under BONA FIDE employee benefit plans adopted
by the Board of Directors, if such Class A Common Stock would otherwise be
covered by this Section 7(d), (v) the Class A Common Stock issued upon the
exercise of options granted to employees at an exercise price equal to at least
85% of the fair market value of such Class A Common Stock at the time that such
options were granted, (vi) the Class A Common Stock issued to stockholders of
any person that merges into the Corporation, or with a subsidiary of the
Corporation, in proportion to their stock holdings in such Person immediately
prior to such merger, upon such merger, (vii) the Class A Common Stock issued in
a BONA FIDE public offering pursuant to a firm commitment or best efforts
underwriting, or (viii) the Class A Common Stock issued in a BONA FIDE private
placement through a placement agent that is a member firm of the National
Association of Securities Dealers, Inc. (except to the extent that any discount
from the current market price attributable to restrictions on transferability of
the Class A Common Stock, as determined in good faith by the Board of Directors,
shall exceed 10% of the then current market price).
(e) ISSUANCE OF CONVERTIBLE DISCOUNTED SECURITIES. If after the Initial
Public Offering the Corporation issues any securities convertible into or
exchangeable for shares of the Class A Common Stock (other than securities
issued in transactions described in Section 7(b) or Section 7(c)) of this
Article for a consideration per share of the Class A Common Stock initially
deliverable upon conversion or exchange of such securities less than the current
market price per share of the Class A Common Stock on the date of issuance of
such securities, the Conversion Price shall be adjusted in accordance with the
formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock outstanding
immediately prior to the issuance of such securities.
P equals the aggregate consideration received for the issuance of
such securities.
M equals the current market price per share of the Class A Common
Stock on the date of issuance of such securities.
<PAGE> 22
D equals the maximum number of shares deliverable upon conversion or
in exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. If all of the Class
A Common Stock deliverable upon conversion or exchange of such securities have
not been issued when such securities are no longer outstanding, then the
Conversion Price shall promptly be readjusted to the conversion price that would
then be in effect had the adjustment upon the issuance of such securities been
made on the basis of the actual number of shares of the Class A Common Stock
issued upon conversion or exchange of such securities.
This Section 7(e) does not apply to (i) convertible securities issued to
stockholders of any Person that merges into the Corporation, or with a
subsidiary of the Corporation, in proportion to their stock holdings in such
Person immediately prior to such merger, upon such merger, (ii) convertible
securities issued in a BONA FIDE public offering pursuant to a firm commitment
or best efforts underwriting, or (iii) convertible securities issued in a BONA
FIDE private placement through a placement agent that is a member firm of the
National Association of Securities Dealers, Inc. (except to the extent that any
discount from the current market price attributable to restrictions on
transferability of the Class A Common Stock issuable upon conversion, as
determined in good faith by the Board of Directors and described in a Board
resolution, shall exceed 20% of the then current market price).
(f) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at
any time or from time to time there is a capital reorganization of the
Corporation (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section 7
or Section 4 of this Article) or a merger or consolidation of the Corporation
with or into another corporation, or the sale of all or substantially all of the
Corporation's properties and assets to any other person then, each share of the
Class B Common Stock then outstanding shall thereafter be convertible into, in
lieu of the Class A Common Stock issuable upon such conversion prior to
consummation of such reorganization, merger, consolidation or sale, the kind and
amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such reorganization, merger,
consolidation or sale by a holder of that number of shares of Class A Common
Stock into which one share of the Class B Common Stock was convertible
immediately prior to such reorganization, merger, consolidation or sale
(including, on a PRO RATA basis, the cash, securities or property received by
holders of Class A Common Stock in any tender or exchange offer that is a step
in such transaction). In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 7 and Section 4 of this
Article with respect to the rights of the holders of the shares of the Class B
Common Stock after the reorganization, merger, consolidation or sale to the end
that the provisions of this Section 7 (including adjustment of the Conversion
Price then in effect and the number of shares issuable upon conversion of the
shares of the Class B Common Stock) shall be applicable after that event and be
as nearly equivalent as may be practicable.
(g) COMPUTATION OF CONSIDERATION. For purposes of any computation
respecting consideration received pursuant to Sections 7(d) and 7(e) of this
Article, the following shall apply:
(1) In the case of the issuance of shares of the Class A Common
Stock for cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Corporation for any underwriting of the issue or
otherwise in connection therewith;
(2) In the case of the issuance of shares of the Class A Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall be conclusive, and
described in a Board resolution; and
(3) In the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Corporation for the issuance of
such securities plus the additional minimum consideration if any, to be received
by the Corporation upon the conversion of exchange thereof (the consideration in
each case to be determined in the same manner
<PAGE> 23
provided in Sections 7(g)(1) and 7(g)(2) of this Article.
(h) COMPUTATION OF CURRENT MARKET PRICE. For the purpose of any
computation pursuant to Sections 7(b), 7(c), 7(d) and 7(e) of this Article, the
current market price per share of the Class A Common Stock on any date shall be
deemed to be the average of the Closing Prices for 15 consecutive Trading Days
commencing 30 Trading Days before that date. However, if the Class A Common
Stock is not publicly listed or publicly traded, current market price shall mean
the fair market value per share of Class A Common Stock, as determined in good
faith by the Board of Directors, based on the opinion of an independent
investment banking firm.
(i) EXCEPTIONS. No adjustment in the Conversion Price need be made:
(1) unless the adjustment would require an increase or decrease of
at least 1% in the Conversion Price. Any adjustments that are not made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 7 shall be made to the nearest cent or to the
nearest one hundredth (1/100th) of a share, as the case may be. The Conversion
Price shall not be adjusted upward except in the event of a combination of the
outstanding shares of the Class A Common Stock into a smaller number of shares
of Common Stock or in the event of a readjustment of the Conversion Price
pursuant to Section 7(b) or Section 7(e) of this Article;
(2) for a transaction referred to in Section 7(a), Section 7(b),
Section 7(c), Section 7(d) or Section 7(e) of this Article if holders of the
Class B Common Stock are to participate in the transaction on a basis and with
notice that the Board of Directors determines to be fair and appropriate in
light of the basis and notice on which holders of the Class A Common Stock
participate in the transaction;
(3) for rights to purchase shares of the Class A Common Stock
pursuant to a plan for reinvestment of dividends or interest;
(4) for a change in the part value or no par value of the Class A
Common Stock; or
(5) to the extent that the Class B Common Stock becomes
convertible into cash, as to such cash. Interest will not accrue on any such
cash.
(j) NOTICE. Whenever the Conversion Price is adjusted or reduced, the
Corporation shall promptly mail, at least 12 days prior to the record date of
the distribution triggering the adjustment or reduction, to holders of the Class
B Common Stock and file with the transfer agent therefor a notice of the
adjustment or reduction and, in the case of an adjustment, file with the
transfer agent for the Class B Common Stock an officer's certificate briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is correct.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of the Class A Common Stock, solely for the purpose of effecting the
conversion of the shares of the Class B Common Stock, such number of its shares
of the Class A Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Class B Common Stock; and if at
any time the number of authorized but unissued shares of the Class A Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Class B Common Stock, the Corporation will take such corporate and
other action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of the Class A Common Stock to such number of
shares as shall be sufficient for such purpose.
(l) DISCRETIONARY ADJUSTMENTS. The Board of Directors may (but shall
not be required to) make such adjustments in the Conversion Price, in addition
to those required by this Section 7, as shall be determined by the Board of
Directors, as evidenced by a Board resolution, to be advisable in order that any
event that would otherwise be treated for federal income tax purposes as a
dividend of stock or stock rights will, to the extent practicable, not be so
treated or not be taxable to all the recipients.
<PAGE> 24
(m) AMBIGUITY. The Board of Directors may interpret the provisions of
this Section 7 to resolve any inconsistency or ambiguity that may arise or be
revealed in connection with the adjustment procedures provided herein, and if
such inconsistency or ambiguity reflects an inaccurate provision hereof, the
Board of Directors may, in appropriate circumstances, authorize the filing of
additional articles supplementary or a certificate of designation.
SECTION 8. RESTRICTION ON ADDITIONAL ISSUANCES. Upon the filing of these
Articles of Amendment, there shall be authorized 750,000 shares and issued and
outstanding 650,000 shares of the Class B Common Stock.(11) No additional shares
of the Class B Common Stock shall be issued without the affirmative consent or
vote of a majority of the Corporation's Board of Directors other than employees
of an Employer.
ARTICLE XIII
CLASS B PREFERRED STOCK
The terms of the Class B Cumulative Convertible Preferred Stock (including
the preferences, conversions or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, or terms or
conditions of redemption) as set by the Board of Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class B Cumulative
Convertible Preferred Stock (the "Class B Preferred Stock") and Seven Hundred
Fifty Thousand (750,000) shall be the authorized number of shares of such
Class B Preferred Stock constituting such class.
2. DEFINITIONS.
For purposes of the Class B Preferred Stock, the following terms shall have
the meanings indicated:
"ACT" shall mean the Securities Act of 1933, as amended.
"affiliate" of a Person means a Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the Person specified.
"AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock, the
sum of the products of (i) the number of shares of each class of Equity
Stock within such block multiplied by (ii) the corresponding Market Price of
one share of Equity Stock of such class.
"BASE COMMON STOCK DIVIDEND" shall have the meaning set forth in paragraph
(a) of Section 9 of this Article.
"BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of
shares of Equity Stock equal to the sum of (i) the number of shares of
Equity Stock directly owned by such Person, (ii) the number of shares of
Equity Stock indirectly owned by such Person (if such Person is an
"individual" as defined in Section 542(a)(2) of the Code) taking into
account the constructive ownership rules of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares
of Equity Stock that such Person is deemed to beneficially own pursuant to
Rule 13d3 under the Exchange Act or that is attributed to such Person
pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the
Code, PROVIDED that when applying this definition of Beneficial Ownership to
the Initial Holder, clause (iii) of this definition, and clause (ii) of the
definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER,"
"BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative
meanings.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation or
any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Class B Preferred Stock.
(11) See Article FIFTH.
<PAGE> 25
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New
York are not required to be open.
"CALL DATE" shall have the meaning set forth in paragraph (b) of Section 5
of this Article.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 11.3 of this Article, each of which shall
be an organization described in Section 170(b)(1)(A), 170(c)(2) and
501(c)(3) of the Code.
"CLASS B PREFERRED STOCK" shall have the meaning set forth in Section 1 of
this Article.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto. Reference to any provision
of the Code shall mean such provision as in effect from time to time, as the
same may be amended, and any successor thereto, as interpreted by any
applicable regulations or other administrative pronouncements as in effect
from time to time.
"COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation or such shares of the Corporation's capital stock
into which outstanding shares of Common Stock shall be reclassified.
"CONVERSION PRICE" shall mean the conversion price per share of Common Stock
for which each share of Class B Preferred Stock is convertible, as such
Conversion Price may be adjusted pursuant to paragraph (d) of Section 7 of
this Article. The initial Conversion Price shall be $30.45
(equivalent to an initial conversion rate of 3.28407 shares of Common Stock
for each share of Class B Preferred Stock).
"CURRENT MARKET PRICE" of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the Corporation
or of any similar security of any other issuer for any day shall mean the
closing price, regular way on such day, or, if no sale takes place on such
day, the average of the reported closing bid and asked prices regular way on
such day, in either case as reported on the principal national securities
exchange on which such securities are listed or admitted for trading, or, if
such security is not quoted on any national securities exchange, on the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or, if such security is not quoted on
the NASDAQ National Market, the average of the closing bid and asked prices
on such day in the overthecounter market as reported by NASDAQ or, if bid
and asked prices for such security on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any New York Stock Exchange or National Association of
Securities Dealers, Inc. member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer or the
Board of Directors or if any class or series of securities are not publicly
traded, the fair value of the shares of such class as determined reasonably
and in good faith by the Board of Directors of the Corporation.
"DISTRIBUTION" shall have the meaning set forth in paragraph (d)(iii) of
Section 7 of this Article.
"DIVIDEND PAYMENT DATE" shall mean, with respect to each Dividend Period,
(a) the date that cash dividends are paid on the Common Stock with respect
to such Dividend Period; or (b) if such dividends have not been paid on the
Common Stock by 9:00 a.m., New York City time, on the sixtieth day from and
including the last day of such Dividend Period, then on such day; provided,
further, that if any Dividend Payment Date falls on any day other than a
Business Day, the dividend payment payable on such Dividend Payment Date
shall be paid on the Business Day immediately following such Dividend
Payment Date.
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January 1,
April 1, July 1 and October 1 of each year and ending on and including the
day preceding the first day of the next succeeding Dividend Period, other
than the Dividend Period during which any Class B Preferred Stock shall be
redeemed pursuant to Section 5 hereof, which shall end on and include the
Call Date with respect to the Class B Preferred Stock being redeemed.
<PAGE> 26
"EQUITY STOCK" shall mean one or more shares of any class of capital stock
of the Corporation.
"EXCESS TRANSFER" has the meaning set forth in Section 11.3(A) of this
Article.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the average of the daily Current Market
Prices of a share of Common Stock during five (5) consecutive Trading Days
selected by the Corporation commencing not more than twenty (20) Trading
Days before, and ending not later than, the earlier of the day in question
and the day before the "ex" date with respect to the issuance or
distribution requiring such computation. The term "'ex' date," when used
with respect to any issuance or distribution, means the first day on which
the share of Common Stock trades regular way, without the right to receive
such issuance or distribution, on the exchange or in the market, as the case
may be, used to determine that day's Current Market Price.
"ISSUE DATE" shall mean August 4, 1997.
"INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including
the Issue Date and ending on and including September 30, 1997.
"INITIAL HOLDER" shall mean Terry Considine.
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class B Preferred Stock of the Corporation having an Aggregate Value not in
excess of the excess of (x) 15% of the Aggregate Value of all Outstanding
shares of Equity Stock over (y) the Aggregate Value of all shares of Equity
Stock other than Class B Preferred Stock that are Beneficially Owned by the
Initial Holder. From the Issue Date, the secretary of the Corporation, or
such other person as shall be designated by the Board of Directors, shall
upon request make available to the representative(s) of the Initial Holder
and the Board of Directors, a schedule that sets forth the thencurrent
Initial Holder Limit applicable to the Initial Holder.
"JUNIOR STOCK" shall have the meaning set forth in paragraph (c) of Section
8 of this Article.
"LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in
Section 401(a) of the Code as provided under Section 856(h)(3) of the
Code or (ii) registered under the Investment Company Act of 1940.
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class B Preferred Stock of the
Corporation having an Aggregate Value not in excess of the excess of (x) 15%
of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by
the Aggregate Value of all shares of Equity Stock other than Class B
Preferred Stock that are Beneficially Owned by the Look-Through Entity.
"MARKET PRICE" on any date shall mean, with respect to any share of Equity
Stock, the Closing Price of a share of that class of Equity Stock on the
Trading Day immediately preceding such date. The term "CLOSING PRICE" on any
date shall mean the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted
to trading on the NYSE or, if the Equity Stock is not listed or admitted to
trading on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Equity Stock is listed or admitted to
trading or, if the Equity 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 overthecounter
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
the Equity Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Equity Stock selected by the Board of Directors of
the Company.
<PAGE> 27
"NYSE" shall mean the New York Stock Exchange, Inc.
"OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of
the Corporation, PROVIDED that for purposes of the application of the
Ownership Limit, the Look-Through Ownership Limit or the Initial Holder
Limit to any Person, the term "OUTSTANDING" shall be deemed to include the
number of shares of Equity Stock that such Person alone, at that time, could
acquire pursuant to any options or convertible securities.
"OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder
or a Look-Through Entity, a number of the Outstanding shares of Class B
Preferred Stock of the Corporation having an Aggregate Value not in excess
of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares
of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock
other than Class B Preferred Stock that are Beneficially Owned by the
Person.
"OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as
applied to Persons other than the Initial Holder or Look-Through Entities,
the Initial Holder Limit as applied to the Initial Holder and the
Look-Through Ownership Limit as applied to Look-Through Entities.
"PARITY STOCK" shall have the meaning set forth in paragraph (b) of Section
8 of this Article.
"PERSON" shall mean (a) for purposes of Section 11 of this Article, (i) an
individual, corporation, partnership, estate, trust (including a trust
qualifying under Section 401(a) or 501(c) of the Code), association, private
foundation within the meaning of Section 509(a) of the Code, joint stock
company or other entity, and (ii) also includes a group as that term is used
for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of
the remaining Sections of this Article, any individual, firm, partnership,
corporation or other entity and shall include any successor (by merger or
otherwise) of such entity.
"PROHIBITED TRANSFEREE" has the meaning set forth in Section 11.3(A) of
this Article.
"REIT" shall mean a "real estate investment trust" as defined in Section 856
of the Code.
"SENIOR STOCK" shall have the meaning set forth in paragraph (a) of Section
8 of this Article.
"SET APART FOR PAYMENT" shall be deemed to include, without any action other
than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to
a declaration of dividends or other distribution by the Board of Directors,
the allocation of funds to be so paid on any series or class of capital
stock of the Corporation; provided, however, that if any funds for any class
or series of Junior Stock or any class or series of Parity Stock are placed
in a separate account of the Corporation or delivered to a disbursing,
paying or other similar agent, then "set apart for payment" with respect to
the Class B Preferred Stock shall mean placing such funds in a separate
account or delivering such funds to a disbursing, paying or other similar
agent.
"TRADING DAY", as to any securities, shall mean any day on which such
securities are traded on the principal national securities exchange on which
such securities are listed or admitted or, if such securities are not listed
or admitted for trading on any national securities exchange, the NASDAQ
National Market or, if such securities are not listed or admitted for
trading on the NASDAQ National Market, any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"TRANSACTION" shall have the meaning set forth in paragraph (e) of Section 7
of this Article.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of a share of Class B Preferred Stock (including (i) the
granting of an option or any series of such options or entering into any
agreement for the sale, transfer or other disposition of Class B Preferred
Stock or (ii) the sale, transfer,
<PAGE> 28
assignment or other disposition of any securities or rights convertible into
or exchangeable for Class B Preferred Stock), whether voluntary or
involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any transfer
of an interest in other entities that results in a change in the Beneficial
Ownership of shares of Class B Preferred Stock). The term "TRANSFERS" and
"TRANSFERRED" shall have correlative meanings.
"TRANSFER AGENT" means such transfer agent as may be designated by the Board
of Directors or their designee as the transfer agent for the Class B
Preferred Stock; provided, that if the Corporation has not designated a
transfer agent then the Corporation shall act as the transfer agent for the
Class B Preferred Stock.
"TRUST" shall mean the trust created pursuant to Section 11.3 of this
Article.
"TRUSTEE" shall mean the Person unaffiliated with either the Corporation or
the Prohibited Transferee that is appointed by the Corporation to serve as
trustee of the Trust.
"VOTING PREFERRED STOCK" shall have the meaning set forth in Section 9 of
this Article.
3. DIVIDENDS.
(a) The holders of Class B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Class B Preferred Stock equal to the greater of (i) the base
dividend of $1.78125 per quarter (the "Base Rate") or (ii) the cash dividends
declared on the number of shares of Common Stock, or portion thereof, into which
a share of Class B Preferred Stock is convertible. The dividends payable with
respect to the Initial Dividend Period shall be determined solely by reference
to the Base Rate. The amount referred to in clause (ii) of this paragraph (a)
with respect to each succeeding Dividend Period shall be determined as of the
applicable Dividend Payment Date by multiplying the number of shares of Common
Stock, or portion thereof calculated to the fourth decimal point, into which a
share of Class B Preferred Stock would be convertible at the opening of business
on such Dividend Payment Date (based on the Conversion Price then in effect) by
the aggregate cash dividends payable or paid for such Dividend Period in respect
of a share of Common Stock outstanding as of the record date for the payment of
dividends on the Common Stock with respect to such Dividend Period. If (A) the
Corporation pays a cash dividend on the Common Stock after the Dividend Payment
Date for the corresponding Dividend Period and (B) the dividend on the Class B
Preferred Stock for such Dividend Period calculated pursuant to clause (ii) of
this paragraph (a), taking into account the Common Stock dividend referenced in
clause (A), exceeds the dividend previously declared on the Class B Preferred
Stock for such Dividend Period, the Corporation shall pay an additional dividend
to the holders of the Class B Preferred Stock on the date that the Common Stock
dividend referenced in clause (A) is paid, in an amount equal to the difference
between the dividend calculated pursuant to clause (B) and the dividends
previously declared on the Class B Preferred Stock with respect to such Dividend
Period. Such dividends shall be cumulative from the Issue Date, whether or not
in any Dividend Period or Periods such dividends shall be declared or there
shall be funds of the Corporation legally available for the payment of such
dividends, and shall be payable quarterly in arrears on the Dividend Payment
Dates, commencing on the first Dividend Payment Date after the Issue Date. Each
such dividend shall be payable in arrears to the holders of record of the Class
B Preferred Stock, as they appear on the stock records of the Corporation at the
close of business on a record date fixed by the Board of Directors which shall
be not more than 60 days prior to the applicable Dividend Payment Date and,
within such 60 day period, shall be the same date as the record date for the
regular quarterly dividend payable with respect to the Common Stock for the
Dividend Period to which such Dividend Payment Date relates (or, if there is no
such record date for Common Stock, then such date as the Board of Directors may
fix). Accumulated, accrued and unpaid dividends for any past Dividend Periods
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to holders of record on such date, which date shall not precede by
more than 45 days the payment date thereof, as may be fixed by the Board of
Directors.
Upon a final administrative determination by the Internal Revenue
Service that the Corporation does not qualify as a real estate investment trust
in accordance with Section 856 of the Code, the Base Rate set forth in (a)(i)
will be increased to $3.03125 until such time as the Corporation regains its
status as a real estate investment
<PAGE> 29
trust; provided, however, that if the Corporation contests its loss of real
estate investment trust status in Federal Court, following its receipt of an
opinion of nationally recognized tax counsel to the effect that there is a
reasonable basis to contest such loss of status, the Base Rate shall not be
increased during the pendency of such judicial proceeding; provided further,
however, that upon a final judicial determination in Federal Tax Court, Federal
District Court or the Federal Claims Court that the Corporation does not qualify
as a real estate investment trust, the Base Rate will be increased as stated
above from the date of such judicial determination.
(b) The amount of dividends payable per share of Class B Preferred
Stock for the Initial Dividend Period, or any other period shorter than a full
Dividend Period, shall be computed ratably on the basis of twelve 30day months
and a 360day year. Holders of Class B Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of
cumulative dividends, as herein provided, on the Class B Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Class B Preferred Stock that may be in
arrears.
(c) So long as any of the shares of Class B Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the Corporation
and no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any class or series of
Parity Stock for any period unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for such payment on the Class B Preferred
Stock for all Dividend Periods terminating on or prior to the Dividend Payment
Date with respect to such class or series of Parity Stock. When dividends are
not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon the Class B Preferred Stock and all
dividends declared upon any other class or series of Parity Stock shall be
declared ratably in proportion to the respective amounts of dividends
accumulated, accrued and unpaid on the Class B Preferred Stock and accumulated,
accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class B Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of or options, warrants or rights to subscribe for or purchase shares of Junior
Stock) shall be declared or paid or set apart for payment by the Corporation and
no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any shares of Junior
Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Common Stock
made for purposes of an employee incentive or benefit plan of the Corporation or
any subsidiary) for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such stock)
directly or indirectly by the Corporation (except by conversion into or exchange
for Junior Stock), nor shall any other cash or other property otherwise be paid
or distributed to or for the benefit of any holder of shares of Junior Stock in
respect thereof, directly or indirectly, by the Corporation unless in each case
(i) the full cumulative dividends (including all accumulated, accrued and unpaid
dividends) on all outstanding shares of Class B Preferred Stock and any other
Parity Stock of the Corporation shall have been paid or such dividends have been
declared and set apart for payment for all past Dividend Periods with respect to
the Class B Preferred Stock and all past dividend periods with respect to such
Parity Stock and (ii) sufficient funds shall have been paid or set apart for the
payment of the full dividend for the current Dividend Period with respect to the
Class B Preferred Stock and the current dividend period with respect to such
Parity Stock.
<PAGE> 30
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the Corporation (whether capital or surplus) shall be made to or
set apart for the holders of Junior Stock, the holders of shares of Class B
Preferred Stock shall be entitled to receive One Hundred Dollars ($100) per
share of Class B Preferred Stock (the "Liquidation Preference"), plus an amount
equal to all dividends (whether or not earned or declared) accumulated, accrued
and unpaid thereon to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment. Until the holders of the
Class B Preferred Stock have been paid the Liquidation Preference in full, plus
an amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final distribution to
such holders, no payment will be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of Class B
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of any class or series of
Parity Stock, then such assets, or the proceeds thereof, shall be distributed
among the holders of Class B Preferred Stock and any such other Parity Stock
ratably in the same proportion as the respective amounts that would be payable
on such Class B Preferred Stock and any such other Parity Stock if all amounts
payable thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with one or more corporations, (ii) a
sale or transfer of all or substantially all of the Corporation's assets, or
(iii) a statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntar, of the Corporation.
(b) Upon any liquidation, dissolution or winding up of the Corporation,
after payment shall have been made in full to the holders of Class B Preferred
Stock and any Parity Stock, as provided in this Section 4, any other series or
class or classes of Junior Stock shall, subject to the respective terms thereof,
be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of the Class B Preferred Stock and any Parity Stock shall not be
entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class B Preferred Stock shall not be redeemable by the
Corporation prior to August 4, 2002. On and after August 4, 2002, the
Corporation, at its option, may redeem shares of Class B Preferred Stock, in
whole or from time to time in part, at a redemption price payable in cash equal
to 100% of the Liquidation Preference thereof, plus all accrued and unpaid
dividends to the Call Date.
(b) Shares of Class B Preferred Stock shall be redeemed by the
Corporation on the date specified in the notice to holders required under
paragraph (d) of this Section 5 (the "Call Date"). The Call Date shall be
selected by the Corporation, shall be specified in the notice of redemption and
shall be not less than 30 days nor more than 60 days after the date notice of
redemption is sent by the Corporation.
(c) If full cumulative dividends on all outstanding shares of Class B
Preferred Stock and any other class or series of Parity Stock of the Corporation
have not been paid or declared and set apart for payment, no shares of Class B
Preferred Stock may be redeemed unless all outstanding shares of Class B
Preferred Stock are simultaneously redeemed and neither the Corporation nor any
affiliate of the Corporation may purchase or acquire shares of Class B Preferred
Stock, otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of shares of Class B Preferred Stock.
(d) If the Corporation shall redeem shares of Class B Preferred Stock
pursuant to paragraph (a) of this Section 5, notice of such redemption shall be
given to each holder of record of the shares to be redeemed. Such notice shall
be provided by first class mail, postage prepaid, at such holder's address as
the same appears on the stock records of the Corporation.
Neither the failure to mail any notice required by this paragraph (d), nor any
defect therein or in the mailing thereof to any particular holder, shall affect
the sufficiency of the notice or the validity of the proceedings for redemption
with respect to the other holders. Any notice which was mailed in the manner
herein provided shall be conclusively presumed to have been duly given on the
date mailed whether or not the holder receives the notice. Each such notice
shall state, as appropriate: (1) the Call Date; (2) the number of
<PAGE> 31
shares of Class B Preferred Stock to be redeemed and, if fewer than all such
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the place or places at which certificates for
such shares are to be surrendered for cash; and (4) the thencurrent Conversion
Price. Notice having been mailed as aforesaid, from and after the Call Date
(unless the Corporation shall fail to make available the amount of cash
necessary to effect such redemption), (i) except as otherwise provided herein,
dividends on the shares of Class B Preferred Stock so called for redemption
shall cease to accumulate or accrue on the shares of Class B Preferred Stock
called for redemption (except that, in the case of a Call Date after a dividend
record date and prior to the related Dividend Payment Date, holders of Class B
Preferred Stock on the dividend record date will be entitled on such Dividend
Payment Date to receive the dividend payable on such shares), (ii) said shares
shall no longer be deemed to be outstanding, and (iii) all rights of the holders
thereof as holders of Class B Preferred Stock of the Corporation shall cease
(except the rights to receive the cash payable upon such redemption, without
interest thereon, upon surrender and endorsement of their certificates if so
required and to receive any dividends payable thereon). The Corporation's
obligation to make available the redemption price in accordance with the
preceding sentence shall be deemed fulfilled if, on or before the Call Date, the
Corporation shall deposit with a bank or trust company (which may be an
affiliate of the Corporation) that has, or is an affiliate of a bank or trust
company that has, a capital and surplus of at least $50,000,000, such amount of
cash as is necessary for such redemption, in trust, with irrevocable
instructions that such cash be applied to the redemption of the shares of Class
B Preferred Stock so called for redemption. No interest shall accrue for the
benefit of the holders of shares of Class B Preferred Stock to be redeemed on
any cash so set aside by the Corporation. Subject to applicable escheat laws,
any such cash unclaimed at the end of two years from the Call Date shall revert
to the general funds of the Corporation, after which reversion the holders of
shares of Class B Preferred Stock so called for redemption shall look only to
the general funds of the Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class B Preferred Stock to be
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which such shares have been
redeemed in accordance with such notice. If fewer than all the outstanding
shares of Class B Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class B
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class B Preferred Stock held of record by each holder of
such shares, pro rata (as nearly as may be) or by any other method as may be
determined by the Board of Directors in its discretion to be equitable. If fewer
than all the shares of Class B Preferred Stock represented by any certificate
are redeemed, then a new certificate representing the unredeemed shares shall be
issued without cost to the holders thereof.
6. STATUS OF REACQUIRED STOCK.
All shares of Class B Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation (including shares of Class B
Preferred Stock which have been surrendered for conversion into Common Stock)
shall be returned to the status of authorized, but unissued shares of Class B
Preferred Stock.
7. CONVERSION.
At any time on or after August 4, 1998. Holders of shares of Class B
Preferred Stock shall have the right to convert all or a portion of such shares
into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this Section
7, a holder of shares of Class B Preferred Stock shall have the right, at such
holder's option, at any time on or after August 4, 1998 to convert such shares,
in whole or in part, into the number of fully paid and nonassessable shares of
authorized but previously unissued shares of Common Stock per each share of
Class B Preferred Stock obtained by dividing the Liquidation Preference
(excluding any accumulated, accrued and unpaid dividends) per share of Class B
Preferred Stock by the Conversion Price (as in effect at the time and on the
date provided for in the last subparagraph of paragraph (b) of this Section 7)
and by surrendering such shares to be converted, such surrender to be made in
the manner provided in paragraph (b) of this Section 7; provided, however, that
the right to convert shares of Class B Preferred Stock called for redemption
pursuant to Section 5 shall terminate at the close of business on the Call Date
fixed for such redemption, unless the Corporation shall default in making
payment of cash payable upon such redemption under Section 5 of this Article.
<PAGE> 32
(b) In order to exercise the conversion right, the holder of each share
of Class B Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent, accompanied by written notice to the
Corporation that the holder thereof elects to convert such share of Class B
Preferred Stock. Unless the shares issuable on conversion are to be issued in
the same name as the name in which such share of Class B Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid).
Holders of shares of Class B Preferred Stock at the close of business on a
dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date and prior to such
Dividend Payment Date. Except as provided above, the Corporation shall make no
payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares or for dividends on the shares of Common Stock issued upon such
conversion.
As promptly as practicable after the surrender of certificates for shares of
Class B Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or send on such holder's written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares of Class B Preferred Stock in
accordance with provisions of this Section 7, and any fractional interest in
respect of a share of Common Stock arising upon such conversion shall be settled
as provided in paragraph (c) of this Section 7.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Class
B Preferred Stock shall have been surrendered and such notice received by the
Corporation as aforesaid, and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby at such time on such date and such conversion
shall be at the Conversion Price in effect at such time on such date unless the
stock transfer books of the Corporation shall be closed on that date, in which
event such Person or Persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such shares shall have been
surrendered and such notice received by the Corporation. If the dividend payment
record date for the Class B Preferred Stock and Common Stock do not coincide,
and the preceding sentence does not operate to ensure that a holder of shares of
Class B Preferred Stock whose shares are converted into Common Stock does not
receive dividends on both the shares of Class B Preferred Stock and the Common
Stock into which such shares are converted for the same Dividend Period, then
notwithstanding anything herein to the contrary, it is the intent, and the
Transfer Agent is authorized to ensure that no conversion after the earlier of
such record dates will be accepted until after the latter of such record dates.
(c) No fractional share of Common Stock or scrip representing fractions
of a share of Common Stock shall be issued upon conversion of the shares of
Class B Preferred Stock. Instead of any fractional interest in a share of Common
Stock that would otherwise be deliverable upon the conversion of shares of Class
B Preferred Stock, the Corporation shall pay to the holder of such share an
amount in cash based upon the Current Market Price of the Common Stock on the
Trading Day immediately preceding the date of conversion.
If more than one share shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Class B Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Corporation shall after the Issue Date (A) pay a
dividend or make a distribution on its capital stock in shares of Common Stock,
(B) subdivide its outstanding Common Stock into a greater number
<PAGE> 33
of shares, (C) combine its outstanding Common Stock into a smaller number of
shares or (D) issue any shares of capital stock by reclassification of its
outstanding Common Stock, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or distribution or at the opening
of business on the day following the day on which such subdivision, combination
or reclassification becomes effective, as the case may be, shall be adjusted so
that the holder of any share of Class B Preferred Stock thereafter surrendered
for conversion shall be entitled to receive the number of shares of Common Stock
(or fraction of a share of Common Stock) that such holder would have owned or
have been entitled to receive after the happening of any of the events described
above had such share of Class B Preferred Stock been converted immediately prior
to the record date in the case of a dividend or distribution or the effective
date in the case of a subdivision, combination or reclassification. An
adjustment made pursuant to this paragraph (d)(i) of this Section 7 shall become
effective immediately after the opening of business on the day next following
the record date (except as provided in paragraph (h) below) in the case of a
dividend or distribution and shall become effective immediately after the
opening of business on the day next following the effective date in the case of
a subdivision, combination or reclassification.
(ii) If the Corporation shall issue after the Issue Date rights,
options or warrants to all holders of Common Stock entitling them (for a period
expiring within 45 days after the record date described below in this paragraph
(d)(ii) of this Section 7) to subscribe for or purchase Common Stock at a price
per share less than the Fair Market Value per share of the Common Stock on the
record date for the determination of stockholders entitled to receive such
rights, options or warrants, then the Conversion Price in effect at the opening
of business on the day next following such record date shall be adjusted to
equal the price determined by multiplying (A) the Conversion Price in effect
immediately prior to the opening of business on the day following the date fixed
for such determination by (B) a fraction, the numerator of which shall be the
sum of (X) the number of shares of Common Stock outstanding on the close of
business on the date fixed for such determination and (Y) the number of shares
that could be purchased at such Fair Market Value from the aggregate proceeds to
the Corporation from the exercise of such rights, options or warrants for Common
Stock, and the denominator of which shall be the sum of (XX) the number of
shares of Common Stock outstanding on the close of business on the date fixed
for such determination and (YY) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights, options or
warrants. Such adjustment shall become effective immediately after the opening
of business on the day next following such record date (except as provided in
paragraph (h) below). In determining whether any rights, options or warrants
entitle the holders of Common Stock to subscribe for or purchase Common Stock at
less than such Fair Market Value, there shall be taken into account any
consideration received by the Corporation upon issuance and upon exercise of
such rights, options or warrants, the value of such consideration, if other than
cash, to be determined in good faith by the Board of Directors.
(iii) If the Corporation shall after the Issue Date make a
distribution on its Common Stock other than in cash or shares of Common Stock
(including any distribution in securities (other than rights, options or
warrants referred to in paragraph (d)(ii) of this Section 7)) (each of the
foregoing being referred to herein as a "distribution"), then the Conversion
Price in effect at the opening of business on the next day following the record
date for determination of stockholders entitled to receive such distribution
shall be adjusted to equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the opening of business on the
day following the record date by (B) a fraction, the numerator of which shall be
the difference between (X) the number of shares of Common Stock outstanding on
the close of business on the record date and (Y) the number of shares determined
by dividing (aa) the aggregate value of the property being distributed by (bb)
the Fair Market Value per share of Common Stock on the record date, and the
denominator of which shall be the number of shares of Common Stock outstanding
on the close of business on the record date. Such adjustment shall become
effective immediately after the opening of business on the day next following
such record date (except as provided below). The value of the property being
distributed shall be as determined in good faith by the Board of Directors;
provided, however, if the property being distributed is a publicly traded
security, its value shall be calculated in accordance with the procedure for
calculating the Fair Market Value of a share of Common Stock (calculated for a
period of five consecutive Trading Days commencing on the twentieth Trading Day
after the distribution). Neither the issuance by the Corporation of rights,
options or warrants to subscribe for or purchase securities of the Corporation
nor the exercise thereof shall be deemed a distribution under this paragraph.
(iv) If after the Issue Date the Corporation shall acquire,
pursuant to an issuer or self tender
<PAGE> 34
offer, all or any portion of the outstanding Common Stock and such tender offer
involves the payment of consideration per share of Common Stock having a fair
market value (as determined in good faith by the Board of Directors), at the
last time (the "Expiration Time") tenders may be made pursuant to such offer,
that exceeds the Current Market Price per share of Common Stock on the Trading
Day next succeeding the Expiration Time, then the Conversion Price in effect on
the opening of business on the day next succeeding the Expiration Time shall be
adjusted to equal the price determined by multiplying (A) the Conversion Price
in effect immediately prior to the Expiration Time by (B) a fraction, the
numerator of which shall be (X) the number of shares of Common Stock outstanding
(including the shares acquired in the tender offer (the "Acquired Shares"))
immediately prior to the Expiration Time, multiplied by (Y) the Current Market
Price per share of Common Stock on the Trading Day next succeeding the
Expiration Time, and the denominator of which shall be the sum of (XX) the fair
market value (determined as aforesaid) of the aggregate consideration paid to
acquire the Acquired Shares and (YY) the product of (I) the number of shares of
Common Stock outstanding (less any Acquired Shares) at the Expiration Time,
multiplied by (II) the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time.
(v) No adjustment in the Conversion Price shall be required unless
such adjustment would require a cumulative increase or decrease of at least 1%
in such price; provided, however, that any adjustments that by reason of this
paragraph (d)(v) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment until made; and provided, further,
that any adjustment shall be required and made in accordance with the provisions
of this Section 7 (other than this paragraph (d)(v)) not later than such time as
may be required in order to preserve the taxfree nature of a distribution to the
holders of shares of Common Stock. Notwithstanding any other provisions of this
Section 7, the Corporation shall not be required to make any adjustment of the
Conversion Price for the issuance of (A) any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of optional amounts in shares
of Common Stock under such plan or (B) any options, rights or shares of Common
Stock pursuant to any stock option, stock purchase or other stockbased plan
maintained by the Corporation. All calculations under this Section 7 shall be
made to the nearest cent (with $.005 being rounded upward) or to the nearest
onetenth of a share (with .05 of a share being rounded upward), as the case may
be. Anything in this paragraph (d) of this Section 7 to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Price, in addition to those
required by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of other assets (other than cash
dividends) hereafter made by the Corporation to its stockholders shall not be
taxable, or if that is not possible, to diminish any income taxes that are
otherwise payable because of such event.
(e) If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share exchange, issuer or
self tender offer for at least 30% of the shares of Common Stock outstanding,
sale of all or substantially all of the Corporation's assets or recapitalization
of the Common Stock, but excluding any transaction as to which paragraph (d)(i)
of this Section 7 applies) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which shares of Common Stock shall
be converted into the right to receive stock, securities or other property
(including cash or any combination thereof), each share of Class B Preferred
Stock which is not converted into the right to receive stock, securities or
other property in connection with such Transaction shall thereupon be
convertible into the kind and amount of shares of stock, securities and other
property (including cash or any combination thereof) receivable upon such
consummation by a holder of that number of shares of Common Stock into which one
share of Class B Preferred Stock was convertible immediately prior to such
Transaction (without giving effect to any Conversion Price adjustment pursuant
to Section 7(d)(iv) of this Article). The Corporation shall not be a party to
any Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Class B Preferred Stock that will contain
provisions enabling the holders of the Class B Preferred Stock that remain
outstanding after such Transaction to convert into the consideration received by
holders of Common Stock at the Conversion Price in effect immediately prior to
such Transaction. The provisions of this paragraph (e) shall similarly apply to
successive Transactions.
<PAGE> 35
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than cash dividends and cash
distributions); or
(ii) the Corporation shall authorize the granting to all holders
of the Common Stock of rights or warrants to subscribe for or purchase any
shares of any class or series of capital stock or any other rights or warrants;
or
(iii) there shall be any reclassification of the outstanding
Common Stock or any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is required, or a
statutory share exchange, an issuer or self tender offer shall have been
commenced for at least 30% of the outstanding shares of Common Stock (or an
amendment thereto changing the maximum number of shares sought or the amount or
type of consideration being offered therefor shall have been adopted), or the
sale or transfer of all or substantially all of the assets of the Corporation as
an entirety; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to each holder of shares of Class B Preferred Stock at such
holder's address as shown on the stock records of the Corporation, as promptly
as possible, a notice stating (A) the record date for the payment of such
dividend, distribution or rights or warrants, or, if a record date is not
established, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up or (C) the date
on which such tender offer commenced, the date on which such tender offer is
scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment thereto). Failure
to give or receive such notice or any defect therein shall not affect the
legality or validity of the proceedings described in this Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be conclusive evidence of the correctness of such adjustment absent manifest
error. Promptly after delivery of such certificate, the Corporation shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the effective date such adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion Price
to each holder of shares of Class B Preferred Stock at such holder's last
address as shown on the stock records of the Corporation.
(h) In any case in which paragraph (d) of this Section 7 provides that
an adjustment shall become effective on the day next following the record date
for an event, the Corporation may defer until the occurrence of such event (A)
issuing to the holder of any share of Class B Preferred Stock converted after
such record date and before the occurrence of such event the additional Common
Stock issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (B) paying to such holder any amount of
cash in lieu of any fraction pursuant to paragraph (c) of this Section 7.
(i) There shall be no adjustment of the Conversion Price in case of the
issuance of any capital stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 7.
(j) If the Corporation shall take any action affecting the Common
Stock, other than action described in this Section 7, that in the opinion of the
Board of Directors would materially adversely affect the conversion rights of
the holders of Class B Preferred Stock, the Conversion Price for the Class B
Preferred Stock
<PAGE> 36
may be adjusted, to the extent permitted by law, in such manner, if any, and at
such time as the Board of Directors, in its sole discretion, may determine to be
equitable under the circumstances.
(k) The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock solely for the purpose of effecting conversion of the Class B
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Class B Preferred Stock not theretofore
converted into Common Stock. For purposes of this paragraph (k), the number of
shares of Common Stock that shall be deliverable upon the conversion of all
outstanding shares of Class B Preferred Stock shall be computed as if at the
time of computation all such outstanding shares were held by a single holder
(and without regard to the Ownership Limit set forth in the Charter of the
Corporation).
The Corporation covenants that any shares of Common Stock issued upon
conversion of the shares of Class B Preferred Stock shall be validly issued,
fully paid and nonassessable.
The Corporation shall use its best efforts to list the shares of Common
Stock required to be delivered upon conversion of the shares of Class B
Preferred Stock, prior to such delivery, upon each national securities exchange,
if any, upon which the outstanding shares of Common Stock are listed at the time
of such delivery.
(l) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion or redemption of
shares of Class B Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of shares of Common Stock or
other securities or property in a name other than that of the holder of the
shares of Class B Preferred Stock to be converted or redeemed, and no such issue
or delivery shall be made unless and until the Person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or established,
to the reasonable satisfaction of the Corporation, that such tax has been paid.
(m) In addition to any other adjustment required hereby, to the extent
permitted by law, the Corporation from time to time may decrease the Conversion
Price by any amount, permanently or for a period of at least twenty Business
Days, if the decrease is irrevocable during the period.
(n) Notwithstanding anything to the contrary contained in this Section
7, conversion of Class B Preferred Stock pursuant to this Section 7 shall be
permitted only to the extent that such conversion would not result in a
violation of the Ownership Restrictions (as defined in the Charter), after
taking into account any waiver of such limitation granted to any holder of the
shares of Class B Preferred Stock.
8. RANKING.
Any class or series of capital stock of the Corporation shall be deemed to
rank:
(a) prior or senior to the Class B Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Class B Preferred Stock ("Senior Stock");
(b) on a parity with the Class B Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Class B Preferred Stock, if the holders of such class of stock or series and
the Class B Preferred Stock shall be entitled to the receipt of dividends and of
amounts distributable upon liquidation, dissolution or winding up in proportion
to their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority one over the other
("Parity Stock"); and
(c) junior to the Class B Preferred Stock, as to the payment of
dividends or as to the distribution
<PAGE> 37
of assets upon liquidation, dissolution or winding up, if such stock or series
shall be Common Stock or if the holders of Class B Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of shares of such class or series ("Junior Stock").
9. VOTING.
(a) If and whenever (i) six quarterly dividends (whether or not
consecutive) payable on the Class B Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, or (ii) for two consecutive quarterly
dividend periods the Corporation fails to pay dividends on the Common Stock in
an amount per share at least equal to $0.4625 (subject to adjustment consistent
with any adjustment of the Conversion Price pursuant to Section 7(d) of this
Article) (the "Base Common Stock Dividend") the number of directors then
constituting the Board of Directors shall be increased by two (in the case of an
arrearage in dividends described in clause (i)) or one additional director (in
the case of an arrearage in dividends described in clause (ii)) (in each case if
not already increased by reason of similar types of provisions with respect to
Voting Preferred Stock (as defined below)) and the holders of shares of Class B
Preferred Stock, together with the holders of shares of every other series or
class of Parity Stock (any other such series, the "Voting Preferred Stock"),
voting as a single class regardless of series, shall be entitled to elect the
two additional directors (in the case of an arrearage in dividends described in
clause (i)) or one (in the case of an arrearage in dividends described in clause
(ii)) to serve on the Board of Directors at any annual meeting of stockholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Class B Preferred Stock and the Voting Preferred Stock called as
hereinafter provided. Whenever (1) in the case of an arrearage in dividends
described in clause (i), all arrears in dividends on the Class B Preferred Stock
and the Voting Preferred Stock then outstanding shall have been paid and
dividends thereon for the current quarterly dividend period shall have been paid
or declared and set apart for payment, or 2) in the case of an arrearage in
dividends described in clause (ii), the Corporation makes a quarterly dividend
payment on the Common Stock in an amount per share equal to or exceeding the
Base Common Stock Dividend, then the right of the holders of the Class B
Preferred Stock and the Voting Preferred Stock to elect such additional two
directors (in the case of an arrearage in dividends described in clause (i)) or
one additional director (in the case of an arrearage in dividends described in
clause (ii)) shall cease (but subject always to the same provision for the
vesting of such voting rights in the case of any similar future arrearages), and
the terms of office of all Persons elected as directors by the holders of the
Class B Preferred Stock and the Voting Preferred Stock shall forthwith terminate
and the number of directors constituting the Board of Directors shall be reduced
accordingly. At any time after such voting power shall have been so vested in
the holders of Class B Preferred Stock and the Voting Preferred Stock, if
applicable, the Secretary of the Corporation may, and upon the written request
of any holder of Class B Preferred Stock (addressed to the Secretary at the
principal office of the Corporation) shall, call a special meeting of the
holders of the Class B Preferred Stock and of the Voting Preferred Stock for the
election of the two directors (in the case of an arrearage in dividends
described in clause (i)) or one director (in the case of an arrearage in
dividends described in clause (ii)) to be elected by them as herein provided,
such call to be made by notice similar to that provided in the Bylaws of the
Corporation for a special meeting of the stockholders or as required by law. If
any such special meeting required to be called as above provided shall not be
called by the Secretary within 20 days after receipt of any such request, then
any holder of Class B Preferred Stock may call such meeting, upon the notice
above provided, and for that purpose shall have access to the stock books of the
Corporation. The directors or director elected at any such special meeting shall
hold office until the next annual meeting of the stockholders or special meeting
held in lieu thereof if such office shall not have previously terminated as
above provided. If any vacancy shall occur among the directors elected by the
holders of the Class B Preferred Stock and the Voting Preferred Stock, a
successor shall be elected by the Board of Directors, upon the nomination of the
thenremaining director elected by the holders of the Class B Preferred Stock and
the Voting Preferred Stock or the successor of such remaining director, to serve
until the next annual meeting of the stockholders or special meeting held in
place thereof if such office shall not have previously terminated as provided
above.
(b) So long as any shares of Class B Preferred Stock are outstanding,
in addition to any other vote or consent of stockholders required by law or by
the Charter of the Corporation, the affirmative vote of at least 662/3% of the
votes entitled to be cast by the holders of the Class B Preferred Stock, given
in Person or by proxy, either in writing without a meeting or by vote at any
meeting called for the purpose, shall be necessary for effecting or validating:
<PAGE> 38
(i) Any amendment, alteration or repeal of any of the provisions
of these Articles Supplementary, the Charter or the ByLaws of the Corporation
that materially adversely affects the voting powers, rights or preferences of
the holders of the Class B Preferred Stock; provided, however, that the
amendment of the provisions of the Charter so as to authorize or create, or to
increase the authorized amount of, any Junior Stock or any shares of any class
of Parity Stock shall not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class B Preferred Stock; or
(ii) The authorization, creation of, the increase in the
authorized amount of, or issuance of , any shares of any class of Senior Stock
or any security convertible into shares of any class of Senior Stock (whether or
not such class of Senior Stock is currently authorized); provided, however, that
no such vote of the holders of Class B Preferred Stock shall be required if, at
or prior to the time when such amendment, alteration or repeal is to take
effect, or when the issuance of any such prior shares or convertible security is
to be made, as the case may be, provision is made for the redemption of all
shares of Class B Preferred Stock at the time outstanding to the extent such
redemption is authorized by Section 5 of this Article.
For purposes of the foregoing provisions and all other voting rights under
these Articles Supplementary, each share of Class B Preferred Stock shall have
one (1) vote per share, except that when any other class or series of preferred
stock shall have the right to vote with the Class B Preferred Stock as a single
class on any matter, then the Class B Preferred Stock and such other class or
series shall have with respect to such matters one (1) vote per $100 of stated
liquidation preference. Except as otherwise required by applicable law or as set
forth herein, the Class B Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers other than as
set forth herein, and the consent of the holders thereof shall not be required
for the taking of any corporate action.
10. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record holder
of any share of Class B Preferred Stock as the true and lawful owner thereof for
all purposes, and neither the Corporation nor the Transfer Agent shall be
affected by any notice to the contrary.
11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in
Section 11.8, from and after the Issue Date, no Person (other than the Initial
Holder or a Look-Through Entity) shall Beneficially Own shares of Class B
Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not
Beneficially Own shares of Class B Preferred Stock in excess of the Initial
Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class B
Preferred Stock in excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 11.8, from and after the Issue Date (and subject to Section 11.12), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated interdealer quotation system) that, if effective, would result in any
Person (other than the Initial Holder or a Look-Through Entity) Beneficially
Owning shares of Class B Preferred Stock in excess of the Ownership Limit shall
be void AB INITIO as to the Transfer of such shares of Class B Preferred Stock
that would be otherwise Beneficially Owned by such Person in excess of the
Ownership Limit, and the intended transferee shall acquire no rights in such
shares of Class B Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided
in Section 11.8, from and after the Issue Date (and subject to Section 11.12),
any Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated interdealer quotation system) that, if effective, would result in the
Initial Holder Beneficially Owning shares of Class B Preferred Stock in excess
of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such
shares of Class B Preferred Stock that would be otherwise Beneficially Owned by
the Initial Holder in excess of the Initial Holder
<PAGE> 39
limit, and the Initial Holder shall acquire no rights in such shares of Class B
Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 11.8 from and after the Issue Date (and subject to Section
11.12), any Transfer (whether or not such Transfer is the result of transactions
entered into through the facilities of the NYSE or other securities exchange or
an automated interdealer quotation system) that, if effective, would result in
any Look-Through Entity Beneficially Owning shares of Class B Preferred Stock in
excess of the Look-Through Ownership limit shall be void AB INITIO as to the
Transfer of such shares of Class B Preferred Stock that would be otherwise
Beneficially Owned by such Look-Through Entity in excess of the Look-Through
Ownership Limit and such Look-Through Entity shall acquire no rights in such
shares of Class B Preferred Stock.
(E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the
Issue Date, any Transfer that, if effective would result in the Corporation
being "closely held" within the meaning of Section 856(h) of the Code, or would
otherwise result in the Corporation failing to qualify as a REIT (including,
without limitation, a Transfer or other event that would result in the
Corporation owning (directly 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) shall be void AB
INITIO as to the Transfer of shares of Class B Preferred Stock that would cause
the Corporation (i) to be "closely held" within the meaning of Section 856(h) of
the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and
the intended transferee shall acquire no rights in such shares of Class B
Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class B
Preferred Stock that is null and void under Sections 11.1(B), (C), (D), or (E)
of this Article because it would, if effective, result in (i) the ownership of
Class B Preferred Stock in excess of the Initial Holder Limit, the Ownership
Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (iii) the Corporation
otherwise failing to qualify as a REIT, shall not adversely affect the validity
of the Transfer of any other share of Class B Preferred Stock in the same or any
other related transaction.
11.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof
shall at any time determine in good faith that a Transfer or other event has
taken place in violation of Section 11.1 of this Article or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership of any
shares of Class B Preferred Stock in violation of Section 11.1 of this Article
(whether or not such violation is intended), the Board of Directors or a
committee thereof shall be empowered to take any action as it deems advisable to
refuse to give effect to or to prevent such Transfer or other event, including,
but not limited to, refusing to give effect to such Transfer or other event on
the books of the Corporation, causing the Corporation to redeem such shares at
the then current Market Price and upon such terms and conditions as may be
specified by the Board of Directors in its sole discretion (including, but not
limited to, by means of the issuance of longterm indebtedness for the purpose of
such redemption), demanding the repayment of any distributions received in
respect of shares of Class B Preferred Stock acquired in violation of Section
11.1 of this Article or instituting proceedings to enjoin such Transfer or to
rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any
Transfers or attempted Transfers (or in the case of events other than a
Transfer, Beneficial Ownership) in violation of Section 11.1 of this Article,
regardless of any action (or nonaction) by the Board of Directors or such
committee, (a) shall be void AB INITIO or (b) shall automatically result in the
transfer described in Section 11.3 of this Article; PROVIDED, FURTHER, that the
provisions of this Section 11.2 shall be subject to the provisions of Section
11.12 of this Article; PROVIDED, FURTHER, that neither the Board of Directors
nor any committee thereof may exercise such authority in a manner that
interferes with any ownership or transfer of Class B Preferred Stock that is
expressly authorized pursuant to Section 11.8(d) of this Article.
<PAGE> 40
11.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions
contained in this Article, at any time after the Issue Date there is a purported
Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other securities
exchange or an automated interdealer quotation system) or other change in the
capital structure of the Corporation (including, but not limited to, any
redemption of Preferred Stock) or other event (including, but not limited to,
any acquisition of any share of Equity Stock) such that (a) any Person (other
than the Initial Holder or a Look-Through Entity) would Beneficially Own shares
of Class B Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class B Preferred Stock in excess of the
Initial Holder Limit, or (c) any Person that is a Look-Through Entity would
Beneficially Own shares of Class B Preferred Stock in excess of the Look-Through
Ownership Limit (in any such event, the Person, Initial Holder or Look-Through
Entity that would Beneficially Own shares of Class B Preferred Stock in excess
of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity
Limit, respectively, is referred to as a "PROHIBITED TRANSFEREE"), then, except
as otherwise provided in Section 11.8 of this Article, such shares of Class B
Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest
whole share) shall be automatically transferred to a Trustee in his capacity as
trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as
of the close of business on the business day prior to the Excess Transfer,
change in capital structure or another event giving rise to a potential
violation of the Ownership Limit, the Initial Holder Limit or the Look-Through
Entity Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with either the Corporation or
any Prohibited Transferee. The Trustee may be an individual or a bank or trust
company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class B Preferred
Stock held by the Trustee shall be issued and outstanding shares of capital
stock of the Corporation. Except to the extent provided in Section 11.3(E), the
Prohibited Transferee shall have no rights in the Class B Preferred Stock held
by the Trustee, and the Prohibited Transferee shall not benefit economically
from ownership of any shares held in trust by the Trustee, shall have no rights
to dividends and shall not possess any rights to vote or other rights
attributable to the shares held in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting
rights and rights to dividends with respect to shares of Class B Preferred Stock
held in the Trust, which rights shall be exercised for the benefit of the
Charitable Beneficiary. Any dividend or distribution paid prior to the discovery
by the Corporation that the shares of Class B Preferred Stock have been
transferred to the Trustee shall be repaid to the Corporation upon demand, and
any dividend or distribution declared but unpaid shall be rescinded as void AB
INITIO with respect to such shares of Class B Preferred Stock. Any dividends or
distributions so disgorged or rescinded shall be paid over to the Trustee and
held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited
Transferee prior to the discovery by the Corporation that the shares of Class B
Preferred Stock have been transferred to the Trustee will be rescinded as void
AB INITIO and shall be recast in accordance with the desires of the Trustee
acting for the benefit of the Charitable Beneficiary. The owner of the shares at
the time of the Excess Transfer, change in capital structure or other event
giving rise to a potential violation of the Ownership Limit, Initial Holder
Limit or Look-Through Entity Ownership Limit shall be deemed to have given an
irrevocable proxy to the Trustee to vote the shares of Class B Preferred Stock
for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the
shares held in the Trust to a person, designated by the Trustee, whose ownership
of the shares will not violate the Ownership Restrictions. If such a sale is
made, the interest of the Charitable Beneficiary shall terminate and proceeds of
the sale shall be payable to the Prohibited Transferee and to the Charitable
Beneficiary as provided in this Section 11.3(E). The Prohibited Transferee shall
receive the lesser of (1) the price paid by the Prohibited Transferee for the
shares or, if the Prohibited Transferee did not give value for the shares
(through a gift, devise or other transaction), the Market Price of the shares on
the day of the event causing the shares to be held in the Trust and (2) the
price per share received by the Trustee from the sale or other disposition of
the shares held in the Trust. Any proceeds in excess of the amount payable to
the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any
of the transfer
<PAGE> 41
restrictions set forth in this Section 11.3(E) or any application thereof is
determined in a final judgment to be void, invalid or unenforceable by any court
having jurisdiction over the issue, the Prohibited Transferee may be deemed, at
the option of the Corporation, to have acted as the agent of the Corporation in
acquiring the Class B Preferred Stock as to which such restrictions would, by
their terms, apply, and to hold such Class B Preferred Stock on behalf of the
Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class
B Preferred Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the Trust (or, in the case of a devise or gift, the Market
Price at the time of such devise or gift) and (ii) the Market Price on the date
the Corporation, or its designee, accepts such offer. The Corporation shall have
the right to accept such offer for a period of 90 days after the later of (i)
the date of the Excess Transfer or other event resulting in a transfer to the
Trust and (ii) the date that the Board of Directors determines in good faith
that an Excess Transfer or other event occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the
Trustee, the Corporation shall designate one or more nonprofit organizations to
be the Charitable Beneficiary of the interest in the Trust relating to such
Prohibited Transferee if (i) the shares of Class B Preferred Stock held in the
Trust would not violate the Ownership Restrictions in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to
acquire shares of Class B Preferred Stock in violation of Section 11.1 of this
Article, or any Person that is a Prohibited Transferee such that stock is
transferred to the Trustee under Section 11.3 of this Article, shall immediately
give written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted Transfer or other
event on the Corporation's status as a REIT. Failure to give such notice shall
not limit the rights and remedies of the Board of Directors provided herein in
any way.
11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date
certain record and Beneficial Owners and transferees of shares of Class B
Preferred Stock will be required to provide certain information as set out
below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than
5% (or such other percentage between 0.5% and 5%, as provided in the applicable
regulations adopted under the Code) of the number of Outstanding shares of Class
B Preferred Stock shall, within 30 days after January 1 of each year, give
written notice to the Corporation stating the name and address of such record or
Beneficial Owner, the number of shares of Class B Preferred Stock Beneficially
Owned, and a full description of how such shares are held. Each such record or
Beneficial Owner of Class B Preferred Stock shall, upon demand by the
Corporation, disclose to the Corporation in writing such additional information
with respect to the Beneficial Ownership of the Class B Preferred Stock as the
Board of Directors, in its sole discretion, deems appropriate or necessary to
(i) comply with the provisions of the Code regarding the qualification of the
Corporation as a REIT under the Code and (ii) ensure compliance with the
Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit,
as applicable. Each stockholder of record, including without limitation any
Person that holds shares of Class B Preferred Stock on behalf of a Beneficial
Owner, shall take all reasonable steps to obtain the written notice described in
this Section 11.5 from the Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a
Beneficial Owner of shares of Class B Preferred Stock and any Person (including
the stockholder of record) that is holding shares of Class B Preferred Stock for
a Beneficial Owner, and any proposed transferee of shares, shall provide such
information as the Corporation, in its sole discretion, may request in order to
determine the Corporation's status as a REIT, to comply with the requirements of
any taxing authority or other governmental agency, to determine any such
compliance or to ensure compliance with the Ownership Limit, the Initial Holder
Limit and the Look-Through Ownership Limit, and shall provide a statement or
affidavit to the Corporation setting forth the number of shares of Class B
Preferred Stock already Beneficially Owned by such stockholder or proposed
transferee and any related
<PAGE> 42
persons specified, which statement or affidavit shall be in the form prescribed
by the Corporation for that purpose.
11.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the
authority of the Board of Directors to take such other action as it deems
necessary or advisable (subject to the provisions of Section 11.12 of this
Article) (i) to protect the Corporation and the interests of its stockholders in
the preservation of the Corporation's status as a REIT and (ii) to insure
compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit.
11.7 AMBIGUITY. In the case of an ambiguity in the application of any of the
provisions of Section 11 of this Article, or in the case of an ambiguity in any
definition contained in Section 11 of this Article, the Board of Directors shall
have the power to determine the application of the provisions of this Article
with respect to any situation based on its reasonable belief, understanding or
knowledge of the circumstances.
11.8 EXCEPTIONS. The following exceptions shall apply or may be established
with respect to the limitations of Section 11.1 of this Article.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of
a ruling from the Internal Revenue Service or an opinion of tax counsel or other
evidence or undertaking acceptable to it, may waive the application, in whole or
in part, of the Ownership Limit to a Person subject to the Ownership Limit, if
such person is not an individual for purposes of Section 542(a) of the Code and
is a corporation, partnership, estate or trust. In connection with any such
exemption, the Board of Directors may require such representations and
undertakings from such Person and may impose such other conditions as the Board
deems necessary, in its sole discretion, to determine the effect, if any, of the
proposed Transfer on the Corporation's status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of
this Article, the pledge by the Initial Holder of all or any portion of the
Class B Preferred Stock directly owned at any time or from time to time shall
not constitute a violation of Section 11.1 of this Article and the pledgee shall
not be subject to the Ownership Limit with respect to the Class B Preferred
Stock so pledged to it either as a result of the pledge or upon foreclosure.
(C) UNDERWRITERS. For a period of 270 days following the purchase of
Class B Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class B Preferred Stock,
such underwriter shall not be subject to the Ownership Limit with respect to the
Class B Preferred Stock purchased by it as a part of or in connection with such
offering and with respect to any Class B Preferred Stock purchased in connection
with market making activities.
11.9 LEGEND. Each certificate for Class B Preferred Stock shall bear the
following legend:
"The shares of Class B Preferred Stock represented by this certificate
are subject to restrictions on transfer. No person may Beneficially Own
shares of Class B Preferred Stock in excess of the Ownership Restrictions,
as applicable, with certain further restrictions and exceptions set forth in
the Corporation's Charter (including the Articles Supplementary setting
forth the terms of the Class B Preferred Stock). Any Person that attempts to
Beneficially Own shares of Class B Preferred Stock in excess of the
applicable limitation must immediately notify the Corporation. All
capitalized terms in this legend have the meanings ascribed to such terms in
the Corporation's Charter (including the Articles Supplementary setting
forth the terms of the Class B Preferred Stock), 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 stockholder that so requests. If the
restrictions on transfer are violated, the shares of Class B Preferred Stock
represented hereby will be either (i) void in accordance with the
Certificate or (ii) automatically transferred to a Trustee of a Trust for
the benefit of one or more Charitable Beneficiaries."
11.10 SEVERABILITY. If any provision of this Article or any application of
any such provision is determined in a final and unappealable judgment to be
void, invalid or unenforceable by any Federal or state court having jurisdiction
over the issues, the validity and enforceability of the remaining provisions
shall not be affected and other
<PAGE> 43
applications of such provision shall be affected only to the extent necessary to
comply with the determination of such court.
11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit in the event of a
change in law.
11.12 SETTLEMENT. Nothing in this Section 11 of this Article shall be
interpreted to preclude the settlement of any transaction entered into through
the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system.
* * * * * *
SECOND: The Board of Directors of the Corporation at a meeting or by a
unanimous consent in writing in lieu of a meeting under Section 2408 of the
Maryland General Corporation Law, as of October 23, 1997, adopted a resolution
that set forth and approved the foregoing restatement of the Charter.
THIRD: The Charter of the Corporation is not amended by these Articles of
Restatement; PROVIDED, HOWEVER, consistent with Section 2608(b)(7) of the
Maryland General Corporation Law, the current number and names of directors are
provided in Section 2 of Article VI of the restated Charter of the Corporation.
FOURTH: References to "these Articles of Amendment and Restatement" have
been retained in Section 4 of Article IV, in Section 4, Section 5, and Section 7
of Article VI, and in Article VIII of the restated Charter and to "these
Articles Supplementary" have been retained in Section 1 of Article XII of the
restated Charter to conform to the original text of the provisions. In the
context of these Articles of Restatement the term "these Articles of Amendment
and Restatement" should be read as "the Charter" and the term "these Articles
Supplementary" should be read as "this Article".
FIFTH: The sentence "Upon the filing of these Articles of Amendment, there
shall be authorized 750,000 shares and issued and outstanding 650,000 shares of
the Class B Common Stock" has been retained in Section 8 of Article XII of the
restated Charter to conform to the original text of the provision.
In the context of these Articles of Restatement the sentence is not necessary.
SIXTH: The number of shares of Class B Common Stock shown as "750,000" has
been retained in Section 1.1 of Article IV of the restated Charter to conform to
the original text of the provision. As of August 11, 1997 a total of 325,000
shares of Class B Common Stock have been converted which causes the number of
authorized shares of Class B Common Stock to be reduced from 750,000 shares to
425,000 shares as provided in Sections 6(a) and 8 of Article XII of the restated
Charter.
SEVENTH: The number of shares of Preferred Stock shown as "10,000,000" has
been retained in Section 1.1 of Article IV of the restated Charter to conform to
the original text of the provision. As of August 4, 1997 a total of 750,000
shares of Preferred Stock were reclassified as Class B Cumulative Convertible
Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"), which
causes the number of authorized shares of Preferred Stock to be reduced from
10,000,000 shares to 9,250,000 shares and the number of authorized shares of
Class B Preferred Stock to be increased from zero shares to 750,000 shares as
provided in Sections 1 Article XIII of the restated Charter.
<PAGE> 44
IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has caused
these presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on November 7, 1997.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ LEEANN MOREIN By: /s/ PETER K. KOMPANIEZ
- - ------------------------------- ----------------------------------
Leeann Morein, Secretary Peter K. Kompaniez, President
THE UNDERSIGNED, President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
who executed on behalf of the Corporation the foregoing Articles of Restatement
of which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Restatement to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ PETER K. KOMPANIEZ
--------------------------------------
Peter K. Kompaniez, President
<PAGE> 45
ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS C CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in Baltimore
City, Maryland, hereby certifies to the Department of Assessments and Taxation
of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Section 1.2 of Article IV of the Charter of the Corporation,
the Board of Directors has duly divided and classified 2,760,000 authorized but
unissued shares of the capital stock of the Corporation into a class designated
as Class C Cumulative Preferred Stock and has provided for the issuance of such
class.
SECOND: The reclassification increases the number of shares classified as
Class C Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 2,760,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Preferred Stock, par value $.01 per share, from 9,250,000 shares
immediately prior to the reclassification to 6,490,000 shares immediately after
the reclassification. The number of shares classified as Class C Cumulative
Preferred Stock may be decreased pursuant to Section 6 of Article Third of these
Articles Supplementary upon reacquisition thereof in any manner, or by
retirement thereof, by the Corporation.
THIRD: The terms of the Class C Cumulative Preferred Stock (including the
preferences, conversions or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, or terms or
conditions of redemption) as set by the Board of Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class C Cumulative
Preferred Stock (the "Class C Preferred Stock") and Two Million Seven Hundred
Sixty Thousand (2,760,000) shall be the authorized number of shares of such
Class C Preferred Stock constituting such class.
5
<PAGE> 46
2. DEFINITIONS.
For purposes of the Class C Preferred Stock, the following terms shall have
the meanings indicated:
"ACT" shall mean the Securities Act of 1933, as amended.
"AFFILIATE" of a Person means a Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the Person specified.
"AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock, the
sum of the products of (i) the number of shares of each class of Equity Stock
within such block multiplied by (ii) the corresponding Market Price of one share
of Equity Stock of such class.
"BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of
shares of Equity Stock equal to the sum of (i) the number of shares of Equity
Stock directly owned by such Person, (ii) the number of shares of Equity Stock
indirectly owned by such Person (if such Person is an "individual" as defined in
Section 542(a)(2) of the Code) taking into account the constructive ownership
rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the
Code, and (iii) the number of shares of Equity Stock that such Person is deemed
to beneficially own pursuant to Rule 13d3 under the Exchange Act or that is
attributed to such Person pursuant to Section 318 of the Code, as modified by
Section 856(d)(5) of the Code, PROVIDED that when applying this definition of
Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and
clause (ii) of the definition of "Person" shall be disregarded. The terms
"BENEFICIAL OWNER," "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the
correlative meanings.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation or
any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Class C Preferred Stock.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New York
are not required to be open.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 10.3 of this Article, each of which shall be
an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of
the Code.
"CLASS C PREFERRED STOCK" shall have the meaning set forth in Section 1 of
this Article.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto. Reference to any provision of the Code
shall mean such provision as in effect from time to time, as the same may be
amended, and any successor thereto, as interpreted by any applicable
6
<PAGE> 47
regulations or other administrative pronouncements as in effect from time to
time.
"COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation or such shares of the Corporation's capital stock into
which outstanding shares of Common Stock shall be reclassified.
"DIVIDEND PAYMENT DATE" shall mean January 15, April 15, July 15 and October
15 of each year; provided, further, that if any Dividend Payment Date falls on
any day other than a Business Day, the dividend payment payable on such Dividend
Payment Date shall be paid on the Business Day immediately following such
Dividend Payment Date and no interest shall accrue on such dividend from such
date to such Dividend Payment Date.
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January 15,
April 15, July 15 and October 15 of each year and ending on and including the
day preceding the first day of the next succeeding Dividend Period, other than
the Dividend Period during which any Class B Preferred Stock shall be redeemed
pursuant to Section 5 hereof, which shall end on and include the Redemption Date
with respect to the Class C Preferred Stock being redeemed.
"EQUITY STOCK" shall mean one or more shares of any class of capital stock
of the Corporation.
"EXCESS TRANSFER" has the meaning set forth in Section 10.3(A) of this
Article.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ISSUE DATE" shall mean December 23, 1997(1).
"INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including
the Issue Date and ending on and including April 14, 1998.
"INITIAL HOLDER" shall mean Terry Considine.
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class C Preferred Stock of the Corporation having an Aggregate Value not in
excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares
of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other
than Class B Preferred Stock that are Beneficially Owned by the Initial Holder.
From the Issue Date, the secretary of the Corporation, or such other person as
shall be designated by the Board of Directors, shall upon request make available
to the representative(s) of the Initial Holder and the Board of Directors, a
schedule that sets forth the thencurrent Initial Holder Limit applicable to the
Initial Holder.
7
<PAGE> 48
"JUNIOR STOCK" shall mean the Common Stock and any other class or series of
capital stock of the Corporation over which the shares of Class C Preferred
Stock have preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in
Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or
(ii) registered under the Investment Company Act of 1940.
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class C Preferred Stock of the Corporation
having an Aggregate Value not in excess of the excess of (x) 15% of the
Aggregate Value of all Outstanding shares of Equity Stock over (y) by the
Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock
that are Beneficially Owned by the Look-Through Entity.
"MARKET PRICE" on any date shall mean, with respect to any share of Equity
Stock, the Closing Price of share of that class of Equity Stock on the Trading
Day immediately preceding such date. The term "CLOSING PRICE" on any date shall
mean the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NYSE or,
if the Equity Stock is not listed or admitted to trading on the NYSE, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Equity Stock is listed or admitted to trading or, if the Equity 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 overthecounter 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 the Equity Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Equity Stock selected by the Board of
Directors of the Company. The term "TRADING DAY" shall mean a day on which the
principal national securities exchange on which the Equity Stock is listed or
admitted to trading is open for the transaction of business or, if the Equity
Stock is not listed or admitted to trading on any national securities exchange,
shall mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of
the Corporation, PROVIDED that for purposes of the application of the Ownership
Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any
Person, the term "OUTSTANDING" shall be deemed to include the number of shares
of Equity Stock that such Person alone, at that time, could acquire pursuant to
any options or convertible securities.
8
<PAGE> 49
"OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder
or a Look-Through Entity, a number of the Outstanding shares of Class C
Preferred Stock of the Corporation having an Aggregate Value not in excess of
the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of
Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other
than Class C Preferred Stock that are Beneficially Owned by the Person.
"OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as
applied to Persons other than the Initial Holder or Look-Through Entities, the
Initial Holder Limit as applied to the Initial Holder and the Look-Through
Ownership Limit as applied to Look-Through Entities.
"PARITY STOCK" shall have the meaning set forth in paragraph (b) of Section
7 of this Article. The Class B Preferred Stock shall be a Parity Stock.
"PERSON" shall mean (a) for purposes of Section 10 of this Article, (i) an
individual, corporation, partnership, estate, trust (including a trust
qualifying under Section 401(a) or 501(c) of the Code), association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity, and (ii) also includes a group as that term is used for
purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the
remaining Sections of this Article, any individual, firm, partnership,
corporation or other entity and shall include any successor (by merger or
otherwise) of such entity.
"PROHIBITED TRANSFEREE" has the meaning set forth in Section 10.3(A) of
this Article.
"REDEMPTION DATE" shall have the meaning set forth in paragraph (b) of
Section 5 of this Article.
"REIT" shall mean a "real estate investment trust" as defined in Section 856
of the Code.
"SENIOR STOCK" shall have the meaning set forth in paragraph (a) of Section
7 of this Article.
"SET APART FOR PAYMENT" shall be deemed to include, without any action other
than the following, the recording by the Corporation in its accounting ledgers
of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
Junior Stock or any class or series of Parity Stock are placed in a separate
account of the Corporation or delivered to a disbursing, paying or other similar
agent, then "set apart for payment" with respect to the Class C Preferred Stock
shall mean placing such funds in a separate account or delivering such funds to
a disbursing, paying or other similar agent.
"TRADING DAY", as to any securities, shall mean any day on which such
securities are traded on the principal national securities exchange on which
such securities are listed or admitted or, if such securities are not listed or
admitted for trading on any national securities exchange, the NASDAQ
9
<PAGE> 50
National Market or, if such securities are not listed or admitted for trading on
the NASDAQ National Market, in the securities market in which such securities
are traded.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of a share of Class C Preferred Stock (including (i) the granting of
an option or any series of such options or entering into any agreement for the
sale, transfer or other disposition of Class C Preferred Stock or (ii) the sale,
transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Class C Preferred Stock), whether voluntary
or involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any transfer of an
interest in other entities that results in a change in the Beneficial Ownership
of shares of Class C Preferred Stock). The term "TRANSFERS" and "TRANSFERRED"
shall have correlative meanings.
"TRANSFER AGENT" means such transfer agent as may be designated by the Board
of Directors or their designee as the transfer agent for the Class C Preferred
Stock; provided, that if the Corporation has not designated a transfer agent
then the Corporation shall act as the transfer agent for the Class C Preferred
Stock.
"TRUST" shall mean the trust created pursuant to Section 10.3 of this
Article.
"TRUSTEE" shall mean the Person unaffiliated with either the Corporation or
the Prohibited Transferee that is appointed by the Corporation to serve as
trustee of the Trust.
"VOTING PREFERRED STOCK" shall have the meaning set forth in Section 8 of
this Article.
3. DIVIDENDS.
(a) The holders of Class C Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Class C Preferred Stock equal to $2.25 per annum. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable quarterly in arrears on each Dividend Payment Date, commencing on April
15, 1998. Each such dividend shall be payable in arrears to the holders of
record of the Class C Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on the January 1, April 1, July 1 or
October 1, as the case may be, immediately preceding such Dividend Payment Date.
Accumulated, accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to holders of record on such date, which date shall not precede by more
than 45 days the payment date thereof, as may be fixed by the Board of
Directors.
(b) The amount of dividends payable per share of Class C Preferred
Stock for the Initial Dividend Period, or any other period shorter than a full
Dividend Period, shall be computed ratably on the basis of twelve 30day months
and a 360day
10
<PAGE> 51
year. Holders of Class C Preferred Stock shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of cumulative dividends,
as herein provided, on the Class C Preferred Stock. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on the Class C Preferred Stock that may be in arrears.
(c) So long as any of the shares of Class C Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the Corporation
and no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any class or series of
Parity Stock for any period unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for such payment on the Class C Preferred
Stock for all Dividend Periods terminating on or prior to the Dividend Payment
Date with respect to such class or series of Parity Stock. When dividends are
not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon the Class C Preferred Stock and all
dividends declared upon any other class or series of Parity Stock shall be
declared ratably in proportion to the respective amounts of dividends
accumulated, accrued and unpaid on the Class C Preferred Stock and accumulated,
accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class C Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Junior Stock) shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made, directly or indirectly, by the Corporation with respect to any
shares of Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such stock), directly or indirectly, by the Corporation (except by
conversion into or exchange for shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Stock), nor shall any other cash or
other property otherwise be paid or distributed to or for the benefit of any
holder of shares of Junior Stock in respect thereof, directly or indirectly, by
the Corporation unless in each case the full cumulative dividends (including all
accumulated, accrued and unpaid dividends) on all outstanding shares of Class C
Preferred Stock shall have been paid or such dividends have been declared and
set apart for payment for all past Dividend Periods with respect to the Class C
Preferred Stock.
Notwithstanding the provisions of this Section 3(d), the Corporation
shall not be prohibited from (i) declaring or paying or setting apart for
payment any dividend or distribution on any shares of Parity Stock or (ii) or
redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if
such declaration, payment, redemption, purchase or other acquisition is
necessary in order to maintain the continued qualification of the Corporation as
a REIT under Section 856 of the Code.
11
<PAGE> 52
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution by the Corporation (whether of capital or surplus) shall be made to
or set apart for the holders of Junior Stock, the holders of shares of Class C
Preferred Stock shall be entitled to receive TwentyFive Dollars ($25) per share
of Class C Preferred Stock (the "Liquidation Preference"), plus an amount equal
to all dividends (whether or not earned or declared) accumulated, accrued and
unpaid thereon to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment. Until the holders of the
Class C Preferred Stock have been paid the Liquidation Preference in full, plus
an amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final distribution to
such holders, no payment will be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of Class C
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of any class or series of
Parity Stock, then such assets, or the proceeds thereof, shall be distributed
among the holders of Class C Preferred Stock and any such other Parity Stock
ratably in the same proportion as the respective amounts that would be payable
on such Class C Preferred Stock and any such other Parity Stock if all amounts
payable thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with one or more corporations, (ii) a
sale or transfer of all or substantially all of the Corporation's assets, or
(iii) a statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the Corporation.
(b) Upon any liquidation, dissolution or winding up of the Corporation,
after payment shall have been made in full to the holders of Class C Preferred
Stock and any Parity Stock, as provided in this Section 4, any other series or
class or classes of Junior Stock shall, subject to the respective terms thereof,
be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of the Class C Preferred Stock and any Parity Stock shall not be
entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class C Preferred Stock shall not be redeemable by the
Corporation prior to December 23, 2002(2) except as set forth in Section 10.2 of
this Article. On and after December 23, 2002(3), the Corporation, at its option,
may redeem shares of Class C Preferred Stock, in whole or from time to time in
part, at a redemption price payable in cash equal to 100% of the Liquidation
Preference thereof, plus all accrued and unpaid dividends to the date fixed for
redemption (the "Redemption Date"). In connection with any redemption pursuant
to this Section 5(a), the redemption price of the Class C Preferred Stock (other
than any portion thereof consisting of accrued and unpaid dividends) shall be
payable solely with the proceeds from the sale by the Corporation or AIMCO
Properties, L.P., a Delaware limited partnership (the "Operating Partnership")
of other capital shares of the Corporation or the Operating Partnership (whether
or not such sale occurs concurrently with such redemption). For purposes of the
preceding sentence, 'capital shares' means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable at the option of the holder for
equity securities (unless and to the extent such debt securities are
subsequently converted into capital shares)) or options to purchase any of the
foregoing of or in the Corporation or the Operating Partnership.
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(b) The Redemption Date shall be selected by the Corporation, shall be
specified in the notice of redemption and shall be not less than 30 days nor
more than 60 days after the date notice of redemption is sent by the
Corporation.
(c) If full cumulative dividends on all outstanding shares of Class C
Preferred Stock have not been paid or declared and set apart for payment, no
shares of Class C Preferred Stock may be redeemed unless all outstanding shares
of Class C Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire shares
of Class C Preferred Stock, otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of shares of Class C Preferred
Stock.
(d) If the Corporation shall redeem shares of Class C Preferred Stock
pursuant to paragraph (a) of this Section 5, notice of such redemption shall be
given to each holder of record of the shares to be redeemed. Such notice shall
be provided by first class mail, postage prepaid, at such holder's address as
the same appears on the stock records of the Corporation.
Neither the failure to mail any notice required by this paragraph (d), nor any
defect therein or in the mailing thereof to any particular holder, shall affect
the sufficiency of the notice or the validity of the proceedings for redemption
with respect to the other holders. Any notice which was mailed in the manner
herein provided shall be conclusively presumed to have been duly given on the
date mailed whether or not the holder receives the notice. Each such notice
shall state, as appropriate: (1) the Redemption Date; (2) the number of shares
of Class C Preferred Stock to be redeemed and, if fewer than all such shares
held by such holder are to be redeemed, the number of such shares to be redeemed
from such holder; and (3) the place or places at which certificates for such
shares are to be surrendered for cash. Notice having been mailed as aforesaid,
from and after the Redemption Date (unless the Corporation shall fail to make
available the amount of cash necessary to effect such redemption), (i) except as
otherwise provided herein, dividends on the shares of Class C Preferred Stock so
called for redemption shall cease to accumulate or accrue on the shares of Class
C Preferred Stock called for redemption (except that, in the case of a
Redemption Date after a dividend record date and prior to the related Dividend
Payment Date, holders of Class C Preferred Stock on the dividend record date
will be entitled on such Dividend Payment Date to receive the dividend payable
on such shares), (ii) said shares shall no longer be deemed to be outstanding,
and (iii) all rights of the holders thereof as holders of Class C Preferred
Stock of the Corporation shall cease (except the rights to receive the cash
payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any dividends
payable thereon). The Corporation's obligation to make available the redemption
price in accordance with the preceding sentence shall be deemed fulfilled if, on
or before the Call Date, the Corporation shall deposit with a bank or trust
company (which may be an affiliate of the Corporation) that has, or is an
affiliate of a bank or trust company that has, a capital and surplus of at least
$50,000,000, such amount of cash as is necessary for such redemption, in trust,
with irrevocable instructions that such cash be applied to the redemption of the
shares of Class C Preferred Stock so called for redemption. No interest shall
accrue for the benefit of the holders of shares of Class C Preferred Stock to be
redeemed on any cash so set aside by the Corporation. Subject to applicable
escheat laws, any such cash unclaimed at the end of two years from the
Redemption Date shall revert to the general funds of the Corporation, after
which reversion the holders of shares of Class C Preferred Stock so called for
redemption shall look only to the general funds of the Corporation for the
payment of such cash.
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As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class C Preferred Stock to be
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which such shares have been
redeemed in accordance with such notice. If fewer than all the outstanding
shares of Class C Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class C
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class C Preferred Stock held of record by each holder of
such shares, pro rata (as nearly as may be) or by any other method as may be
determined by the Board of Directors in its discretion to be equitable. If fewer
than all the shares of Class C Preferred Stock represented by any certificate
are redeemed, then a new certificate representing the unredeemed shares shall be
issued without cost to the holders thereof.
6. STATUS OF REACQUIRED STOCK.
All shares of Class C Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class C Preferred Stock.
7. RANKING.
Any class or series of capital stock of the Corporation shall be deemed to
rank:
(a) prior or senior to the Class C Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Class C Preferred Stock ("Senior Stock");
(b) on a parity with the Class C Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Class C Preferred Stock, if the holders of such class of stock or series and
the Class C Preferred Stock shall be entitled to the receipt of dividends and of
amounts distributable upon liquidation, dissolution or winding up in proportion
to their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority one over the other
("Parity Stock"); and
(c) junior to the Class C Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Class C Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such class or series
("Junior Stock").
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8. VOTING.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Class C Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of directors then constituting the
Board of Directors shall be increased by two (if not already increased by reason
of similar types of provisions with respect to shares of Parity Stock of any
other class or series which is entitled to similar voting rights (the "Voting
Preferred Stock")) and the holders of shares of Class C Preferred Stock,
together with the holders of shares of all other Voting Preferred Stock then
entitled to exercise similar voting rights, voting as a single class regardless
of series, shall be entitled to elect the two additional directors to serve on
the Board of Directors at any annual meeting of stockholders or special meeting
held in place thereof, or at a special meeting of the holders of the Class C
Preferred Stock and the Voting Preferred Stock called as hereinafter provided.
Whenever all arrears in dividends on the Class C Preferred Stock and the Voting
Preferred Stock then outstanding shall have been paid and dividends thereon for
the current quarterly dividend period shall have been paid or declared and set
apart for payment, then the right of the holders of the Class C Preferred Stock
and the Voting Preferred Stock to elect such additional two directors shall
cease (but subject always to the same provision for the vesting of such voting
rights in the case of any similar future arrearages), and the terms of office of
all Persons elected as directors by the holders of the Class C Preferred Stock
and the Voting Preferred Stock shall forthwith terminate and the number of
directors constituting the Board of Directors shall be reduced accordingly. At
any time after such voting power shall have been so vested in the holders of
Class C Preferred Stock and the Voting Preferred Stock, if applicable, the
Secretary of the Corporation may, and upon the written request of any holder of
Class C Preferred Stock (addressed to the Secretary at the principal office of
the Corporation) shall, call a special meeting of the holders of the Class C
Preferred Stock and of the Voting Preferred Stock for the election of the two
directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation for a special
meeting of the stockholders or as required by law. If any such special meeting
required to be called as above provided shall not be called by the Secretary
within 20 days after receipt of any such request, then any holder of Class C
Preferred Stock may call such meeting, upon the notice above provided, and for
that purpose shall have access to the stock books of the Corporation. The
directors elected at any such special meeting shall hold office until the next
annual meeting of the stockholders or special meeting held in lieu thereof if
such office shall not have previously terminated as above provided. If any
vacancy shall occur among the directors elected by the holders of the Class C
Preferred Stock and the Voting Preferred Stock, a successor shall be elected by
the Board of Directors, upon the nomination of the thenremaining director
elected by the holders of the Class C Preferred Stock and the Voting Preferred
Stock or the successor of such remaining director, to serve until the next
annual meeting of the stockholders or special meeting held in place thereof if
such office shall not have previously terminated as provided above.
(b) So long as any shares of Class C Preferred Stock are outstanding,
in addition to any other vote or consent of stockholders required by law or by
the Charter of the Corporation, the affirmative vote of at least 662/3% of the
votes entitled to be cast by the holders of the Class C Preferred Stock voting
as a single class
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with the holders of all other classes or series of Preferred Stock entitled to
vote on such matters, given in Person or by proxy, either in writing without a
meeting or by vote at any meeting called for the purpose, shall be necessary for
effecting or validating:
(i) Any amendment, alteration or repeal of any of the provisions
of these Articles Supplementary, the Charter or the ByLaws of the Corporation
that materially adversely affects the voting powers, rights or preferences of
the holders of the Class C Preferred Stock; provided, however, that the
amendment of the provisions of the Charter so as to authorize or create, or to
increase the authorized amount of, or issue any Junior Stock or any shares of
any class of Parity Stock shall not be deemed to materially adversely affect the
voting powers, rights or preferences of the holders of Class C Preferred Stock;
or
(ii) The authorization, creation of, the increase in the
authorized amount of, or issuance of any shares of any class of Senior Stock or
any security convertible into shares of any class of Senior Stock (whether or
not such class of Senior Stock is currently authorized); provided, however, that
no such vote of the holders of Class C Preferred Stock shall be required if, at
or prior to the time when such amendment, alteration or repeal is to take
effect, or when the issuance of any such prior shares or convertible security is
to be made, as the case may be, provision is made for the redemption of all
shares of Class C Preferred Stock at the time outstanding to the extent such
redemption is authorized by Section 5 of this Article.
For purposes of the foregoing provisions and all other voting rights under
these Articles Supplementary, each share of Class C Preferred Stock shall have
one (1) vote per share, except that when any other class or series of preferred
stock shall have the right to vote with the Class C Preferred Stock as a single
class on any matter, then the Class C Preferred Stock and such other class or
series shall have with respect to such matters one quarter of one (.25) vote per
$25 of stated liquidation preference. Except as otherwise required by applicable
law or as set forth herein, the Class C Preferred Stock shall not have any
relative, participating, optional or other special voting rights and powers
other than as set forth herein, and the consent of the holders thereof shall not
be required for the taking of any corporate action.
9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record holder
of any share of Class C Preferred Stock as the true and lawful owner thereof for
all purposes, and neither the Corporation nor the Transfer Agent shall be
affected by any notice to the contrary.
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10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 10.8,
from and after the Issue Date, no Person (other than the Initial Holder or a
Look-Through Entity) shall Beneficially Own shares of Class C Preferred Stock in
excess of the Ownership Limit, the Initial Holder shall not Beneficially Own
shares of Class C Preferred Stock in excess of the Initial Holder Limit and no
Look-Through Entity shall Beneficially Own shares of Class C Preferred Stock in
excess of the Look-Through Ownership Limit.
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(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated interdealer quotation system) that, if effective, would result in any
Person (other than the Initial Holder or a Look-Through Entity) Beneficially
Owning shares of Class C Preferred Stock in excess of the Ownership Limit shall
be void AB INITIO as to the Transfer of such shares of Class C Preferred Stock
that would be otherwise Beneficially Owned by such Person in excess of the
Ownership Limit, and the intended transferee shall acquire no rights in such
shares of Class C Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated interdealer quotation system) that, if effective, would result in the
Initial Holder Beneficially Owning shares of Class C Preferred Stock in excess
of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such
shares of Class C Preferred Stock that would be otherwise Beneficially Owned by
the Initial Holder in excess of the Initial Holder limit, and the Initial Holder
shall acquire no rights in such shares of Class C Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 10.8 from and after the Issue Date (and subject to Section
10.12), any Transfer (whether or not such Transfer is the result of transactions
entered into through the facilities of the NYSE or other securities exchange or
an automated interdealer quotation system) that, if effective, would result in
any Look-Through Entity Beneficially Owning shares of Class C Preferred Stock in
excess of the Look-Through Ownership limit shall be void AB INITIO as to the
Transfer of such shares of Class C Preferred Stock that would be otherwise
Beneficially Owned by such Look-Through Entity in excess of the Look-Through
Ownership Limit and such Look-Through Entity shall acquire no rights in such
shares of Class C Preferred Stock.
(E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the
Issue Date, any Transfer that, if effective would result in the Corporation
being "closely held" within the meaning of Section 856(h) of the Code, or would
otherwise result in the Corporation failing to qualify as a REIT (including,
without limitation, a Transfer or other event that would result in the
Corporation owning (directly 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) shall be void AB
INITIO as to the Transfer of shares of Class C Preferred Stock that would cause
the Corporation (i) to be "closely held" within the meaning of Section 856(h) of
the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and
the intended transferee shall acquire no rights in such shares of Class C
Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class
C Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E)
of this Article because it would, if effective, result in (i) the ownership of
Class C Preferred Stock in excess of the Initial Holder Limit, the Ownership
Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely
held" within the
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meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing
to qualify as a REIT, shall not adversely affect the validity of the Transfer of
any other share of Class C Preferred Stock in the same or any other related
transaction.
10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof
shall at any time determine in good faith that a Transfer or other event has
taken place in violation of Section 10.1 of this Article or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership of any
shares of Class C Preferred Stock in violation of Section 10.1 of this Article
(whether or not such violation is intended), the Board of Directors or a
committee thereof shall be empowered to take any action as it deems advisable to
refuse to give effect to or to prevent such Transfer or other event, including,
but not limited to, refusing to give effect to such Transfer or other event on
the books of the Corporation, causing the Corporation to redeem such shares at
the then current Market Price and upon such terms and conditions as may be
specified by the Board of Directors in its sole discretion (including, but not
limited to, by means of the issuance of longterm indebtedness for the purpose of
such redemption), demanding the repayment of any distributions received in
respect of shares of Class C Preferred Stock acquired in violation of Section
10.1 of this Article or instituting proceedings to enjoin such Transfer or to
rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any
Transfers or attempted Transfers (or in the case of events other than a
Transfer, Beneficial Ownership) in violation of Section 10.1 of this Article,
regardless of any action (or nonaction) by the Board of Directors or such
committee, (a) shall be void AB INITIO or (b) shall automatically result in the
transfer described in Section 10.3 of this Article; PROVIDED, FURTHER, that the
provisions of this Section 10.2 shall be subject to the provisions of Section
10.12 of this Article; PROVIDED, FURTHER, that neither the Board of Directors
nor any committee thereof may exercise such authority in a manner that
interferes with any ownership or transfer of Class C Preferred Stock that is
expressly authorized pursuant to Section 10.8(d) of this Article.
10.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions
contained in this Article, at any time after the Issue Date there is a purported
Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other securities
exchange or an automated interdealer quotation system) or other change in the
capital structure of the Corporation (including, but not limited to, any
redemption of Preferred Stock) or other event (including, but not limited to,
any acquisition of any share of Equity Stock) such that (a) any Person (other
than the Initial Holder or a Look-Through Entity) would Beneficially Own shares
of Class C Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class C Preferred Stock in excess of the
Initial Holder Limit, or (c) any Person that is a Look-Through Entity would
Beneficially Own shares of Class C Preferred Stock in excess of the Look-Through
Ownership Limit (in any such event, the Person, Initial Holder or Look-Through
Entity that would Beneficially Own shares of Class C Preferred Stock in excess
of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity
Limit, respectively, is referred to as a "PROHIBITED TRANSFEREE"), then, except
as otherwise provided in Section 10.8 of this Article, such shares of Class C
Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest
whole share) shall be automatically transferred to a Trustee in his capacity as
trustee of a Trust for the
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exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the
Trustee shall be deemed to be effective as of the close of business on the
business day prior to the Excess Transfer, change in capital structure or
another event giving rise to a potential violation of the Ownership Limit, the
Initial Holder Limit or the Look-Through Entity Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with either the Corporation or
any Prohibited Transferee. The Trustee may be an individual or a bank or trust
company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class C Preferred
Stock held by the Trustee shall be issued and outstanding shares of capital
stock of the Corporation. Except to the extent provided in Section 10.3(E), the
Prohibited Transferee shall have no rights in the Class C Preferred Stock held
by the Trustee, and the Prohibited Transferee shall not benefit economically
from ownership of any shares held in trust by the Trustee, shall have no rights
to dividends and shall not possess any rights to vote or other rights
attributable to the shares held in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting
rights and rights to dividends with respect to shares of Class C Preferred Stock
held in the Trust, which rights shall be exercised for the benefit of the
Charitable Beneficiary. Any dividend or distribution paid prior to the discovery
by the Corporation that the shares of Class C Preferred Stock have been
transferred to the Trustee shall be repaid to the Corporation upon demand, and
any dividend or distribution declared but unpaid shall be rescinded as void AB
INITIO with respect to such shares of Class C Preferred Stock. Any dividends or
distributions so disgorged or rescinded shall be paid over to the Trustee and
held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited
Transferee prior to the discovery by the Corporation that the shares of Class C
Preferred Stock have been transferred to the Trustee will be rescinded as void
AB INITIO and shall be recast in accordance with the desires of the Trustee
acting for the benefit of the Charitable Beneficiary. The owner of the shares at
the time of the Excess Transfer, change in capital structure or other event
giving rise to a potential violation of the Ownership Limit, Initial Holder
Limit or Look-Through Entity Ownership Limit shall be deemed to have given an
irrevocable proxy to the Trustee to vote the shares of Class C Preferred Stock
for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the
shares held in the Trust to a person, designated by the Trustee, whose ownership
of the shares will not violate the Ownership Restrictions. If such a sale is
made, the interest of the Charitable Beneficiary shall terminate and proceeds of
the sale shall be payable to the Prohibited Transferee and to the Charitable
Beneficiary as provided in this Section 10.3(E). The Prohibited Transferee shall
receive the lesser of (1) the price paid by the Prohibited Transferee for the
shares or, if the Prohibited Transferee did not give value for the shares
(through a gift, devise or other transaction), the Market Price of the shares on
the day of the event causing the shares to be held in the Trust and (2) the
price per share received by the Trustee from the sale or other disposition of
the shares held in the Trust. Any proceeds in excess of the amount payable to
the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any
of the transfer restrictions set forth in this Section 10.3(E) or any
application thereof is determined in a final judgment to be void, invalid or
unenforceable by any court
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having jurisdiction over the issue, the Prohibited Transferee may be deemed, at
the option of the Corporation, to have acted as the agent of the Corporation in
acquiring the Class C Preferred Stock as to which such restrictions would, by
their terms, apply, and to hold such Class C Preferred Stock on behalf of the
Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class C Preferred Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the Trust (or, in the case of a devise or gift, the Market
Price at the time of such devise or gift) and (ii) the Market Price on the date
the Corporation, or its designee, accepts such offer. The Corporation shall have
the right to accept such offer for a period of 90 days after the later of (i)
the date of the Excess Transfer or other event resulting in a transfer to the
Trust and (ii) the date that the Board of Directors determines in good faith
that an Excess Transfer or other event occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the
Trustee, the Corporation shall designate one or more nonprofit organizations to
be the Charitable Beneficiary of the interest in the Trust relating to such
Prohibited Transferee if (i) the shares of Class C Preferred Stock held in the
Trust would not violate the Ownership Restrictions in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to
acquire shares of Class C Preferred Stock in violation of Section 10.1 of this
Article, or any Person that is a Prohibited Transferee such that stock is
transferred to the Trustee under Section 10.3 of this Article, shall immediately
give written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted Transfer or other
event on the Corporation's status as a REIT. Failure to give such notice shall
not limit the rights and remedies of the Board of Directors provided herein in
any way.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date
certain record and Beneficial Owners and transferees of shares of Class C
Preferred Stock will be required to provide certain information as set out
below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than
5% (or such other percentage between 0.5% and 5%, as provided in the applicable
regulations adopted under the Code) of the number of Outstanding shares of Class
C Preferred Stock shall, within 30 days after January 1 of each year, give
written notice to the Corporation stating the name and address of such record or
Beneficial Owner, the number of shares of Class C Preferred Stock Beneficially
Owned, and a full description of how such shares are held. Each such record or
Beneficial Owner of Class C Preferred Stock shall, upon demand by the
Corporation, disclose to the Corporation in writing such additional information
with respect to the Beneficial Ownership of the Class C Preferred Stock as the
Board of Directors, in its sole discretion, deems appropriate or necessary to
(i) comply with the provisions of the Code regarding the qualification of the
Corporation as a REIT under the Code and (ii) ensure compliance with the
Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit,
as applicable. Each stockholder of record, including
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without limitation any Person that holds shares of Class C Preferred Stock on
behalf of a Beneficial Owner, shall take all reasonable steps to obtain the
written notice described in this Section 10.5 from the Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a
Beneficial Owner of shares of Class C Preferred Stock and any Person (including
the stockholder of record) that is holding shares of Class C Preferred Stock for
a Beneficial Owner, and any proposed transferee of shares, shall provide such
information as the Corporation, in its sole discretion, may request in order to
determine the Corporation's status as a REIT, to comply with the requirements of
any taxing authority or other governmental agency, to determine any such
compliance or to ensure compliance with the Ownership Limit, the Initial Holder
Limit and the Look-Through Ownership Limit, and shall provide a statement or
affidavit to the Corporation setting forth the number of shares of Class C
Preferred Stock already Beneficially Owned by such stockholder or proposed
transferee and any related persons specified, which statement or affidavit shall
be in the form prescribed by the Corporation for that purpose.
10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the
authority of the Board of Directors to take such other action as it deems
necessary or advisable (subject to the provisions of Section 10.12 of this
Article) (i) to protect the Corporation and the interests of its stockholders in
the preservation of the Corporation's status as a REIT and (ii) to insure
compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit.
10.7 AMBIGUITY. In the case of an ambiguity in the application of any of the
provisions of Section 10 of this Article, or in the case of an ambiguity in any
definition contained in Section 10 of this Article, the Board of Directors shall
have the power to determine the application of the provisions of this Article
with respect to any situation based on its reasonable belief, understanding or
knowledge of the circumstances.
10.8 EXCEPTIONS. The following exceptions shall apply or may be established
with respect to the limitations of Section 10.1 of this Article.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a
ruling from the Internal Revenue Service or an opinion of tax counsel or other
evidence or undertaking acceptable to it, may waive the application, in whole or
in part, of the Ownership Limit to a Person subject to the Ownership Limit, if
such person is not an individual for purposes of Section 542(a) of the Code and
is a corporation, partnership, estate or trust. In connection with any such
exemption, the Board of Directors may require such representations and
undertakings from such Person and may impose such other conditions as the Board
deems necessary, in its sole discretion, to determine the effect, if any, of the
proposed Transfer on the Corporation's status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this
Article, the pledge by the Initial Holder of all or any portion of the Class C
Preferred Stock directly owned at any time or from time to time shall not
constitute a violation of Section 10.1 of this Article and the pledgee shall not
be subject to the Ownership Limit with respect to the Class C Preferred Stock so
pledged to it either as a result of the pledge or upon foreclosure.
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<PAGE> 63
(C) UNDERWRITERS. For a period of 270 days following the purchase of
Class C Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class C Preferred Stock,
such underwriter shall not be subject to the Ownership Limit with respect to the
Class C Preferred Stock purchased by it as a part of or in connection with such
offering and with respect to any Class C Preferred Stock purchased in connection
with market making activities.
10.9 LEGEND. Each certificate for Class C Preferred Stock shall bear the
following legend:
"The shares of Class C Cumulative Preferred Stock represented by
this certificate are subject to restrictions on transfer. No person may
Beneficially Own shares of Class C Cumulative Preferred Stock in excess of
the Ownership Restrictions, as applicable, with certain further restrictions
and exceptions set forth in the Corporation's Charter (including the
Articles Supplementary setting forth the terms of the Class C Cumulative
Preferred Stock). Any Person that attempts to Beneficially Own shares of
Class C Cumulative Preferred Stock in excess of the applicable limitation
must immediately notify the Corporation. All capitalized terms in this
legend have the meanings ascribed to such terms in the Corporation's Charter
(including the Articles Supplementary setting forth the terms of the Class C
Cumulative Preferred Stock), 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 stockholder that so requests. If the restrictions on transfer
are violated, the shares of Class C Cumulative Preferred Stock represented
hereby will be either (i) void in accordance with the Certificate or (ii)
automatically transferred to a Trustee of a Trust for the benefit of one or
more Charitable Beneficiaries."
10.10 SEVERABILITY. If any provision of this Article or any application of
any such provision is determined in a final and unappealable judgment to be
void, invalid or unenforceable by any Federal or state court having jurisdiction
over the issues, the validity and enforceability 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.
10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit in the event of a
change in law.
10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall be
interpreted to preclude the settlement of any transaction entered into through
the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system.
FOURTH: The terms of the Class C Cumulative Preferred Stock set forth in
Article Third hereof shall become Article XIV of the Charter.
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<PAGE> 64
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Chairman and witnessed by its Secretary on
December 19, 1997.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ Leeann Morein /s/ Terry Considine
- - ----------------------- --------------------------
Leeann Morein, Terry Considine
Secretary Chairman
THE UNDERSIGNED, Chairman of APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
who executed on behalf of the Corporation the 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 hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ Terry Considine
Terry Considine
-----------------------
Chairman
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<PAGE> 65
CERTIFICATE OF CORRECTION
TO
ARTICLES SUPPLEMENTARY
CLASS C CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(A MARYLAND CORPORATION)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the
"Corporation"), having its principal office in Baltimore City, Maryland, hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Articles Supplementary, dated December, 1997, of the Corporation
relating to its Class C Cumulative Preferred Stock (par value $.01 per share)
were filed with the State Department of Assessments and Taxation of Maryland on
December 22, 1997, and said Articles Supplementary require correction as
permitted by Section 1-207 of the Corporations and Associations Article of the
Annotated Code of Maryland.
SECOND: ARTICLE FIRST of the Articles Supplementary as previously filed
and to be corrected hereby read as follows:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of
the Corporation, the Board of Directors has duly divided and classified
2,300,000 authorized but unissued shares of the capital stock of the
Corporation into a class designated as Class C Cumulative Preferred Stock
and has provided for the issuance of such class.
THIRD: ARTICLE FIRST of the Articles Supplementary as corrected hereby is
as follows:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of
the Corporation, the Board of Directors has duly divided and classified
2,760,000 authorized but unissued shares of the capital stock of the
Corporation into a class designated as Class C Cumulative Preferred Stock
and has provided for the issuance of such class.
FOURTH: The inaccuracy or defect in ARTICLE FIRST of the Articles
Supplementary as previously filed is that ARTICLE FIRST contained the wrong
number of shares classified as Class C Cumulative Preferred Stock.
<PAGE> 66
FIFTH: ARTICLE SECOND of the Articles Supplementary as previously filed
and to be corrected hereby reads as follows:
SECOND: The reclassification increases the number of shares
classified as Class C Cumulative Preferred Stock, par value $.01 per share,
from no shares immediately prior to the reclassification to 2,300,000 shares
immediately after the reclassification. The reclassification decreases the
number of shares classified as Preferred Stock, par value $.01 per share, from
9,250,000 shares immediately prior to the reclassification to 6,950,000
shares immediately after the reclassification. The number of shares classified
as Class C Cumulative Preferred Stock may be decreased pursuant to Section 6 of
Article Third of these Articles Supplementary upon reacquisition thereof in any
manner, or by retirement thereof, by the Corporation.
SIXTH: ARTICLE SECOND of the Articles Supplementary as corrected
hereby is as follows:
SECOND: The reclassification increases the number of shares
classified as Class C Cumulative Preferred Stock, par value $.01 per share,
from no shares immediately prior to the reclassification to 2,760,00 shares
immediately after the reclassification. The reclassification decreases the
number of shares classified as Preferred Stock, par value $.01 per share, from
9,250,000 shares immediately prior to the reclassification to 6,490,000 shares
immediately after the reclassification. The number of shares classified as
Class C Cumulative Preferred Stock may be decreases pursuant to Section 6 of
Article Third of these Articles Supplementary upon reacquisition thereof in any
manner, or by retirement thereof, by the Corporation.
SEVENTH: The inaccuracies or defects in ARTICLE SECOND of the Articles
Supplementary as previously filed are that ARTICLE SECOND contained the wrong
number of shares classified as Class C Cumulative Preferred Stock immediately
after the reclassification and the wrong number of shares classified as
Preferred Stock, par value $.01 per share, immediately after the
reclassification.
EIGHTH: Section 1 of ARTICLE THIRD of the Articles Supplementary as
previously filed and to be corrected hereby reads as follows:
1. Number of Shares and Designation.
This class of Preferred Stock shall be designated as Class C
Cumulative Preferred Stock (the "Class C Preferred Stock") and Two Million
Three Hundred Thousand (2,300,000) shall be the authorized number of shares of
such Class C Preferred Stock constituting such class.
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<PAGE> 67
NINTH: The first paragraph of Section 1 of ARTICLE THIRD of the Articles
Supplementary as corrected hereby is as follows:
1. Number of Shares and Designation.
This class of Preferred Stock shall be designated as Class C
Cumulative Preferred Stock (the "Class C Preferred Stock") and Two Million
Seven Hundred Sixty Thousand (2,760,000) shall be the authorized number of
shares of such Class C Preferred Stock constituting such class.
TENTH: The inaccuracy or defect in Section 1 of ARTICLE THIRD of the
Articles Supplementary as previously filed is that Section 1 of ARTICLE FIRST
contained the wrong number of shares classified as Class C Cumulative Preferred
Stock.
ELEVENTH: The definition of "Dividend Periods" contained in Section 2 of
ARTICLE THIRD of the Articles Supplementary as previously filed and to be
corrected hereby reads as follows:
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January
15, April 15, July 15 and October 15 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend
Period, other than the Dividend Period during which any Class B Preferred
Stock shall be redeemed pursuant to Section 5 hereof, which shall end on
and include the Redemption Date with respect to the Class C Preferred Stock
being redeemed.
TWELFTH: The definition of "Dividend Periods" contained in Section 2 of
ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows:
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January
15, April 15, July 15 and October 15 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend
Period, other than the Dividend Period during which any Class C Preferred
Stock shall be redeemed pursuant to Section 5 hereof, which shall end on
and include the Redemption Date with respect to the Class C Preferred Stock
being redeemed.
THIRTEENTH: The inaccuracy or defect in the definition of "Dividend
Periods" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary
as previously filed is that the reference to "Class B Preferred Stock" in the
fifth line thereof should be to "Class C Preferred Stock."
FOURTEENTH: The definition of "Initial Holder Limit" contained in Section
2 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be
corrected hereby reads as follows:
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<PAGE> 68
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class C Preferred Stock of the Corporation having an Aggregate Value not in
excess of the excess of (x) 15% of the Aggregate Value of all Outstanding
shares of Equity Stock over (y) the Aggregate Value of all shares of Equity
Stock other than Class B Preferred Stock that are Beneficially Owned by the
Initial Holder. From the Issue Date, the secretary of the Corporation, or
such other person as shall be designated by the Board of Directors, shall
upon request make available to the representative(s) of the Initial Holder
and the Board of Directors' a schedule that sets forth the then-current
Initial Holder Limit applicable to the Initial Holder.
FIFTEENTH: The definition of "Initial Holder Limit" contained in Section 2
of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as
follows:
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class C Preferred Stock of the Corporation having an Aggregate Value not in
excess of the excess of (x) 15% of the Aggregate Value of all Outstanding
shares of Equity Stock over (y) the Aggregate Value of all shares of Equity
Stock other than Class C Preferred Stock that are Beneficially Owned by the
Initial Holder. From the Issue Date, the secretary of the Corporation, or
such other person as shall be designated by the Board of Directors, shall
upon request make available to the representative(s) of the Initial Holder
and the Board of Directors, a schedule that sets forth the then-current
Initial Holder Limit applicable to the Initial Holder.
SIXTEENTH: The inaccuracy or defect in the definition of "Initial Holder
Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as
previously filed is that the reference to "Class B Preferred Stock" in the
fourth and fifth lines thereof should be to "Class C Preferred Stock."
SEVENTEENTH: The definition of "Look-Through Ownership Limit" contained in
Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed
and to be corrected hereby reads as follows:
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class C Preferred Stock of the
Corporation having an Aggregate Value not in excess of the excess of (x)
15% of the Aggregate Value of all Outstanding shares of Equity Stock over
(y) by the Aggregate Value of all shares of Equity Stock other than Class B
Preferred Stock that are Beneficially Owned by the Look-Through Entity.
EIGHTEENTH: The definition of "Look-Through Ownership Limit" contained in
Section 2 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is
as follows:
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class C Preferred Stock of the
Corporation
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<PAGE> 69
having an Aggregate Value not in excess of the (x) 15% of the Aggregate
Value of all Outstanding shares of Equity Stock over (y) by the Aggregate
Value of all shares of Equity Stock other than Class C Preferred Stock that
are Beneficially Owned by the Look-Through Entity.
NINETEENTH: The inaccuracy or defect in the definition of "Look-Through
Ownership Limit" contained in Section 2 of ARTICLE THIRD of the Articles
Supplementary as previously filed is that the reference to "Class B Preferred
Stock" in the fifth line thereof should be to "Class C Preferred Stock."
TWENTIETH: The provision in the Articles Supplementary as previously filed
and to be corrected hereby reads as follows:
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman and witnessed by its
Secretary on December ____, 1997.
TWENTY-FIRST: The provision in the Articles Supplementary as corrected
hereby is as follows:
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman and witnessed by its
Secretary on December 22, 1997.
TWENTY-SECOND: The inaccuracy or defect in the provision of the Articles
Supplementary as previously filed is that such statement failed to state
correctly the date such Articles were signed.
-5-
<PAGE> 70
IN WITNESS WHEREOF, Apartment Investment and Management Company has caused
this Certificate of Correction to be signed in its name and on its behalf by its
Chairman and witnessed by its Secretary on February 17, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ LEEANN MOREIN By: TERRY CONSIDINE
- - ----------------------------- -----------------------------
Leeann Morein, Secretary Terry Considine, Chairman
The undersigned, Chairman of APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
with respect to the foregoing Certificate of Correction of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Certificate of Correction to be the act of said
Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects, under
the penalties of perjury.
/s/ TERRY CONSIDINE
-----------------------------
Terry Considine, Chairman
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<PAGE> 71
ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS D CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in Baltimore
City, Maryland, hereby certifies to the Department of Assessments and Taxation
of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Section 1.2 of Article IV of the Charter of the Corporation,
the Board of Directors has duly divided and classified 4,600,000 authorized but
unissued shares of the capital stock of the Corporation into a class designated
as Class D Cumulative Preferred Stock and has provided for the issuance of such
class.
SECOND: The reclassification increases the number of shares classified as
Class D Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 4,600,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Preferred Stock, par value $.01 per share, from 6,490,000 shares
immediately prior to the reclassification to 1,890,000 shares immediately after
the reclassification. The number of shares classified as Class D Cumulative
Preferred Stock may be decreased pursuant to Section 6 of Article Third of these
Articles Supplementary upon reacquisition thereof in any manner, or by
retirement thereof, by the Corporation.
THIRD: The terms of the Class D Cumulative Preferred Stock (including the
preferences, conversions or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, or terms or
conditions of redemption) as set by the Board of Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class D Cumulative
Preferred Stock (the "Class D Preferred Stock") and Four Million Six Hundred
Thousand (4,600,000) shall be the authorized number of shares of such Class D
Preferred Stock constituting such class.
<PAGE> 72
2. DEFINITIONS.
For purposes of the Class D Preferred Stock, the following terms shall have
the meanings indicated:
"ACT" shall mean the Securities Act of 1933, as amended.
"AFFILIATE" of a Person means a Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under
common control with, the Person specified.
"AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock,
the sum of the products of (i) the number of shares of each class of Equity
Stock within such block multiplied by (ii) the corresponding Market Price
of one share of Equity Stock of such class.
"BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of
shares of Equity Stock equal to the sum of (i) the number of shares of
Equity Stock directly owned by such Person, (ii) the number of shares of
Equity Stock indirectly owned by such Person (if such Person is an
"individual" as defined in Section 542(a)(2) of the Code) taking into
account the constructive ownership rules of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code, and (iii) the number of
shares of Equity Stock that such Person is deemed to beneficially own
pursuant to Rule 13d3 under the Exchange Act or that is attributed to such
Person pursuant to Section 318 of the Code, as modified by Section
856(d)(5) of the Code, PROVIDED that when applying this definition of
Beneficial Ownership to the Initial Holder, clause (iii) of this
definition, and clause (ii) of the definition of "Person" shall be
disregarded. The terms "BENEFICIAL OWNER," "BENEFICIALLY OWNS" and
"BENEFICIALLY OWNED" shall have the correlative meanings.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation
or any committee authorized by such Board of Directors to perform any of
its responsibilities with respect to the Class D Preferred Stock.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New
York are not required to be open.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 10.3 of this Article, each of which shall
be an organization described in Section 170(b)(1)(A), 170(c)(2) and
501(c)(3) of the Code.
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<PAGE> 73
"CLASS D PREFERRED STOCK" shall have the meaning set forth in Section 1 of
this Article.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto. Reference to any provision of
the Code shall mean such provision as in effect from time to time, as the
same may be amended, and any successor thereto, as interpreted by any
applicable regulations or other administrative pronouncements as in effect
from time to time.
"COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation or such shares of the Corporation's capital stock
into which outstanding shares of Common Stock shall be reclassified.
"DIVIDEND PAYMENT DATE" shall mean January 15, April 15, July 15 and
October 15 of each year; provided, further, that if any Dividend Payment
Date falls on any day other than a Business Day, the dividend payment
payable on such Dividend Payment Date shall be paid on the Business Day
immediately following such Dividend Payment Date and no interest shall
accrue on such dividend from such date to such Dividend Payment Date.
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January
15, April 15, July 15 and October 15 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend
Period, other than the Dividend Period during which any Class D Preferred
Stock shall be redeemed pursuant to Section 5 hereof, which shall end on
and include the Redemption Date with respect to the Class D Preferred Stock
being redeemed.
"EQUITY STOCK" shall mean one or more shares of any class of capital stock
of the Corporation.
"EXCESS TRANSFER" has the meaning set forth in Section 10.3(A) of this
Article.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ISSUE DATE" shall mean February 19, 1998.
"INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including
the Issue Date and ending on and including April 14, 1998.
"INITIAL HOLDER" shall mean Terry Considine.
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class D Preferred Stock of the Corporation having an Aggregate Value not in
excess
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<PAGE> 74
of the excess of (x) 15% of the Aggregate Value of all Outstanding shares
of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock
other than Class D Preferred Stock that are Beneficially Owned by the
Initial Holder. From the Issue Date, the secretary of the Corporation, or
such other person as shall be designated by the Board of Directors, shall
upon request make available to the representative(s) of the Initial Holder
and the Board of Directors, a schedule that sets forth the thencurrent
Initial Holder Limit applicable to the Initial Holder.
"JUNIOR STOCK" shall mean the Common Stock and any other class or series of
capital stock of the Corporation over which the shares of Class D Preferred
Stock have preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in
Section 401(a) of the Code as provided under Section 856(h)(3) of the Code
or (ii) registered under the Investment Company Act of 1940.
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class D Preferred Stock of the
Corporation having an Aggregate Value not in excess of the excess of (x)
15% of the Aggregate Value of all Outstanding shares of Equity Stock over
(y) by the Aggregate Value of all shares of Equity Stock other than Class D
Preferred Stock that are Beneficially Owned by the Look-Through Entity.
"MARKET PRICE" on any date shall mean, with respect to any share of Equity
Stock, the Closing Price of share of that class of Equity Stock on the
Trading Day immediately preceding such date. The term "CLOSING PRICE" on
any date shall mean the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the NYSE or, if the Equity Stock is not listed or
admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Equity Stock is listed
or admitted to trading or, if the Equity 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
overthecounter 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 the Equity Stock is not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Equity Stock selected
by the Board of
4
<PAGE> 75
Directors of the Company. The term "TRADING DAY" shall mean a day on which
the principal national securities exchange on which the Equity Stock is
listed or admitted to trading is open for the transaction of business or,
if the Equity Stock is not listed or admitted to trading on any national
securities exchange, shall mean any day other than a Saturday, a Sunday or
a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of
the Corporation, PROVIDED that for purposes of the application of the
Ownership Limit, the Look-Through Ownership Limit or the Initial Holder
Limit to any Person, the term "OUTSTANDING" shall be deemed to include the
number of shares of Equity Stock that such Person alone, at that time,
could acquire pursuant to any options or convertible securities.
"OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder
or a Look-Through Entity, a number of the Outstanding shares of Class D
Preferred Stock of the Corporation having an Aggregate Value not in excess
of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares
of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock
other than Class D Preferred Stock that are Beneficially Owned by the
Person.
"OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as
applied to Persons other than the Initial Holder or Look-Through Entities,
the Initial Holder Limit as applied to the Initial Holder and the
Look-Through Ownership Limit as applied to Look-Through Entities.
"PARITY STOCK" shall have the meaning set forth in paragraph (b) of Section
7 of this Article. The Class B Preferred Stock and the Class C Preferred
Stock shall each be a Parity Stock.
"PERSON" shall mean (a) for purposes of Section 10 of this Article, (i) an
individual, corporation, partnership, estate, trust (including a trust
qualifying under Section 401(a) or 501(c) of the Code), association,
private foundation within the meaning of Section 509(a) of the Code, joint
stock company or other entity, and (ii) also includes a group as that term
is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for
purposes of the remaining Sections of this Article, any individual, firm,
partnership, corporation or other entity and shall include any successor
(by merger or otherwise) of such entity.
"PROHIBITED TRANSFEREE" has the meaning set forth in Section 10.3(A) of
this Article.
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<PAGE> 76
"REDEMPTION DATE" shall have the meaning set forth in paragraph (b) of
Section 5 of this Article.
"REIT" shall mean a "real estate investment trust" as defined in Section
856 of the Code.
"SENIOR STOCK" shall have the meaning set forth in paragraph (a) of Section
7 of this Article.
"SET APART FOR PAYMENT" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of dividends or other distribution by the Board
of Directors, the allocation of funds to be so paid on any series or class
of capital stock of the Corporation; provided, however, that if any funds
for any class or series of Junior Stock or any class or series of Parity
Stock are placed in a separate account of the Corporation or delivered to a
disbursing, paying or other similar agent, then "set apart for payment"
with respect to the Class D Preferred Stock shall mean placing such funds
in a separate account or delivering such funds to a disbursing, paying or
other similar agent.
"TRADING DAY", as to any securities, shall mean any day on which such
securities are traded on the principal national securities exchange on
which such securities are listed or admitted or, if such securities are not
listed or admitted for trading on any national securities exchange, the
NASDAQ National Market or, if such securities are not listed or admitted
for trading on the NASDAQ National Market, in the securities market in
which such securities are traded.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of a share of Class D Preferred Stock (including (i) the
granting of an option or any series of such options or entering into any
agreement for the sale, transfer or other disposition of Class D Preferred
Stock or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Class D Preferred
Stock), whether voluntary or involuntary, whether of record or Beneficial
Ownership, and whether by operation of law or otherwise (including, but not
limited to, any transfer of an interest in other entities that results in a
change in the Beneficial Ownership of shares of Class D Preferred Stock).
The term "TRANSFERS" and "TRANSFERRED" shall have correlative meanings.
"TRANSFER AGENT" means such transfer agent as may be designated by the
Board of Directors or their designee as the transfer agent for the Class D
Preferred Stock; provided, that if the Corporation has not designated a
transfer agent then the Corporation shall act as the transfer agent for the
Class D Preferred Stock.
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"TRUST" shall mean the trust created pursuant to Section 10.3 of this
Article.
"TRUSTEE" shall mean the Person unaffiliated with either the Corporation or
the Prohibited Transferee that is appointed by the Corporation to serve as
trustee of the Trust.
"VOTING PREFERRED STOCK" shall have the meaning set forth in Section 8 of
this Article.
3. DIVIDENDS.
(a) The holders of Class D Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Class D Preferred Stock equal to $2.1875 per annum. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable quarterly in arrears on each Dividend Payment Date, commencing on April
15, 1998. Each such dividend shall be payable in arrears to the holders of
record of the Class D Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on the January 1, April 1, July 1 or
October 1, as the case may be, immediately preceding such Dividend Payment Date.
Accumulated, accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to holders of record on such date, which date shall not precede by more
than 45 days the payment date thereof, as may be fixed by the Board of
Directors.
(b) The amount of dividends payable per share of Class D Preferred
Stock for the Initial Dividend Period, or any other period shorter than a full
Dividend Period, shall be computed ratably on the basis of twelve 30day months
and a 360day year. Holders of Class D Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of
cumulative dividends, as herein provided, on the Class D Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Class D Preferred Stock that may be in
arrears.
(c) So long as any of the shares of Class D Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the Corporation
and no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any class or series of
Parity Stock for any period unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for
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such payment on the Class D Preferred Stock for all Dividend Periods terminating
on or prior to the Dividend Payment Date with respect to such class or series of
Parity Stock. When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon the Class D
Preferred Stock and all dividends declared upon any other class or series of
Parity Stock shall be declared ratably in proportion to the respective amounts
of dividends accumulated, accrued and unpaid on the Class D Preferred Stock and
accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class D Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Junior Stock) shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made, directly or indirectly, by the Corporation with respect to any
shares of Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such stock), directly or indirectly, by the Corporation (except by
conversion into or exchange for shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Stock), nor shall any other cash or
other property otherwise be paid or distributed to or for the benefit of any
holder of shares of Junior Stock in respect thereof, directly or indirectly, by
the Corporation unless in each case the full cumulative dividends (including all
accumulated, accrued and unpaid dividends) on all outstanding shares of Class D
Preferred Stock shall have been paid or such dividends have been declared and
set apart for payment for all past Dividend Periods with respect to the Class D
Preferred Stock.
Notwithstanding the provisions of this Section 3(d), the Corporation
shall not be prohibited from (i) declaring or paying or setting apart for
payment any dividend or distribution on any shares of Parity Stock or (ii) or
redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if
such declaration, payment, redemption, purchase or other acquisition is
necessary in order to maintain the continued qualification of the Corporation as
a REIT under Section 856 of the Code.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution by the Corporation (whether of capital or surplus) shall be made to
or set apart for the holders of Junior Stock, the holders of shares of Class D
Preferred Stock shall be entitled to receive TwentyFive Dollars ($25) per share
of Class D Preferred Stock (the "Liquidation Preference"), plus an amount equal
to all dividends (whether or not earned or declared) accumulated, accrued and
unpaid thereon to the date of final
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distribution to such holders; but such holders shall not be entitled to any
further payment. Until the holders of the Class D Preferred Stock have been paid
the Liquidation Preference in full, plus an amount equal to all dividends
(whether or not earned or declared) accumulated, accrued and unpaid thereon to
the date of final distribution to such holders, no payment will be made to any
holder of Junior Stock upon the liquidation, dissolution or winding up of the
Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of Class D Preferred Stock shall be insufficient to pay in
full the preferential amount aforesaid and liquidating payments on any other
shares of any class or series of Parity Stock, then such assets, or the proceeds
thereof, shall be distributed among the holders of Class D Preferred Stock and
any such other Parity Stock ratably in the same proportion as the respective
amounts that would be payable on such Class D Preferred Stock and any such other
Parity Stock if all amounts payable thereon were paid in full. For the purposes
of this Section 4, (i) a consolidation or merger of the Corporation with one or
more corporations, (ii) a sale or transfer of all or substantially all of the
Corporation's assets, or (iii) a statutory share exchange shall not be deemed to
be a liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of Class
D Preferred Stock and any Parity Stock, as provided in this Section 4, any other
series or class or classes of Junior Stock shall, subject to the respective
terms thereof, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Class D Preferred Stock and any Parity Stock
shall not be entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class D Preferred Stock shall not be redeemable by the
Corporation prior to February 19, 2003, except as set forth in Section 10.2 of
this Article. On and after February 19, 2003, the Corporation, at its option,
may redeem shares of Class D Preferred Stock, in whole or from time to time in
part, at a redemption price payable in cash equal to 100% of the Liquidation
Preference thereof, plus all accrued and unpaid dividends to the date fixed for
redemption (the "Redemption Date"). In connection with any redemption pursuant
to this Section 5(a), the redemption price of the Class D Preferred Stock (other
than any portion thereof consisting of accrued and unpaid dividends) shall be
payable solely with the proceeds from the sale by the Corporation or AIMCO
Properties, L.P., a Delaware limited Partnership (the "Operating Partnership"),
of other capital shares of the Corporation or the Operating Partnership (whether
or not such sale occurs concurrently with such redemption). For purposes of the
preceding sentence, 'capital shares' means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable at the option of the holder for
equity securities (unless
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and to the extent such debt securities are subsequently converted into capital
shares)) or options to purchase any of the foregoing of or in the Corporation or
the Operating Partnership.
(b) The Redemption Date shall be selected by the Corporation, shall be
specified in the notice of redemption and shall be not less than 30 days nor
more than 60 days after the date notice of redemption is sent by the
Corporation.
(c) If full cumulative dividends on all outstanding shares of Class D
Preferred Stock have not been paid or declared and set apart for payment, no
shares of Class D Preferred Stock may be redeemed unless all outstanding shares
of Class D Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire shares
of Class D Preferred Stock, otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of shares of Class D Preferred
Stock.
(d) If the Corporation shall redeem shares of Class D Preferred Stock
pursuant to paragraph (a) of this Section 5, notice of such redemption shall be
given to each holder of record of the shares to be redeemed. Such notice shall
be provided by first class mail, postage prepaid, at such holder's address as
the same appears on the stock records of the Corporation. Neither the failure to
mail any notice required by this paragraph (d), nor any defect therein or in the
mailing thereof to any particular holder, shall affect the sufficiency of the
notice or the validity of the proceedings for redemption with respect to the
other holders. Any notice which was mailed in the manner herein provided shall
be conclusively presumed to have been duly given on the date mailed whether or
not the holder receives the notice. Each such notice shall state, as
appropriate: (1) the Redemption Date; (2) the number of shares of Class D
Preferred Stock to be redeemed and, if fewer than all such shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; and (3) the place or places at which certificates for such shares are to
be surrendered for cash. Notice having been mailed as aforesaid, from and after
the Redemption Date (unless the Corporation shall fail to make available the
amount of cash necessary to effect such redemption), (i) except as otherwise
provided herein, dividends on the shares of Class D Preferred Stock so called
for redemption shall cease to accumulate or accrue on the shares of Class D
Preferred Stock called for redemption (except that, in the case of a Redemption
Date after a dividend record date and prior to the related Dividend Payment
Date, holders of Class D Preferred Stock on the dividend record date will be
entitled on such Dividend Payment Date to receive the dividend payable on such
shares), (ii) said shares shall no longer be deemed to be outstanding, and (iii)
all rights of the holders thereof as holders of Class D Preferred Stock of the
Corporation shall cease (except the rights to receive the cash payable upon such
redemption, without interest thereon, upon surrender and endorsement of their
certificates if so required and to receive any dividends payable thereon). The
Corporation's obligation to make available the redemption price in accordance
with the preceding sentence shall be deemed fulfilled if, on or before the Call
Date, the
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Corporation shall deposit with a bank or trust company (which may be an
affiliate of the Corporation) that has, or is an affiliate of a bank or trust
company that has, a capital and surplus of at least $50,000,000, such amount of
cash as is necessary for such redemption, in trust, with irrevocable
instructions that such cash be applied to the redemption of the shares of Class
D Preferred Stock so called for redemption. No interest shall accrue for the
benefit of the holders of shares of Class D Preferred Stock to be redeemed on
any cash so set aside by the Corporation. Subject to applicable escheat laws,
any such cash unclaimed at the end of two years from the Redemption Date shall
revert to the general funds of the Corporation, after which reversion the
holders of shares of Class D Preferred Stock so called for redemption shall look
only to the general funds of the Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class D Preferred Stock to be
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which such shares have been
redeemed in accordance with such notice. If fewer than all the outstanding
shares of Class D Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class D
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class D Preferred Stock held of record by each holder of
such shares, pro rata (as nearly as may be) or by any other method as may be
determined by the Board of Directors in its discretion to be equitable. If fewer
than all the shares of Class D Preferred Stock represented by any certificate
are redeemed, then a new certificate representing the unredeemed shares shall be
issued without cost to the holders thereof.
6. STATUS OF REACQUIRED STOCK.
All shares of Class D Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class D Preferred Stock.
7. RANKING.
Any class or series of capital stock of the Corporation shall be deemed to
rank:
(a) prior or senior to the Class D Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Class D Preferred Stock ("Senior Stock");
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(b) on a parity with the Class D Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Class D Preferred Stock, if the holders of such class of stock or series and
the Class D Preferred Stock shall be entitled to the receipt of dividends and of
amounts distributable upon liquidation, dissolution or winding up in proportion
to their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority one over the other
("Parity Stock"); and
(c) junior to the Class D Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Class D Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such class or series
("Junior Stock").
8. VOTING.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Class D Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of directors then constituting the
Board of Directors shall be increased by two (if not already increased by reason
of similar types of provisions with respect to shares of Parity Stock of any
other class or series which is entitled to similar voting rights (the "Voting
Preferred Stock")) and the holders of shares of Class D Preferred Stock,
together with the holders of shares of all other Voting Preferred Stock then
entitled to exercise similar voting rights, voting as a single class regardless
of series, shall be entitled to elect the two additional directors to serve on
the Board of Directors at any annual meeting of stockholders or special meeting
held in place thereof, or at a special meeting of the holders of the Class D
Preferred Stock and the Voting Preferred Stock called as hereinafter provided.
Whenever all arrears in dividends on the Class D Preferred Stock and the Voting
Preferred Stock then outstanding shall have been paid and dividends thereon for
the current quarterly dividend period shall have been paid or declared and set
apart for payment, then the right of the holders of the Class D Preferred Stock
and the Voting Preferred Stock to elect such additional two directors shall
cease (but subject always to the same provision for the vesting of such voting
rights in the case of any similar future arrearages), and the terms of office of
all Persons elected as directors by the holders of the Class D Preferred Stock
and the Voting Preferred Stock shall forthwith terminate and the number of
directors constituting the Board of Directors shall be reduced accordingly. At
any time after such voting power shall have been so vested in the holders of
Class D Preferred Stock and the Voting Preferred Stock, if applicable, the
Secretary of the Corporation may, and upon the written request of any holder of
Class D Preferred
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Stock (addressed to the Secretary at the principal office of the Corporation)
shall, call a special meeting of the holders of the Class D Preferred Stock and
of the Voting Preferred Stock for the election of the two directors to be
elected by them as herein provided, such call to be made by notice similar to
that provided in the Bylaws of the Corporation for a special meeting of the
stockholders or as required by law. If any such special meeting required to be
called as above provided shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of Class D Preferred Stock
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors elected
at any such special meeting shall hold office until the next annual meeting of
the stockholders or special meeting held in lieu thereof if such office shall
not have previously terminated as above provided. If any vacancy shall occur
among the directors elected by the holders of the Class D Preferred Stock and
the Voting Preferred Stock, a successor shall be elected by the Board of
Directors, upon the nomination of the then remaining director elected by the
holders of the Class D Preferred Stock and the Voting Preferred Stock or the
successor of such remaining director, to serve until the next annual meeting of
the stockholders or special meeting held in place thereof if such office shall
not have previously terminated as provided above.
(b) So long as any shares of Class D Preferred Stock are outstanding,
in addition to any other vote or consent of stockholders required by law or by
the Charter of the Corporation, the affirmative vote of at least 662/3% of the
votes entitled to be cast by the holders of the Class D Preferred Stock voting
as a single class with the holders of all other classes or series of Preferred
Stock entitled to vote on such matters, given in Person or by proxy, either in
writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the provisions
of these Articles Supplementary, the Charter or the ByLaws of the Corporation
that materially adversely affects the voting powers, rights or preferences of
the holders of the Class D Preferred Stock; provided, however, that the
amendment of the provisions of the Charter so as to authorize or create, or to
increase the authorized amount of, or issue any Junior Stock or any shares of
any class of Parity Stock shall not be deemed to materially adversely affect the
voting powers, rights or preferences of the holders of Class D Preferred Stock;
or
(ii) The authorization, creation of, the increase in the
authorized amount of, or issuance of any shares of any class of Senior Stock or
any security convertible into shares of any class of Senior Stock (whether or
not such class of Senior Stock is currently authorized); provided, however, that
no such vote of the holders of Class D Preferred Stock shall be required if, at
or prior to the time when such amendment, alteration or repeal is to take
effect, or when the issuance of any such prior shares or convertible security is
to be made, as the case may be, provision
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is made for the redemption of all shares of Class D Preferred Stock at the time
outstanding to the extent such redemption is authorized by Section 5 of this
Article.
For purposes of the foregoing provisions and all other voting rights under
these Articles Supplementary, each share of Class D Preferred Stock shall have
one (1) vote per share, except that when any other class or series of preferred
stock shall have the right to vote with the Class D Preferred Stock as a single
class on any matter, then the Class D Preferred Stock and such other class or
series shall have with respect to such matters one quarter of one (.25) vote per
$25 of stated liquidation preference. Except as otherwise required by applicable
law or as set forth herein, the Class D Preferred Stock shall not have any
relative, participating, optional or other special voting rights and powers
other than as set forth herein, and the consent of the holders thereof shall not
be required for the taking of any corporate action.
9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record holder
of any share of Class D Preferred Stock as the true and lawful owner thereof for
all purposes, and neither the Corporation nor the Transfer Agent shall be
affected by any notice to the contrary.
10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section
10.8, from and after the Issue Date, no Person (other than the Initial Holder or
a Look-Through Entity) shall Beneficially Own shares of Class D Preferred Stock
in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own
shares of Class D Preferred Stock in excess of the Initial Holder Limit and no
Look-Through Entity shall Beneficially Own shares of Class D Preferred Stock in
excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated interdealer quotation system) that, if effective, would result in any
Person (other than the Initial Holder or a Look-Through Entity) Beneficially
Owning shares of Class D Preferred Stock in excess of the Ownership Limit shall
be void AB INITIO as to the Transfer of such shares of Class D Preferred Stock
that would be otherwise Beneficially Owned by such Person in excess of the
Ownership Limit, and the intended transferee shall acquire no rights in such
shares of Class D Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), any
Transfer (whether or not such Transfer is the result of transactions entered
into
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through the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system) that, if effective, would result in the Initial
Holder Beneficially Owning shares of Class D Preferred Stock in excess of the
Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares
of Class D Preferred Stock that would be otherwise Beneficially Owned by the
Initial Holder in excess of the Initial Holder limit, and the Initial Holder
shall acquire no rights in such shares of Class D Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 10.8 from and after the Issue Date (and subject to Section
10.12), any Transfer (whether or not such Transfer is the result of transactions
entered into through the facilities of the NYSE or other securities exchange or
an automated interdealer quotation system) that, if effective, would result in
any Look-Through Entity Beneficially Owning shares of Class D Preferred Stock in
excess of the Look-Through Ownership limit shall be void AB INITIO as to the
Transfer of such shares of Class D Preferred Stock that would be otherwise
Beneficially Owned by such Look-Through Entity in excess of the Look-Through
Ownership Limit and such Look-Through Entity shall acquire no rights in such
shares of Class D Preferred Stock.
(E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the
Issue Date, any Transfer that, if effective would result in the Corporation
being "closely held" within the meaning of Section 856(h) of the Code, or would
otherwise result in the Corporation failing to qualify as a REIT (including,
without limitation, a Transfer or other event that would result in the
Corporation owning (directly 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) shall be void AB
INITIO as to the Transfer of shares of Class D Preferred Stock that would cause
the Corporation (i) to be "closely held" within the meaning of Section 856(h) of
the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and
the intended transferee shall acquire no rights in such shares of Class D
Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class
D Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E)
of this Article because it would, if effective, result in (i) the ownership of
Class D Preferred Stock in excess of the Initial Holder Limit, the Ownership
Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (iii) the Corporation
otherwise failing to qualify as a REIT, shall not adversely affect the validity
of the Transfer of any other share of Class D Preferred Stock in the same or any
other related transaction.
10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof
shall at any time determine in good faith that a Transfer or other event has
taken place in violation of Section 10.1 of this Article or that a Person
intends to acquire or has
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attempted to acquire Beneficial Ownership of any shares of Class D Preferred
Stock in violation of Section 10.1 of this Article (whether or not such
violation is intended), the Board of Directors or a committee thereof shall be
empowered to take any action as it deems advisable to refuse to give effect to
or to prevent such Transfer or other event, including, but not limited to,
refusing to give effect to such Transfer or other event on the books of the
Corporation, causing the Corporation to redeem such shares at the then current
Market Price and upon such terms and conditions as may be specified by the Board
of Directors in its sole discretion (including, but not limited to, by means of
the issuance of longterm indebtedness for the purpose of such redemption),
demanding the repayment of any distributions received in respect of shares of
Class D Preferred Stock acquired in violation of Section 10.1 of this Article or
instituting proceedings to enjoin such Transfer or to rescind such Transfer or
attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers
(or in the case of events other than a Transfer, Beneficial Ownership) in
violation of Section 10.1 of this Article, regardless of any action (or
nonaction) by the Board of Directors or such committee, (a) shall be void AB
INITIO or (b) shall automatically result in the transfer described in Section
10.3 of this Article; PROVIDED, FURTHER, that the provisions of this Section
10.2 shall be subject to the provisions of Section 10.12 of this Article;
PROVIDED, FURTHER, that neither the Board of Directors nor any committee thereof
may exercise such authority in a manner that interferes with any ownership or
transfer of Class D Preferred Stock that is expressly authorized pursuant to
Section 10.8(d) of this Article.
10.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions
contained in this Article, at any time after the Issue Date there is a purported
Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other securities
exchange or an automated interdealer quotation system) or other change in the
capital structure of the Corporation (including, but not limited to, any
redemption of Preferred Stock) or other event (including, but not limited to,
any acquisition of any share of Equity Stock) such that (a) any Person (other
than the Initial Holder or a Look-Through Entity) would Beneficially Own shares
of Class D Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class D Preferred Stock in excess of the
Initial Holder Limit, or (c) any Person that is a Look-Through Entity would
Beneficially Own shares of Class D Preferred Stock in excess of the Look-Through
Ownership Limit (in any such event, the Person, Initial Holder or Look-Through
Entity that would Beneficially Own shares of Class D Preferred Stock in excess
of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity
Limit, respectively, is referred to as a "PROHIBITED TRANSFEREE"), then, except
as otherwise provided in Section 10.8 of this Article, such shares of Class D
Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest
whole share) shall be automatically transferred to a Trustee in his capacity as
trustee of a Trust for the
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exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the
Trustee shall be deemed to be effective as of the close of business on the
business day prior to the Excess Transfer, change in capital structure or
another event giving rise to a potential violation of the Ownership Limit, the
Initial Holder Limit or the Look-Through Entity Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with either the Corporation or
any Prohibited Transferee. The Trustee may be an individual or a bank or trust
company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class D
Preferred Stock held by the Trustee shall be issued and outstanding shares of
capital stock of the Corporation. Except to the extent provided in Section
10.3(E), the Prohibited Transferee shall have no rights in the Class D Preferred
Stock held by the Trustee, and the Prohibited Transferee shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares held in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting
rights and rights to dividends with respect to shares of Class D Preferred Stock
held in the Trust, which rights shall be exercised for the benefit of the
Charitable Beneficiary. Any dividend or distribution paid prior to the discovery
by the Corporation that the shares of Class D Preferred Stock have been
transferred to the Trustee shall be repaid to the Corporation upon demand, and
any dividend or distribution declared but unpaid shall be rescinded as void AB
INITIO with respect to such shares of Class D Preferred Stock. Any dividends or
distributions so disgorged or rescinded shall be paid over to the Trustee and
held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited
Transferee prior to the discovery by the Corporation that the shares of Class D
Preferred Stock have been transferred to the Trustee will be rescinded as void
AB INITIO and shall be recast in accordance with the desires of the Trustee
acting for the benefit of the Charitable Beneficiary. The owner of the shares at
the time of the Excess Transfer, change in capital structure or other event
giving rise to a potential violation of the Ownership Limit, Initial Holder
Limit or Look-Through Entity Ownership Limit shall be deemed to have given an
irrevocable proxy to the Trustee to vote the shares of Class D Preferred Stock
for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the
shares held in the Trust to a person, designated by the Trustee, whose ownership
of the shares will not violate the Ownership Restrictions. If such a sale is
made, the interest of the Charitable Beneficiary shall terminate and proceeds of
the sale shall be payable to the Prohibited Transferee and to the Charitable
Beneficiary as provided in this Section 10.3(E). The Prohibited Transferee shall
receive the lesser of (1) the price
17
<PAGE> 88
paid by the Prohibited Transferee for the shares or, if the Prohibited
Transferee did not give value for the shares (through a gift, devise or other
transaction), the Market Price of the shares on the day of the event causing the
shares to be held in the Trust and (2) the price per share received by the
Trustee from the sale or other disposition of the shares held in the Trust. Any
proceeds in excess of the amount payable to the Prohibited Transferee shall be
payable to the Charitable Beneficiary. If any of the transfer restrictions set
forth in this Section 10.3(E) or any application thereof is determined in a
final judgment to be void, invalid or unenforceable by any court having
jurisdiction over the issue, the Prohibited Transferee may be deemed, at the
option of the Corporation, to have acted as the agent of the Corporation in
acquiring the Class D Preferred Stock as to which such restrictions would, by
their terms, apply, and to hold such Class D Preferred Stock on behalf of the
Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class D Preferred Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the Trust (or, in the case of a devise or gift, the Market
Price at the time of such devise or gift) and (ii) the Market Price on the date
the Corporation, or its designee, accepts such offer. The Corporation shall have
the right to accept such offer for a period of 90 days after the later of (i)
the date of the Excess Transfer or other event resulting in a transfer to the
Trust and (ii) the date that the Board of Directors determines in good faith
that an Excess Transfer or other event occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to
the Trustee, the Corporation shall designate one or more nonprofit organizations
to be the Charitable Beneficiary of the interest in the Trust relating to such
Prohibited Transferee if (i) the shares of Class D Preferred Stock held in the
Trust would not violate the Ownership Restrictions in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to
acquire shares of Class D Preferred Stock in violation of Section 10.1 of this
Article, or any Person that is a Prohibited Transferee such that stock is
transferred to the Trustee under Section 10.3 of this Article, shall immediately
give written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted Transfer or other
event on the Corporation's status as a REIT. Failure to give such notice shall
not limit the rights and remedies of the Board of Directors provided herein in
any way.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date
certain record and Beneficial Owners and transferees of shares of Class D
Preferred Stock will be required to provide certain information as set out
below.
18
<PAGE> 89
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more
than 5% (or such other percentage between 0.5% and 5%, as provided in the
applicable regulations adopted under the Code) of the number of Outstanding
shares of Class D Preferred Stock shall, within 30 days after January 1 of each
year, give written notice to the Corporation stating the name and address of
such record or Beneficial Owner, the number of shares of Class D Preferred Stock
Beneficially Owned, and a full description of how such shares are held. Each
such record or Beneficial Owner of Class D Preferred Stock shall, upon demand by
the Corporation, disclose to the Corporation in writing such additional
information with respect to the Beneficial Ownership of the Class D Preferred
Stock as the Board of Directors, in its sole discretion, deems appropriate or
necessary to (i) comply with the provisions of the Code regarding the
qualification of the Corporation as a REIT under the Code and (ii) ensure
compliance with the Ownership Limit, the Initial Holder Limit or the
Look-Through Ownership Limit, as applicable. Each stockholder of record,
including without limitation any Person that holds shares of Class D Preferred
Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain
the written notice described in this Section 10.5 from the Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is
a Beneficial Owner of shares of Class D Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class D
Preferred Stock for a Beneficial Owner, and any proposed transferee of shares,
shall provide such information as the Corporation, in its sole discretion, may
request in order to determine the Corporation's status as a REIT, to comply with
the requirements of any taxing authority or other governmental agency, to
determine any such compliance or to ensure compliance with the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide
a statement or affidavit to the Corporation setting forth the number of shares
of Class D Preferred Stock already Beneficially Owned by such stockholder or
proposed transferee and any related persons specified, which statement or
affidavit shall be in the form prescribed by the Corporation for that purpose.
10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit
the authority of the Board of Directors to take such other action as it deems
necessary or advisable (subject to the provisions of Section 10.12 of this
Article) (i) to protect the Corporation and the interests of its stockholders in
the preservation of the Corporation's status as a REIT and (ii) to insure
compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit.
10.7 AMBIGUITY. In the case of an ambiguity in the application of any of
the provisions of Section 10 of this Article, or in the case of an ambiguity in
any definition contained in Section 10 of this Article, the Board of Directors
shall have the power to determine the application of the provisions of this
Article with respect to any situation based on its reasonable belief,
understanding or knowledge of the circumstances.
19
<PAGE> 90
10.8 EXCEPTIONS. The following exceptions shall apply or may be established
with respect to the limitations of Section 10.1 of this Article.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt
of a ruling from the Internal Revenue Service or an opinion of tax counsel or
other evidence or undertaking acceptable to it, may waive the application, in
whole or in part, of the Ownership Limit to a Person subject to the Ownership
Limit, if such person is not an individual for purposes of Section 542(a) of the
Code and is a corporation, partnership, estate or trust. In connection with any
such exemption, the Board of Directors may require such representations and
undertakings from such Person and may impose such other conditions as the Board
deems necessary, in its sole discretion, to determine the effect, if any, of the
proposed Transfer on the Corporation's status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of
this Article, the pledge by the Initial Holder of all or any portion of the
Class D Preferred Stock directly owned at any time or from time to time shall
not constitute a violation of Section 10.1 of this Article and the pledgee shall
not be subject to the Ownership Limit with respect to the Class D Preferred
Stock so pledged to it either as a result of the pledge or upon foreclosure.
(C) UNDERWRITERS. For a period of 270 days following the purchase of
Class D Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class D Preferred Stock,
such underwriter shall not be subject to the Ownership Limit with respect to the
Class D Preferred Stock purchased by it as a part of or in connection with such
offering and with respect to any Class D Preferred Stock purchased in connection
with market making activities.
10.9 LEGEND. Each certificate for Class D Preferred Stock shall bear the
following legend:
"The shares of Class D Cumulative Preferred Stock represented by
this certificate are subject to restrictions on transfer. No person may
Beneficially Own shares of Class D Cumulative Preferred Stock in excess of
the Ownership Restrictions, as applicable, with certain further
restrictions and exceptions set forth in the Corporation's Charter
(including the Articles Supplementary setting forth the terms of the Class
D Cumulative Preferred Stock). Any Person that attempts to Beneficially Own
shares of Class D Cumulative Preferred Stock in excess of the applicable
limitation must immediately notify the Corporation. All capitalized terms
in this legend have the meanings ascribed to such terms in the
Corporation's Charter (including the Articles Supplementary setting forth
the terms of the Class D Cumulative Preferred Stock), as the same may be
amended from time to time, a copy of which, including the restrictions on
transfer, will be sent
20
<PAGE> 91
without charge to each stockholder that so requests. If the restrictions on
transfer are violated, the shares of Class D Cumulative Preferred Stock
represented hereby will be either (i) void in accordance with the
Certificate or (ii) automatically transferred to a Trustee of a Trust for
the benefit of one or more Charitable Beneficiaries."
10.10 SEVERABILITY. If any provision of this Article or any application of
any such provision is determined in a final and unappealable judgment to be
void, invalid or unenforceable by any Federal or state court having jurisdiction
over the issues, the validity and enforceability 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.
10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit in the event of a
change in law.
10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall be
interpreted to preclude the settlement of any transaction entered into through
the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system.
FOURTH: The terms of the Class D Cumulative Preferred Stock set forth
in Article Third hereof shall become Article XV of the Charter.
21
<PAGE> 92
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Senior Vice President and Chief Financial
Officer and witnessed by its Secretary on February 17, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ Leeann Morein /s/ Troy D. Butts
- - --------------------------- ------------------------------
Leeann Morein, Troy D. Butts
Secretary Senior Vice President and
Chief Financial Officer
THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the
Corporation the 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 hereby
certifies that the matters and facts set forth herein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
/s/ Troy D. Butts
-----------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
<PAGE> 93
ARTICLES OF MERGER
BETWEEN
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(a Maryland corporation)
AND
AMBASSADOR APARTMENTS, INC.
(a Maryland corporation)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a corporation duly organized
and existing under the laws of the State of Maryland ("AIMCO"), and AMBASSADOR
APARTMENTS, INC., a corporation duly organized and existing under the laws of
the State of Maryland ("AAI"), do hereby certify that:
FIRST: AIMCO and AAI have agreed to merge.
SECOND: The name and place of incorporation of each party to these
Articles are APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland
corporation, and AMBASSADOR APARTMENTS, INC., a Maryland corporation. AIMCO
shall survive the merger and shall continue under the name "APARTMENT
INVESTMENT AND MANAGEMENT COMPANY" as a corporation of the State of Maryland.
THIRD: AIMCO has its principal office in Baltimore City, Maryland. AAI has
its principal office in Baltimore City, Maryland and does not own an interest
in land in the State of Maryland.
FOURTH: The terms and conditions of the transaction set forth in these
Articles were advised, authorized, and approved by each corporation party to
the Articles in the manner and by the vote required by its Charter and the laws
of the state of its incorporation. The manner of approval was as follows:
(a) The Board of Directors of AIMCO at meetings held on December 21,
1997 and May 7, 1998 adopted resolutions (by a vote of a majority of the entire
Board of Directors) which declared that the proposed merger was advisable on
substantially the terms and conditions set forth or referred to in the
resolutions and approved the proposed merger.
(b) The Board of Directors of AAI at meetings held on, or by
unanimous consents dated, December 23, 1997, March 9, 1998, and March 13, 1998
adopted resolutions (by a vote of a majority of the entire Board of Directors)
which declared that the proposed merger was advisable on substantially the
terms and conditions set forth or referred to in the resolutions and directed
that the proposed merger be submitted for consideration at a special meeting of
the stockholders of AAI.
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<PAGE> 94
(c) Notice which stated that a purpose of the meeting was to act on
the proposed merger was given by AAI to AAI's stockholders of record as
required by law.
(d) The proposed merger was approved by the stockholders of AAI at a
special meeting of stockholders held May 8, 1998, by the affirmative vote of
two-thirds of all the votes entitled to be cast on the matter.
FIFTH: No amendment to the Charter of AIMCO is to be effected as a part of
the merger. The merger does not reclassify or change the outstanding capital
stock of AIMCO. The number of shares of Class A Common Stock, par value $.01
per share, of AIMCO to be issued or delivered in the proposed merger is not
more than 20 percent of the number of shares of Class A Common Stock, par value
$.01 per share, of AIMCO outstanding immediately before the proposed merger
becomes effective.
SIXTH: (a) The total number of shares of capital stock of all classes
which AIMCO has authority to issue is 160,262,500 shares, currently classified
as follows:
150,000,000 shares of Class A Common Stock, par value $.01 per share;
262,500 shares of Class B Common Stock, par value $.01 per share;
1,890,000 shares of Preferred Stock, par value $.01 per share;
750,000 shares of Class B Cumulative Convertible Preferred Stock, par
value $.01 per share;
2,760,000 shares of Class C Cumulative Preferred Stock, par value
$.01 per share; and
4,600,000 shares of Class D Cumulative Preferred Stock, par value
$.01 per share.
The aggregate par value of all the shares of stock of all classes of AIMCO is
$1,602,625.00.
(b) The total number of shares of capital stock of all classes which
AAI has authority to issue is 240,000,000 shares, currently classified as
follows:
100,000,000 shares of Common Stock, par value $.01 per share;
18,648,649 shares of Preferred Stock, par value $.01 per share;
1,351,351 shares of Class A Senior Cumulative Convertible Preferred
Stock, par value $.01 per share;
100,000,000 shares of Excess Common Stock, par value $.01 per share;
18,648,649 shares of Excess Preferred Stock, par value $.01 per
share; and
1,351,351 shares of Excess Class A Preferred Stock, par value $.01 per
share.
-2-
<PAGE> 95
The aggregate par value of all the shares of stock of all classes of AAI is
$2,400,000.00.
SEVENTH: The merger does not increase the authorized stock of AIMCO.
EIGHTH: The manner and basis of converting or exchanging issued stock of
the merging corporations into different stock of a corporation, for other
consideration and the treatment of any issued stock of the merging corporations
not to be converted or exchanged are as follows:
(a) Each issued and outstanding share of the capital stock of AIMCO
at the effective time of the merger shall continue, without change as to class,
series or otherwise, to be an issued and outstanding share of capital stock of
AIMCO.
(b) Each issued and outstanding share of Common Stock, par value $.01
per share, of AAI at the effective time of the merger, other than shares of
Common Stock, par value $.01 per share, of AAI held by AAI or AIMCO, shall upon
effectiveness and without further act be converted into and become 0.553 shares
of Class A Common Stock, par value $.01 per share, of AIMCO. In lieu of
issuance of fractional shares of Class A Common Stock, par value $.01 per
share, of AIMCO, cash will be paid at the rate of $38.00 per share. Each issued
and outstanding share of Common Stock, par value $.01 per share, of AAI at the
effective time of the merger held by AAI or AIMCO shall upon effectiveness and
without further act be canceled. There will be no issued and outstanding shares
of Preferred Stock, par value $.01 per share, Class A Senior Cumulative
Convertible Preferred Stock, par value $.01 per share, Excess Common Stock, par
value $.01 per share, Excess Preferred Stock, par value $.01 per share, or
Excess Class A Preferred Stock, par value $.01 per share, of AAI at the
effective time of the merger.
(c) As soon as practicable following the effective time of the
merger, each holder of issued and outstanding shares of Common Stock, par value
$.01 per share, of AAI shall be entitled to surrender to AIMCO the certificates
representing the shares of Common Stock, par value $.01 per share, of AAI held
by such holder immediately prior to the effective time of the merger, and, upon
such surrender, shall be entitled to receive in exchange therefor a certificate
or certificates representing the number of whole shares of Class A Common
Stock, par value $.01 per share, of AIMCO deliverable in respect thereof,
together with cash, without interest, in lieu of any fractional shares of Class
A Common Stock, par value $.01 per share, of AIMCO and in respect of any
dividends withheld on Class A Common Stock, par value $.01 per share, of AIMCO
with record and payment dates after the effective time.
NINTH: The merger shall become effective upon acceptance for record by the
Maryland State Department of Assessments and Taxation.
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<PAGE> 96
IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY and
AMBASSADOR APARTMENTS, INC. have caused these presents to be signed in their
respective names and on their respective behalves by their respective
presidents or chairmen and witnessed by their respective secretaries on May 8,
1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
(a Maryland corporation)
/s/ JOEL F. BONDER By: /s/ PETER K. KOMPANIEZ
- - --------------------------------- -------------------------------
Joel F. Bonder, Secretary Peter K. Kompaniez, President
WITNESS: AMBASSADOR APARTMENTS, INC.
(a Maryland corporation)
/s/ THOMAS J. COORSH By: /s/ DAVID M. GLICKMAN
- - --------------------------------- -------------------------------
Thomas J. Coorsh, Secretary David M. Glickman, Chairman of the Board
-4-
<PAGE> 97
THE UNDERSIGNED, the President of APARTMENT INVESTMENT AND MANAGEMENT
COMPANY, who executed on behalf of the Corporation the foregoing Articles of
Merger of which this certificate is made a part, hereby acknowledges in the name
and on behalf of said Corporation the foregoing Articles of Merger to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ PETER K. KOMPANIEZ
----------------------------------------
Peter K. Kompaniez, President
THE UNDERSIGNED, the Chairman of the Board of AMBASSADOR APARTMENTS, INC.,
who executed on behalf of the Corporation the foregoing Articles of Merger of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Merger to be the corporate
act of said Corporation and hereby certifies that to the best of his knowledge,
information and belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
/s/ DAVID M. GLICKMAN
----------------------------------------
David M. Glickman, Chairman of the Board
-5-
<PAGE> 98
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ARTICLES OF AMENDMENT
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation,
having its principal office in Baltimore City, Maryland (which is hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Article IV, Section 1.1 of the Charter of the Corporation is hereby
amended in its entirety to read as follows:
1.1 CLASS AND NUMBER OF SHARES. The total number of shares of stock
that the Corporation from time to time shall have authority to issue is
510,750,000 shares of capital stock having a par value of $.01 per share
amounting to an aggregate par value of $5,107,500, consisting of 502,377,500
shares currently classified as Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), 262,500 shares currently classified as Class B
Common Stock, par value $.01 per share (the "Class B Common Stock") (the Class A
Common Stock and Class B Common Stock being referred to collectively herein as
"Common Stock"), 750,000 shares currently classified as Class B Cumulative
Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred
Stock"), 2,760,000 shares currently classified as Class C Cumulative Preferred
Stock, par value $.01 per share (the "Class C Preferred Stock"), and 4,600,000
shares currently classified as Class D Cumulative Preferred Stock, par value
$.01 per share (the "Class D Preferred Stock")(the Class B Preferred Stock, the
Class C Preferred Stock, the Class D Preferred Stock, and all other classes or
series of preferred stock hereafter classified being referred to collectively
herein as the "Preferred Stock").
SECOND: (a) As of immediately before the amendment the total number of
shares of stock of all classes which the Corporation has authority to issue is
160,262,500(1) shares of capital stock, which are currently classified as
follows:
150,000,000 shares of Class A Common Stock, par value $.01 per share;
262.500 shares of Class B Common Stock, par value $.01 per share;(2)
- - -----------------------
(1) The number of shares of authorized capital stock has been reduced since the
last amendment of the Charter of the Corporation from 160,750,000 shares to
160,262,500 shares through the cancellation of 487,500 shares of Class B
Common Stock, par value $.01 per share, that were converted into shares of
Class A Common Stock, par value $.01 per share.
-1-
<PAGE> 99
1,890,000 shares of Preferred Stock, par value $.01 per share;
750,000 shares of Class B Cumulative Convertible Preferred Stock, par value
$.01 per share;
2,760,000 shares of Class C Cumulative Preferred Stock, par value $.01 per
share; and
4,600,000 shares of Class D Cumulative Preferred Stock, par value $.01 per
share.
(b) As amended the total number of shares of stock of all classes which
the Corporation has authority to issue is 510,750,000 shares of capital stock,
which, as amended, are currently classified as follows:
502,377,500 shares of Class A Common Stock, par value $.01 per share;
262,500 shares of Class B Common Stock, par value $.01 per share;
750,000 shares of Class B Cumulative Convertible Preferred Stock, par
value $.01 per share;
2,760,000 shares of Class C Cumulative Preferred Stock, par value $.01 per
share; and
4,600,000 shares of Class D Cumulative Preferred Stock, par value $.01 per
share.
(c) The aggregate par value of all shares having a par value is
$1,602,625(3) before the amendment and $5,107,500 as amended.
(d) The shares of stock of the Corporation are divided into classes, but
the descriptions of each class of capital stock of the Corporation are not
changed by the amendment.
THIRD: The foregoing amendment to the Charter of the Corporation has been
advised by the Board of Directors and approved by the stockholders of the
Corporation.
- - ------------------------------------------------------------------------------
(2) The number of shares of Class B Common Stock, par value $.01 per share, has
been reduced since the last amendment of the Charter of the Corporation from
750,000 shares to 262,500 shares through the cancellation of 487,500 shares of
Class B Common Stock, par value $.01 per share, that were converted into shares
of Class A Common Stock, par value $.01 per share.
(3) The aggregate par value of shares having a par value before the amendment
has been reduced since the last amendment of the Charter of the Corporation
from $1,607,500 to $1,602,625 through the cancellation of 487,500 shares of
Class B Common Stock, par value $.01 per share, that were converted into shares
of Class A Common Stock, par value $.01 per share.
-2-
<PAGE> 100
IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has caused
these presents to be signed in its name and on its behalf by its Chairman of
the Board and witnessed by its Secretary on June 16, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ JOEL F. BONDER By:/s/ TERRY CONSIDINE
- - ----------------------- ---------------------
Joel F. Bonder Terry Considine
Secretary Chairman of the Board
THE UNDERSIGNED, Chairman of the Board of APARTMENT INVESTMENT AND
MANAGEMENT COMPANY, who executed on behalf of the Corporation the foregoing
Articles of Amendment of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Amendment to be the corporate act of said Corporation and hereby
certifies that to the best of his knowledge, information, and belief the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
/s/ TERRY CONSIDINE
---------------------
Terry Considine
Chairman of the Board
-3-
<PAGE> 101
ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS G CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in
Baltimore City, Maryland, hereby certifies to the Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Section 1.2 of Article IV of the Charter of the
Corporation, as amended to date (the "Charter"), the Board of Directors has
duly divided and classified 4,050,000 authorized but unissued shares of Class A
Common Stock of the Corporation, par value $.01 per share (the "Class A Common
Stock"), into a class designated as Class G Cumulative Preferred Stock, par
value $.01 per share, and has provided for the issuance of such class.
SECOND: The reclassification increases the number of shares classified as
Class G Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 4,050,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Class A Common Stock from 502,377,500 shares immediately prior to
the reclassification to 498,327,500 shares immediately after the
reclassification.
THIRD: The terms of the Class G Cumulative Preferred Stock (including the
preferences, conversions or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, or terms
or conditions of redemption) as set by the Board of Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class G Cumulative
Preferred Stock, par value $.01 per share (the "Class G Preferred Stock") and
Four Million Fifty Thousand (4,050,000) shall be the authorized number of
shares of such Class G Preferred Stock constituting such class.
<PAGE> 102
2. DEFINITIONS.
For purposes of the Class G Preferred Stock, the following terms shall
have the meanings indicated:
"Act" shall mean the Securities Act of 1933, as amended.
"affiliate" of a Person means a Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under
common control with, the Person specified.
"Aggregate Value" shall mean, with respect to any block of Equity Stock,
the sum of the products of (i) the number of shares of each class of Equity
Stock within such block multiplied by (ii) the corresponding Market Price
of one share of Equity Stock of such class.
"Beneficial Ownership" shall mean, with respect to any Person, ownership of
shares of Equity Stock equal to the sum of (i) the number of shares of
Equity Stock directly owned by such Person, (ii) the number of shares of
Equity Stock indirectly owned by such Person (if such Person is an
"individual" as defined in Section 542(a)(2) of the Code) taking into
account the constructive ownership rules of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code, and (iii) the number of
shares of Equity Stock that such Person is deemed to beneficially own
pursuant to Rule 13d-3 under the Exchange Act or that is attributed to such
Person pursuant to Section 318 of the Code, as modified by Section
856(d)(5) of the Code, provided that when applying this definition of
Beneficial Ownership to the Initial Holder, clause (iii) of this
definition, and clause (ii) of the definition of "Person" shall be
disregarded. The terms "Beneficial Owner,""Beneficially Owns" and
"Beneficially Owned" shall have the correlative meanings.
"Board of Directors" shall mean the Board of Directors of the Corporation
or any committee authorized by such Board of Directors to perform any of
its responsibilities with respect to the Class G Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New
York are not required to be open.
"Charitable Beneficiary" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 10.3 of this Article, each of which shall
be an organization described in Section 170(b)(1)(A), 170(c)(2) and
501(c)(3) of the Code.
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"Class G Preferred Stock" shall have the meaning set forth in Section 1 of this
Article.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto. Reference to any provision of the Code
shall mean such provision as in effect from time to time, as the same may be
amended, and any successor thereto, as interpreted by any applicable
regulations or other administrative pronouncements as in effect from time to
time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per share,
of the Corporation or such shares of the Corporation's capital stock into which
outstanding shares of Common Stock shall be reclassified.
"Dividend Payment Date" shall mean January 15, April 15, July 15 and October 15
of each year; provided, further, that if any Dividend Payment Date falls on any
day other than a Business Day, the dividend payment payable on such Dividend
Payment Date shall be paid on the Business Day immediately following such
Dividend Payment Date and no interest shall accrue on such dividend from such
date to such Dividend Payment Date.
"Dividend Periods" shall mean the Initial Dividend Period and each subsequent
quarterly dividend period commencing on and including January 15, April 15,
July 15 and October 15 of each year and ending on and including the day
preceding the first day of the next succeeding Dividend Period, other than the
Dividend Period during which any Class G Preferred Stock shall be redeemed
pursuant to Section 5 hereof, which shall end on and include the Redemption
Date with respect to the Class G Preferred Stock being redeemed.
"Equity Stock" shall mean one or more shares of any class of capital stock of
the Corporation.
"Excess Transfer" has the meaning set forth in Section 10.3(A) of this Article.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Issue Date" shall mean July 15, 1998.
"Initial Dividend Period" shall mean the period commencing on and including the
Issue Date and ending on and including October 15, 1998.
"Initial Holder" shall mean Terry Considine.
"Initial Holder Limit" shall mean a number of the Outstanding shares of Class G
Preferred Stock of the Corporation having an Aggregate Value not in excess of
the excess of (x) 15% of the Aggregate Value of all Outstanding shares of
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Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other
than Class G Preferred Stock that are Beneficially Owned by the Initial
Holder. From the Issue Date, the secretary of the Corporation, or such other
person as shall be designated by the Board of Directors, shall upon request
make available to the representative(s) of the Initial Holder and the Board of
Directors, a schedule that sets forth the then-current Initial Holder Limit
applicable to the Initial Holder.
"Junior Stock" shall mean the Common Stock and any other class or series of
capital stock of the Corporation over which the shares of Class G Preferred
Stock have preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"Look-Through Entity" shall mean a Person that is either (i) described in
Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or
(ii) registered under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class G Preferred Stock of the Corporation
having an Aggregate Value not in excess of the excess of (x) 15% of the
Aggregate Value of all Outstanding shares of Equity Stock over (y) by the
Aggregate Value of all shares of Equity Stock other than Class G Preferred
Stock that are Beneficially Owned by the Look-Through Entity.
"Market Price" on any date shall mean, with respect to any share of Equity
Stock, the Closing Price of share of that class of Equity Stock on the Trading
Day immediately preceding such date. The term "Closing Price" on any date
shall mean that last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the NYSE or, if the Equity Stock is not listed or admitted to trading on the
NYSE, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Equity Stock is listed or admitted to trading or, if the Equity
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 the Equity Stock is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Equity Stock selected by the
Board of Directors of the Company. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which
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the Equity Stock is listed or admitted to trading is open for the
transaction of business or, if the Equity Stock is not listed or admitted to
trading on any national securities exchange, shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Outstanding" shall mean issued and outstanding shares of Equity Stock of the
Corporation, provided that for purposes of the application of the Ownership
Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any
Person, the term "Outstanding" shall be deemed to include the number of shares
of Equity Stock that such Person alone, at that time, could acquire pursuant to
any options or convertible securities.
"Ownership Limit" shall mean, for any Person other than the Initial Holder or a
Look-Through Entity, a number of the Outstanding shares of Class G Preferred
Stock of the Corporation having an Aggregate Value not in excess of the excess
of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock
over (y) the Aggregate Value of all shares of Equity Stock other than Class G
Preferred Stock that are Beneficially Owned by the Person.
"Ownership Restrictions" shall mean collectively the Ownership Limit as applied
to Persons other than the Initial Holder or Look-Through Entities, the Initial
Holder Limit as applied to the Initial Holder and the Look-Through Ownership
Limit as applied to Look-Through Entities.
"Parity Stock" shall have the meaning set forth in paragraph (b) of Section 7
of this Article. The Class B Preferred Stock, the Class C Preferred Stock and
the Class D Preferred Stock shall each be a Parity Stock.
"Person" shall mean (a) for purposes of Section 10 of this Article, (i) an
individual, corporation, partnership, estate, trust (including a trust
qualifying under Section 401(a) or 501(c) of the Code), association, private
foundation within the meaning of Section 509(a) of the Code, joint stock
company or other entity, and (ii) also includes a group as that term is used
for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the
remaining Sections of this Article, any individual, firm, partnership,
corporation or other entity and shall include any successor (by merger or
otherwise) of such entity.
"Prohibited Transferee" has the meaning set forth in Section 10.3(A) of this
Article.
"Redemption Date" shall have the meaning set forth in paragraph (b) of Section
5 of this Article.
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"REIT" shall mean a "real estate investment trust" as defined in Section 856 of
the Code.
"Senior Stock" shall have the meaning set forth in paragraph (a) of Section 7
of this Article.
"set apart for payment" shall be deemed to include, without any action other
than the following, the recording by the Corporation in its accounting ledgers
of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of
the Corporation; provided, however, that if any funds for any class or series
of Junior Stock or any class or series of Parity Stock are placed in a separate
account of the Corporation or delivered to a disbursing, paying or other
similar agent, then "set apart for payment" with respect to the Class G
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day", as to any securities, shall mean any day on which such
securities are traded on the principal national securities exchange on which
such securities are listed or admitted or, if such securities are not listed or
admitted for trading on any national securities exchange, the NASDAQ National
Market or, if such securities are not listed or admitted for trading on the
NASDAQ National Market, in the securities market in which such securities are
traded.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or other
disposition of a share of Class G Preferred Stock (including (i) the granting of
an option or any series of such options or entering into any agreement for the
sale, transfer or other disposition of Class G Preferred Stock or (ii) the
sale, transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Class G Preferred Stock), whether
voluntary or involuntary, whether of record or Beneficial Ownership, and
whether by operation of law or otherwise (including, but not limited to, any
transfer of an interest in other entities that results in a change in the
Beneficial Ownership of shares of Class G Preferred Stock). The term
"Transfers" and "Transferred" shall have correlative meanings.
"Transfer Agent" means such transfer agent as may be designated by the Board of
Directors or their designee as the transfer agent for the Class G Preferred
Stock; provided, that if the Corporation has not designated a transfer agent
then the Corporation shall act as the transfer agent for the Class G Preferred
Stock.
"Trust" shall mean the trust created pursuant to Section 10.3 of this Article.
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"Trustee" shall mean the Person unaffiliated with either the Corporation or
the Prohibited Transferee that is appointed by the Corporation to serve as
trustee of the Trust.
"Voting Preferred Stock" shall have the meaning set forth in Section 8 of
this Article.
3. DIVIDENDS.
(a) The holders of Class G Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Class G Preferred Stock equal to $2.34375 per annum. Such
dividends shall be cumulative from the Issue Date, whether or not in any
Dividend Period or Periods such dividends shall be declared or there shall be
funds of the Corporation legally available for the payment of such dividends,
and shall be payable quarterly in arrears on each Dividend Payment Date,
commencing on October 15, 1998. Each such dividend shall be payable in arrears
to the holders of record of the Class G Preferred Stock, as they appear on the
stock records of the Corporation at the close of business on the January 1,
April 1, July 1 or October 1, as the case may be, immediately preceding such
Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past
Dividend Periods may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to holders of record on such date, which date
shall not precede by more than 45 days the payment date thereof, as may be fixed
by the Board of Directors.
(b) Any dividend payable on the Class G Preferred Stock for any
partial dividend period shall be computed ratably on the basis of twelve 30-day
months and a 360-day year. Holders of Class G Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of cumulative dividends, as herein provided, on the Class G Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Class G Preferred Stock that may be in
arrears.
(c) So long as any of the shares of Class G Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the Corporation
and no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any class or series of
Parity Stock for any period unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for such payment on the Class G Preferred
Stock for all Dividend Periods terminating on or prior to the Dividend Payment
Date with respect to such class or series of Parity Stock. When dividends are
not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon the Class G Preferred Stock and all
dividends declared upon any
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other class or series of Parity Stock shall be declared ratably in proportion
to the respective amounts of dividends accumulated, accrued and unpaid on the
Class G Preferred Stock and accumulated, accrued and unpaid on such Parity
Stock.
(d) So long as any of the shares of Class G Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Junior Stock) shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made, directly or indirectly, by the Corporation with respect to
any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock), directly or indirectly, by the Corporation
(except by conversion into or exchange for shares of, or options, warrants or
rights to subscribe for or purchase shares of, Junior Stock), nor shall any
other cash or other property otherwise be paid or distributed to or for the
benefit of any holder of shares of Junior Stock in respect thereof, directly or
indirectly, by the Corporation unless in each case the full cumulative
dividends (including all accumulated, accrued and unpaid dividends) on all
outstanding shares of Class G Preferred Stock shall have been paid or such
dividends have been declared and set apart for payment for all past Dividend
Periods with respect to the Class G Preferred Stock.
Notwithstanding the provisions of this Section 3(d), the Corporation
shall not be prohibited from (i) declaring or paying or setting apart for
payment any dividend or distribution on any shares of Parity Stock or (ii) or
redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if
such declaration, payment, redemption, purchase or other acquisition is
necessary in order to maintain the continued qualification of the Corporation
as a REIT under Section 856 of the Code.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, before any payment or
distribution by the Corporation (whether of capital or surplus) shall be made
to or set apart for the holders of Junior Stock, the holders of shares of Class
G Preferred Stock shall be entitled to receive Twenty-Five Dollars ($25) per
share of Class G Preferred Stock (the "Liquidation Preference"), plus an amount
equal to all dividends (whether or not earned or declared) accumulated, accrued
and unpaid thereon to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment. Until the holders of the
Class G Preferred Stock have been paid the Liquidation Preference in full, plus
an amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final distribution to
such holders, no payment will be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of the
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Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of Class G Preferred Stock shall be insufficient to pay in
full the preferential amount aforesaid and liquidating payments on any other
shares of any class or series of Parity Stock, then such assets, or the
proceeds thereof, shall be distributed among the holders of Class G Preferred
Stock and any such other Parity Stock ratably in the same proportion as the
respective amounts that would be payable on such Class G Preferred Stock and
any such other Parity Stock if all amounts payable thereon were paid in full.
For the purposes of this Section 4, (i) a consolidation or merger of the
Corporation with one or more corporations, (ii) a sale or transfer of all or
substantially all of the Corporation's assets, or (iii) a statutory share
exchange shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of Class
G Preferred Stock and any Parity Stock, as provided in this Section 4, any other
series or class or classes of Junior Stock shall, subject to the respective
terms thereof, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Class G Preferred Stock and any Parity Stock
shall not be entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class G Preferred Stock shall not be redeemable by the
Corporation prior to July 15, 2008, except as set forth in Section 10.2 of this
Article. On and after July 15, 2008, the Corporation, at its option, may redeem
shares of Class G Preferred Stock, in whole or from time to time in part, at a
redemption price payable in cash equal to 100% of the Liquidation Preference
thereof, plus all accrued and unpaid dividends to the date fixed for redemption
(the "Redemption Date"). In connection with any redemption pursuant to this
Section 5(a), the redemption price of the Class G Preferred Stock (other than
any portion thereof consisting of accrued and unpaid dividends) shall be payable
solely with the proceeds from the sale by the Corporation or AIMCO Properties,
L.P., a Delaware limited Partnership (the "Operating Partnership"), of other
capital shares of the Corporation or the Operating Partnership (whether or not
such sale occurs concurrently with such redemption). For purposes of the
preceding sentence, "capital shares" means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable at the option of the holder for
equity securities (unless and to the extent such debt securities are
subsequently converted into capital shares)) or options to purchase any of the
foregoing of or in the Corporation or the Operating Partnership.
(b) The Redemption Date shall be selected by the Corporation, shall
be specified in the notice of redemption and shall be not less than 30 days nor
more than 60 days after the date notice of redemption is sent by the
Corporation.
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(c) If full cumulative dividends on all outstanding shares of Class G
Preferred Stock have not been paid or declared and set apart for payment, no
shares of Class G Preferred Stock may be redeemed unless all outstanding shares
of Class G Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire shares
of Class G Preferred Stock, otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of shares of Class G Preferred
Stock.
(d) If the Corporation shall redeem shares of Class G Preferred Stock
pursuant to paragraph (a) of this Section 5, notice of such redemption shall be
given to each holder of record of the shares to be redeemed. Such notice shall
be provided by first class mail, postage prepaid, at such holder's address as
the same appears on the stock records of the Corporation. Neither the failure
to mail any notice required by this paragraph (d), nor any defect therein or in
the mailing thereof to any particular holder, shall affect the sufficiency of
the notice of the validity of the proceedings for redemption with respect to
the other holders. Any notice which was mailed in the manner herein provided
shall be conclusively presumed to have been duly given on the date mailed
whether or not the holder receives the notice. Each such notice shall state,
as appropriate: (1) the Redemption Date; (2) the number of shares of Class G
Preferred Stock to be redeemed and, if fewer than all such shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; and (3) the place or places at which certificates for such shares are
to be surrendered for cash. Notice having been mailed as aforesaid, from and
after the Redemption Date (unless the Corporation shall fail to make available
the amount of cash necessary to effect such redemption), (i) except as
otherwise provided herein, dividends on the shares of Class G Preferred Stock
so called for redemption shall cease to accumulate or accrue on the shares of
Class G Preferred Stock called for redemption(except that, in the case of a
Redemption Date after a dividend record date and prior to the related Dividend
Payment Date, holders of Class G Preferred Stock on the dividend record date
will be entitled to such Dividend Payment Date to receive the dividend payable
on such shares), (ii) said shares shall no longer be deemed to be outstanding,
and (iii) all rights of the holders thereof as holders of Class G Preferred
Stock of the Corporation shall cease (except the rights to receive the cash
payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any dividends
payable thereon). The Corporation's obligation to make available the redemption
price in accordance with the preceding sentence shall be deemed fulfilled if, on
or before the Call Date, the Corporation shall deposit with a bank or trust
company (which may be an affiliate of the Corporation) that has, or is an
affiliate of a bank or trust company that has, a capital and surplus of at least
$50,000,000, such amount of cash as is necessary for such redemption, in trust,
with irrevocable instructions that such cash be applied to the redemption of the
shares of Class G Preferred Stock so called for redemption. No interest shall
accrue for the benefit of the holders of shares of Class G Preferred Stock to
be redeemed on any cash so set aside by the Corporation. Subject to applicable
escheat laws, any such cash unclaimed at the end of two years from the
Redemption Date shall revert to the general funds of the Corporation, after
which reversion the holders of shares of Class G Preferred
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Stock so called for redemption shall look only to the general funds of the
Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class G Preferred Stock to be
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which such shares have been
redeemed in accordance with such notice. If fewer than all the outstanding
shares of Class G Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class G
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class G Preferred Stock held of record by each holder of
such shares, pro rata (as nearly as may be) or by any other method as may be
determined by the Board of Directors in its discretion to be equitable. If
fewer than all the shares of Class G Preferred Stock represented by any
certificate are redeemed, then a new certificate representing the unredeemed
shares shall be issued without cost to the holders thereof.
6. Status of Reacquired Stock.
All shares of Class G Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class G Preferred Stock.
7. Ranking.
Any class or series of capital stock of the Corporation shall be deemed to
rank:
(a) prior or senior to the Class G Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Class G Preferred Stock ("Senior Stock");
(b) on a parity with the Class G Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Class G Preferred Stock, if the holders of such class of stock or series and
the Class G Preferred Stock shall be entitled to the receipt of dividends and of
amounts distributable upon liquidation, dissolution or winding up in proportion
to their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority one over the other
("Parity Stock"); and
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(c) junior to the Class G Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Class G Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such class or series
("Junior Stock").
8. VOTING.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Class G Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of directors then constituting the
Board of Directors shall be increased by two (if not already increased by reason
of similar types of provisions with respect to shares of Parity Stock of any
other class or series which is entitled to similar voting rights (the "Voting
Preferred Stock")) and the holders of shares of Class G Preferred Stock,
together with the holders of shares of all other Voting Preferred Stock then
entitled to exercise similar voting rights, voting as a single class regardless
of series, shall be entitled to elect the two additional directors to serve on
the Board of Directors at any annual meeting of stockholders or special meeting
held in place thereof, or at a special meeting of the holders of the Class G
Preferred Stock and the Voting Preferred Stock called as hereinafter
provided. Whenever all arrears in dividends on the Class G Preferred Stock and
the Voting Preferred Stock then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been paid or
declared and set apart for payment, then the right of the holders of the Class G
Preferred Stock and the Voting Preferred Stock to elect such additional two
directors shall cease (but subject always to the same provision for the vesting
of such voting rights in the case of any similar future arrearages), and the
terms of office of all Persons elected as directors by the holders of the Class
G Preferred Stock and the Voting Preferred Stock shall forthwith terminate and
the number of directors constituting the Board of Directors shall be reduced
accordingly. At any time after such voting power shall have been so vested in
the holders of Class G Preferred Stock and the Voting Preferred Stock, if
applicable, the Secretary of the Corporation may, and upon the written request
of any holder of Class G Preferred Stock (addressed to the Secretary at the
principal office of the Corporation) shall, call a special meeting of the
holders of the Class G Preferred Stock and of the Voting Preferred Stock for the
election of the two directors to be elected by them as herein provided, such
call to be made by notice similar to that provided in the Bylaws of the
Corporation for a special meeting of the stockholders or as required by law. If
any such special meeting required to be called as above provided shall not be
called by the Secretary within 20 days after receipt of any such request, then
any holder of Class G Preferred Stock may call such meeting, upon the notice
above provided, and for that purpose shall have access to the stock books of the
Corporation. The directors elected at any such special meeting shall hold
office until the next annual meeting of the stockholders or special meeting held
in lieu thereof if such office shall not have
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previously terminated as above provided. If any vacancy shall occur among the
directors elected by the holders of the Class G Preferred Stock and the Voting
Preferred Stock, a successor shall be elected by the Board of Directors, upon
the nomination of the then-remaining director elected by the holders of the
Class G Preferred Stock and the Voting Preferred Stock or the successor of such
remaining director, to serve until the next annual meeting of the stockholders
or special meeting held in place thereof if such office shall not have
previously terminated as provided above.
(b) So long as any shares of Class G Preferred Stock are
outstanding, in addition to any other vote or consent of stockholders required
by law or by the Charter of the Corporation, the affirmative vote of at least
66-2/3% of the votes entitled to be cast by the holders of the Class G
Preferred Stock voting as a single class with the holders of all other classes
or series of Preferred Stock entitled to vote on such matters, given in Person
or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of these Articles Supplementary, the Charter or the By-Laws of the
Corporation that materially adversely affects the voting powers, rights or
preferences of the holders of the Class G Preferred Stock; provided, however,
that the amendment of the provisions of the Charter so as to authorize or
create, or to increase the authorized amount of, or issue any Junior Stock or
any shares of any class of Parity Stock shall not be deemed to materially
adversely affect the voting powers, rights or preferences of the holders of
Class G Preferred Stock; or
(ii) The authorization, creation of, the increase in the
authorized amount of, or issuance of any shares of any class of Senior Stock or
any security convertible into shares of any class of Senior Stock (whether or
not such class of Senior Stock is currently authorized); provided, however, that
no such vote of the holders of Class G Preferred Stock shall be required if, at
or prior to the time when such amendment, alteration or repeal is to take
effect, or when the issuance of any such prior shares or convertible security
is to be made, as the case may be, provision is made for the redemption of all
shares of Class G Preferred Stock at the time outstanding to the extent such
redemption is authorized by Section 5 of this Article.
For purposes of the foregoing provisions and all other voting rights under
these Articles Supplementary, each share of Class G Preferred Stock shall have
one (1) vote per share, except that when any other class or series of preferred
stock shall have the right to vote with the Class G Preferred Stock as a single
class on any matter, then the Class G Preferred Stock and such other class or
series shall have with respect to such matters one quarter of one(.25) vote per
$25 of stated liquidation preference. Except as otherwise required by
applicable law or as set forth herein, the Class G Preferred Stock shall not
have any relative, participating, optional or other special voting rights and
powers other than as set forth herein, and the consent of the holders thereof
shall not be required for the taking of any corporate action.
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9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record holder
of any share of Class G Preferred Stock as the true and lawful owner thereof for
all purposes, and neither the Corporation nor the Transfer Agent shall be
affected by any notice to the contrary.
10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in
Section 10.8, from and after the Issue Date, no Person (other than the Initial
Holder or a Look-Through Entity) shall Beneficially Own shares of Class G
Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not
Beneficially Own shares of Class G Preferred Stock in excess of the Initial
Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class G
Preferred Stock in excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or
automated inter-dealer quotation system) that, if effective, would result in
any Person (other than the Initial Holder or a Look-Through Entity) Beneficially
Owning shares of Class G Preferred Stock in excess of the Ownership Limit shall
be void ab initio as to the Transfer of such shares of Class G Preferred Stock
that would be otherwise Beneficially Owned by such Person in excess of the
Ownership Limit, and the intended transferee shall acquire no rights in such
shares of Class G Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided
in Section 10.8, from and after the Issue Date (and subject to Section 10.12),
any Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) that, if effective, would result in the
Initial Holder Beneficially Owning shares of Class G Preferred Stock in excess
of the Initial Holder Limit shall be void ab initio as to the Transfer of such
shares of Class G Preferred Stock that would be otherwise Beneficially Owned by
the Initial Holder in excess of the Initial Holder limit, and the Initial Holder
shall acquire no rights in such shares of Class G Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 10.8 from and after the Issue Date (and subject to Section
10.12), any Transfer (whether or not such Transfer is the result of transactions
entered into through facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) that, if effective, would result in any
Look-Through Entity Beneficially Owning shares of Class G Preferred Stock in
excess of the Look-Through Ownership limit shall be void ab initio as to the
Transfer of such shares of Class G
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Preferred Stock that would be otherwise Beneficially Owned by such Look-Through
Entity in excess of the Look-Through Ownership Limit and such Look-Through
Entity shall acquire no rights in such shares of Class G Preferred Stock.
(E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue
Date any Transfer that, if effective would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code, or would
otherwise result in the Corporation failing to qualify as a REIT (including
without limitation, a Transfer or other event that would result in the
Corporation owning (directly 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) shall be void ab
initio as to the Transfer of shares of Class G Preferred Stock that would cause
the Corporation (i) to be "closely held" within the meaning of Section 856(h) of
the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and
the intended transferee shall acquire no rights in such shares of Class G
Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class G
Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E)
of this Article because it would, if effective, result in (i) the ownership of
Class G Preferred Stock in excess of the Initial Holder Limit, the Ownership
Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (iii) the Corporation
otherwise failing to qualify as a REIT, shall not adversely affect the validity
of the Transfer of any other share of Class G Preferred Stock in the same or
any other related transaction.
10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof
shall at any time determine in good faith that a Transfer or other event has
taken place in violation of Section 10.1 of this Article or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership of any
shares of Class G Preferred Stock in violation of Section 10.1 of this Article
(whether or not such violation is intended), the Board of Directors or a
committee thereof shall be empowered to take any action as it deems advisable
to refuse to give effect to or to prevent such Transfer or other event,
including, but not limited to, refusing to give effect to such Transfer or
other event on the books of the Corporation, causing the Corporation to redeem
such shares at the then current Market Price and upon such terms and conditions
as may be specified by the Board of Directors in its sole discretion
(including, but not limited to, by means of the issuance of long-term
indebtedness for the purpose of such redemption), demanding the repayment of
any distributions received in respect of shares of Class G Preferred Stock
acquired in violation of Section 10.1 of this Article or instituting
proceedings to enjoin such Transfer or to rescind such Transfer or attempted
Transfer; provided, however, that any Transfers or attempted Transfers (or in
the case of events other than a Transfer, Beneficial Ownership) in violation of
Section 10.1 of this Article, regardless of any action (or non-action) by the
Board of Directors or such committee, (a) shall be void ab initio or (b) shall
automatically result in the transfer described in Section 10.3 of this
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Article; provided, further, that the provisions of this Section 10.2 shall be
subject to the provisions of Section 10.12 of this Article; provided, further,
that neither the Board of Directors nor any committee thereof may exercise such
authority in a manner that interferes with any ownership or transfer of Class G
Preferred Stock that is expressly authorized pursuant to Section 10.8(d) of
this Article.
10.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions
contained in this Article, at any time after the Issue Date there is a purported
Transfer (an "Excess Transfer") (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other securities
exchange or an automated interdealer quotation system) or other change in the
capital structure of the Corporation (including, but not limited to, any
redemption of Preferred Stock) or other event (including, but not limited to,
any acquisition of any share of Equity Stock) such that (a) any Person (other
than the Initial Holder or a Look-Through Entity) would Beneficially Own shares
of Class G Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class G Preferred Stock in excess of the
Initial Holder Limit, or (c) any Person that is a Look-Through Entity would
Beneficially Own shares of Class G Preferred Stock in excess of the Look-Through
Ownership Limit (in any such event, the Person, Initial Holder or Look-Through
Entity that would Beneficially Own shares of Class G Preferred Stock in excess
of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity
Limit, respectively, is referred to as a "Prohibited Transferee"), then, except
as otherwise provided in Section 10.8 of this Article, such shares of Class G
Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest
whole share) shall be automatically transferred to a Trustee in his capacity as
trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as
of the close of business on the business day prior to the Excess Transfer,
change in capital structure or another event giving rise to a potential
violation of the Ownership Limit, the Initial Holder Limit or the Look-Through
Entity Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with either the Corporation or
any Prohibited Transferee. The Trustee may be an individual or a bank or trust
company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class G
Preferred Stock held by the Trustee shall be issued and outstanding shares of
capital stock of the Corporation. Except to the extent provided in Section
10.3(E), the Prohibited Transferee shall have no rights in the Class G
Preferred Stock held by the Trustee, and the Prohibited Transferee shall not
benefit economically from ownership of any shares held in trust by the Trustee,
shall have no rights to dividends and shall not possess any rights to vote or
other rights attributable to the shares held in the Trust.
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(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights
and rights to dividends with respect to shares of Class G Preferred Stock held
in the Trust, which rights shall be exercised for the benefit of the Charitable
Beneficiary. Any dividend or distribution paid prior to the discovery by the
Corporation that the shares of Class G Preferred Stock have been transferred to
the Trustee shall be repaid to the Corporation upon demand, and any dividend or
distribution declared but unpaid shall be rescinded as void ab initio with
respect to such shares of Class G Preferred Stock. Any dividends or
distributions so disgorged or rescinded shall be paid over to the Trustee and
held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited
Transferee prior to the discovery by the Corporation that the shares of Class G
Preferred Stock have been transferred to the Trustee will be rescinded as void
ab initio and shall be recast in accordance with the desires of the Trustee
acting for the benefit of the Charitable Beneficiary. The owner of the shares at
the time of the Excess Transfer, change in capital structure or other event
giving rise to a potential violation of the Ownership Limit, Initial Holder
Limit or Look-Through Entity Ownership Limit shall be deemed to have given an
irrevocable proxy to the Trustee to vote the shares of Class G Preferred Stock
for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the
shares held in the Trust to a person, designated by the Trustee, whose
ownership of the shares will not violate the Ownership Restrictions. If such a
sale is made, the interest of the Charitable Beneficiary shall terminate and
proceeds of the sale shall be payable to the Prohibited Transferee and to the
Charitable Beneficiary as provided in this Section 10.3(E). The Prohibited
Transferee shall receive the lesser of (1) the price paid by the Prohibited
Transferee for the shares or, if the Prohibited Transferee did not give value
for the shares (through a gift, devise or other transaction), the Market Price
of the shares on the day of the event causing the shares to be held in the
Trust and (2) the price per share received by the Trustee from the sale or
other disposition of the shares held in the Trust. Any proceeds in excess of
the amount payable to the Prohibited Transferee shall be payable to the
Charitable Beneficiary. If any of the transfer restrictions set forth in this
Section 10.3(E) or any application thereof is determined in a final judgement
to be void, invalid or unenforceable by any court having jurisdiction over the
issue, the Prohibited Transferee may be deemed, at the option of the
Corporation, to have acted as the agent of the Corporation in acquiring the
Class G Preferred Stock as to which such restrictions would, by their terms,
apply, and to hold such Class G Preferred Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class G Preferred Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share
equal to the lesser of (i) the price per share in the transaction that resulted
in such transfer to the Trust (or, in the case of a devise or gift, the Market
Price at the time of such devise or gift) and (ii) the Market Price on the date
the Corporation, or its designee, accepts such offer. The Corporation shall
have the right to accept such offer for a period of 90 days after the later of
(i) the date of the Excess Transfer or other event resulting in a transfer to
the Trust and
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(ii) the date that the Board of Directors determines in good faith that an
Excess Transfer or other event occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice
to the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
relating to such Prohibited Transferee if (i) the shares of Class G Preferred
Stock held in the Trust would not violate the Ownership Restrictions in the
hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an
organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the
Code.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or
attempts to acquire shares of Class G Preferred Stock in violation of Section
10.1 of this Article, or any Person that is a Prohibited Transferee such that
stock is transferred to the Trustee under Section 10.3 of this Article, shall
immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such Transfer or attempted
Transfer or other event on the Corporations's status as a REIT. Failure to
give such notice shall not limit the rights and remedies of the Board of
Directors provided herein in any way.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue
Date certain record and Beneficial Owners and transferees of shares of Class G
Preferred Stock will be required to provide certain information as set out
below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of
more than 5% (or such other percentage between 0.5% and 5%, as provided in the
applicable regulations adopted under the Code) of the number of Outstanding
shares of Class G Preferred Stock shall, within 30 days after January 1 of each
year, give written notice to the Corporation stating the name and address of
such record or Beneficial Owner, the number of shares of Class G Preferred
Stock Beneficially Owned, and a full description of how such shared are held.
Each such record or Beneficial Owner of Class G Preferred Stock shall, upon
demand by the Corporation, disclose to the Corporation in writing such
additional information with respect to the Beneficial Ownership of the Class G
Preferred Stock as the Board of Directors, in its sole discretion, deems
appropriate or necessary to (i) comply with the provisions of the Code
regarding the qualification of the Corporation as a REIT under the Code and
(ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as applicable. Each stockholder of record,
including without limitation any Person that holds shares of Class G Preferred
Stock on behalf of a Beneficial Owner, shall take all reasonable steps to
obtain the written notice described in this Section 10.5 from the Beneficial
Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person
that is a Beneficial Owner of shares of Class G Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class G
Preferred Stock for a Beneficial
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Owner, and any proposed transferee of shares, shall provide such information as
the Corporation, in its sole discretion, may request in order to determine the
Corporation's status as a REIT, to comply with the requirements of any taxing
authority or other governmental agency, to determine any such compliance or to
ensure compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit, and shall provide a statement or affidavit to the
Corporation setting forth the number of shares of Class G Preferred Stock
already Beneficially Owned by such stockholder or proposed transferee and any
related persons specified, which statement or affidavit shall be in the form
prescribed by the Corporation for that purpose.
10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall
limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable (subject to the provisions of Section 10.12 of
this Article) (i) to protect the Corporation and the interests of its
stockholders in the preservation of the Corporation's status as a REIT and (ii)
to insure compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit.
10.7 AMBIGUITY. In the case of an ambiguity in the application of any
of the provisions of Section 10 of this Article, or in the case of an ambiguity
in any definition contained in Section 10 of this Article, the Board of
Directors shall have the power to determine the application of the provisions
of this Article with respect to any situation based on its reasonable belief,
understanding or knowledge of the circumstances.
10.8 EXPECTATIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 10.1 of this Article.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of tax
counsel or other evidence or undertaking acceptable to it, may waive the
application, in whole or in part, of the Ownership Limit to a Person subject to
the Ownership Limit, if such person is not an individual for purposes of
Section 542(a) of the Code and is a corporation, partnership, estate or trust.
In connection with any such exemption, the Board of Directors may require such
representations and undertakings from such Person and may impose such other
conditions as the Board of Directors deems necessary, in its sole discretion,
to determine the effect, if any, of the proposed Transfer on the Corporation's
status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other
provision of this Article, the pledge by the Initial Holder of all or any
portion of the Class G Preferred Stock directly owned at any time or from time
to time shall not constitute a violation of Section 10.1 of this Article and the
pledgee shall not be subject to the Ownership Limit with respect to the Class G
Preferred Stock so pledged to it either as a result of the pledge or upon
foreclosure.
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(C) UNDERWRITERS. For a period of 270 days following the purchase
of Class G Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class G Preferred
Stock, such underwriter shall not be subject to the Ownership Limit with
respect to the Class G Preferred Stock purchased by it as a part of or in
connection with such offering and with respect to any Class G Preferred Stock
purchased in connection with market making activities.
10.9 LEGEND. Each certificate for Class G Preferred Stock shall bear the
following legend:
"The shares of Class G Cumulative Preferred Stock
represented by this certificate are subject to restrictions on transfer.
No person may Beneficially Own shares of Class G Cumulative Preferred
Stock in excess of the Ownership Restrictions, as applicable, with certain
further restrictions and exceptions set forth in the Charter (including
the Articles Supplementary setting forth the terms of the Class G
Cumulative Preferred Stock). Any Person that attempts to Beneficially
Own shares of Class G Cumulative Preferred Stock in excess of the
applicable limitation must immediately notify the Corporation. All
capitalized terms in this legend have the meanings ascribed to such terms
in the Charter (including the Articles Supplementary setting forth the
terms of the Class G Cumulative Preferred Stock), 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 stockholder that so requests.
If the restrictions on transfer are violated (i) the transfer of the
shares of Class G Cumulative Preferred Stock represented hereby will be
void in accordance with the Charter (including the Articles Supplementary
setting forth the terms of the Class G Cumulative Preferred Stock) or (ii)
the shares of Class G Cumulative Preferred Stock represented hereby will
automatically be transferred to a Trustee of a Trust for the benefit of one
or more Charitable Beneficiaries."
10.10 SEVERABILITY. If any provision of this Article or any
application of any such provision is determined in a final and unappealable
judgment to be void, invalid or unenforceable by any Federal or state court
having jurisdiction over the issues, the validity and enforceability 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.
10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit in the event of a
change in law.
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10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall
be interpreted to preclude the settlement of any transaction entered into
through the facilities of the NYSE or other securities exchange or an automated
inter-dealer quotation system.
FOURTH: The terms of the Class G Cumulative Preferred Stock set forth in
Article Third hereof shall become Article XVI of the Charter.
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IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Senior Vice President and Chief Financial
Officer and witnessed by its Secretary on July 13, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ JOEL BONDER /s/ TROY D. BUTTS
- - ------------------------------ -----------------------------
Joel Bonder Troy D. Butts
Secretary Senior Vice President and
Chief Financial Officer
THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the
Corporation the 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 hereby certifies that the matters and facts set forth herein with respect
to the authorization and approval thereof are true in all material respects
under the penalties of perjury.
/s/ TROY D. BUTTS
-----------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
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ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS H CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in
Baltimore City, Maryland, hereby certifies to the Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of the
Corporation, as amended to date (the "Charter"), the Board of Directors has
duly divided and classified 2,300,000 authorized but unissued shares of Class A
Common Stock of the Corporation, par value $.01 per share (the "Class A Common
Stock"), into a class designated as Class H Cumulative Preferred Stock, par
value $.01 per share, and has provided for the issuance of such class.
SECOND: The reclassification increases the number of shares classified
as Class H Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 2,300,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Class A Common Stock from 498,327,500 shares immediately prior to
the reclassification to 496,027,500 shares immediately after the
reclassification.
THIRD: The terms of the Class H Cumulative Preferred Stock (including
the preferences, conversions or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, or terms
or conditions of redemption) as set by the Board of Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class H Cumulative
Preferred Stock, par value $.01 per share (the "Class H Preferred Stock") and
Two Million Three Hundred Thousand (2,300,000) shall be the authorized number
of shares of such Class H Preferred Stock constituting such class.
2. DEFINITIONS.
For purposes of the Class H Preferred Stock, the following terms shall
have the meanings indicated:
<PAGE> 124
"Act" shall mean the Securities Act of 1933, as amended.
"affiliate" of a Person means a Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or
is under common control with, the Person specified.
"Aggregate Value" shall mean, with respect to any block of Equity
Stock, the sum of the products of (i) the number of shares of each
class of Equity Stock within such block multiplied by (ii) the
corresponding Market Price of one share of Equity Stock of such class.
"Beneficial Ownership" shall mean, with respect to any Person,
ownership of shares of Equity Stock equal to the sum of (i) the number
of shares of Equity Stock directly owned by such Person, (ii) the
number of shares of Equity Stock indirectly owned by such Person (if
such Person is an "individual" as defined in Section 542(a)(2) of the
Code) taking into account the constructive ownership rules of Section
544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and
(iii) the number of shares of Equity Stock that such Person is deemed
to beneficially own pursuant to Rule 13d-3 under the Exchange Act or
that is attributed to such Person pursuant to Section 318 of the Code,
as modified by Section 856(d)(5) of the Code, provided that when
applying this definition of Beneficial Ownership to the Initial
Holder, clause (iii) of this definition, and clause (a) (ii) of the
definition of "Person" shall be disregarded. The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Class H
Preferred Stock; provided that, for purposes of paragraph (a) of
Section 8 of this Article, the term "Board of Directors" shall not
include any such committee.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Charitable Beneficiary" shall mean one or more beneficiaries of the
Trust as determined pursuant to Section 10.3 of this Article, each of
which shall be an organization described in Section 170(b)(1)(A),
170(c)(2) and 501(c)(3) of the Code.
"Class H Preferred Stock" shall have the meaning set forth in Section
1 of this Article.
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"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation, and the Class B Common Stock, $.01 par
value per share, of the Corporation and such other shares of the
Corporation's capital stock into which outstanding shares of such
Class A Common Stock or Class B Common Stock shall be reclassified.
"Dividend Payment Date" shall mean January 15, April 15, July 15 and
October 15 of each year; provided, that if any Dividend Payment Date
falls on any day other than a Business Day, the dividend payment
payable on such Dividend Payment Date shall be paid on the Business
Day immediately following such Dividend Payment Date and no interest
shall accrue on such dividend from such date to such Dividend Payment
Date.
"Dividend Periods" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including
January 15, April 15, July 15 and October 15 of each year and ending
on and including the day preceding the first day of the next
succeeding Dividend Period, other than the Dividend Period during
which any Class H Preferred Stock shall be redeemed pursuant to
Section 5 hereof, which shall end on and include the Redemption Date
with respect to the Class H Preferred Stock being redeemed.
"Equity Stock" shall mean one or more shares of any class of capital
stock of the Corporation.
"Excess Transfer" has the meaning set forth in Section 10.3(A) of this
Article.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Issue Date" shall mean August 14, 1998.
"Initial Dividend Period" shall mean the period commencing on and
including the Issue Date and ending on and including October 14, 1998.
"Initial Holder" shall mean Terry Considine.
"Initial Holder Limit" shall mean a number of the Outstanding shares
of Class H Preferred Stock of the Corporation having an Aggregate
Value not in excess of the excess of (x) 15% of the Aggregate Value of
all Outstanding shares of
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Equity Stock over (y) the Aggregate Value of all shares of Equity
Stock other than Class H Preferred Stock that are Beneficially Owned
by the Initial Holder. From the Issue Date, the secretary of the
Corporation, or such other person as shall be designated by the Board
of Directors, shall upon request make available to the
representative(s) of the Initial Holder and the Board of Directors, a
schedule that sets forth the then-current Initial Holder Limit
applicable to the Initial Holder.
"Junior Stock" shall have the meaning set forth in paragraph (c) of
Section 7 of this Article.
"Look-Through Entity" shall mean a Person that is either (i) described
in Section 401(a) of the Code as provided under Section 856(h)(3) of
the Code or (ii) registered under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, for any Look-Through
Entity, a number of the Outstanding shares of Class H Preferred Stock
of the Corporation having an Aggregate Value not in excess of the
excess of (x) 15% of the Aggregate Value of all Outstanding shares of
Equity Stock over (y) the Aggregate Value of all shares of Equity
Stock other than Class H Preferred Stock that are Beneficially Owned
by the Look-Through Entity.
"Market Price" on any date shall mean, with respect to any share of
Equity Stock, the Closing Price of a share of that class of Equity
Stock on the Trading Day immediately preceding such date. The term
"Closing Price," when used with respect to a share of any Equity Stock
and for any date, shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case, as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if the Equity
Stock is not listed or admitted to trading on the NYSE, as reported in
the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on
which the Equity Stock is listed or admitted to trading or, if the
Equity 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 the Equity Stock is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Equity Stock selected
by the Board of Directors of the Corporation. The term "Trading Day,"
when used with respect to the Closing Price of a share of any Equity
Stock, shall mean (i) if the Equity Stock is listed or admitted to
trading on the NYSE, a day on which the NYSE is open for the
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transaction of business, (ii) if the Equity Stock is not listed or
admitted to trading on the NYSE but is listed or admitted to trading
on another national securities exchange or automated quotation system,
a day on which the principal national securities exchange or automated
quotation system, as the case may be, on which the Equity Stock is
listed or admitted to trading is open for the transaction of business,
or (iii) if the Equity Stock is not listed or admitted to trading on
any national securities exchange or automated quotation system, any
day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by
law or executive order to close.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Operating Partnership" shall mean AIMCO Properties, L.P., a Delaware
limited partnership.
"Outstanding" shall mean issued and outstanding shares of Equity Stock
of the Corporation, provided that for purposes of the application of
the Ownership Limit, the Look-Through Ownership Limit or the Initial
Holder Limit to any Person, the term "Outstanding" shall be deemed to
include the number of shares of Equity Stock that such Person alone,
at that time, could acquire pursuant to any options or convertible
securities.
"Ownership Limit" shall mean, for any Person other than the Initial
Holder or a Look-Through Entity, a number of the Outstanding shares of
Class H Preferred Stock of the Corporation having an Aggregate Value
not in excess of the excess of (x) 8.7% of the Aggregate Value of all
Outstanding shares of Equity Stock over (y) the Aggregate Value of all
shares of Equity Stock other than Class H Preferred Stock that are
Beneficially Owned by the Person.
"Ownership Restrictions" shall mean collectively the Ownership Limit
as applied to Persons other than the Initial Holder or Look-Through
Entities, the Initial Holder Limit as applied to the Initial Holder
and the Look-Through Ownership Limit as applied to Look-Through
Entities.
"Parity Stock" shall have the meaning set forth in paragraph (b) of
Section 7 of this Article.
"Person" shall mean (a) for purposes of Section 10 of this Article,
(i) an individual, corporation, partnership, estate, trust (including
a trust qualifying under Section 401(a) or 501(c) of the Code),
association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity, and (ii) also
includes a group as that term is used for purposes of Section 13(d)(3)
of the Exchange Act and (b) for purposes of the remaining
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Sections of this Article, any individual, firm, partnership,
corporation or other entity and shall include any successor (by merger
or otherwise) of such entity.
"Prohibited Transferee" has the meaning set forth in Section 10.3(A)
of this Article.
"Redemption Date" shall have the meaning set forth in paragraph (a) of
Section 5 of this Article.
"REIT" shall mean a "real estate investment trust" as defined in
Section 856 of the Code.
"Senior Stock" shall have the meaning set forth in paragraph (a) of
Section 7 of this Article.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other
distribution by the Board of Directors, the allocation of funds to be
so paid on any series or class of capital stock of the Corporation;
provided, however, that if any funds for any class or series of Junior
Stock or any class or series of Parity Stock are placed in a separate
account of the Corporation or delivered to a disbursing, paying or
other similar agent, then "set apart for payment" with respect to the
Class H Preferred Stock shall mean placing such funds in a separate
account or delivering such funds to a disbursing, paying or other
similar agent.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of a share of Class H Preferred Stock (including (i)
the granting of an option or any series of such options or entering
into any agreement for the sale, transfer or other disposition of
Class H Preferred Stock or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or
exchangeable for Class H Preferred Stock), whether voluntary or
involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any
transfer of an interest in other entities that results in a change in
the Beneficial Ownership of shares of Class H Preferred Stock). The
term "Transfers" and "Transferred" shall have correlative meanings.
"Transfer Agent" means such transfer agent as may be designated by the
Board of Directors or their designee as the transfer agent for the
Class H Preferred Stock; provided, that if the Corporation has not
designated a transfer agent then the Corporation shall act as the
transfer agent for the Class H Preferred Stock.
"Trust" shall mean the trust created pursuant to Section 10.3 of this
Article.
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"Trustee" shall mean the Person unaffiliated with either the
Corporation or the Prohibited Transferee that is appointed by the
Corporation to serve as trustee of the Trust.
"Voting Preferred Stock" shall have the meaning set forth in Section 8
of this Article.
3. DIVIDENDS.
(a) The holders of Class H Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of
funds legally available for that purpose, cumulative dividends payable in cash
in an amount per share of Class H Preferred Stock equal to $2.375 per annum
(equivalent to 9 1/2% per annum of the per share Liquidation Preference (as
hereinafter defined)). Such dividends shall be cumulative from the Issue Date,
whether or not in any Dividend Period or Periods such dividends shall be
declared or there shall be funds of the Corporation legally available for the
payment of such dividends, and shall be payable quarterly in arrears on each
Dividend Payment Date, commencing on October 15, 1998. Each such dividend
shall be payable in arrears to the holders of record of the Class H Preferred
Stock, as they appear on the stock records of the Corporation at the close of
business on the January 1, April 1, July 1 or October 1, as the case may be,
immediately preceding such Dividend Payment Date. Accumulated, accrued and
unpaid dividends for any past Dividend Periods may be declared and paid at any
time, without reference to any regular Dividend Payment Date, to holders of
record on such date, which date shall not precede by more than 45 days the
payment date thereof, as may be fixed by the Board of Directors.
(b) Any dividend payable on the Class H Preferred Stock
for any partial dividend period shall be computed ratably on the basis of
twelve 30-day months and a 360-day year. Holders of Class H Preferred Stock
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as herein provided, on the Class
H Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Class H Preferred
Stock that may be in arrears.
(c) So long as any of the shares of Class H Preferred
Stock are outstanding, except as described in the immediately following
sentence, no dividends shall be declared or paid or set apart for payment by
the Corporation and no other distribution of cash or other property shall be
declared or made, directly or indirectly, by the Corporation with respect to
any shares of Parity Stock unless, in each case, dividends equal to the full
amount of accumulated, accrued and unpaid dividends on all outstanding shares
of Class H Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof has been or
contemporaneously is set apart for payment of such dividends on the Class H
Preferred Stock for all Dividend Periods ending on or prior to the date such
dividend
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or distribution is declared, paid, set apart for payment or made, as the case
may be, with respect to such shares of Parity Stock. When dividends are not
paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon the Class H Preferred Stock and all
dividends declared upon any shares of Parity Stock shall be declared ratably in
proportion to the respective amounts of dividends accumulated, accrued and
unpaid on the Class H Preferred Stock and accumulated, accrued and unpaid on
such Parity Stock.
(d) So long as any of the shares of Class H Preferred
Stock are outstanding, no dividends (other than dividends or distributions paid
in shares of, or options, warrants or rights to subscribe for or purchase
shares of, Junior Stock) shall be declared or paid or set apart for payment by
the Corporation and no other distribution of cash or other property shall be
declared or made, directly or indirectly, by the Corporation with respect to
any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock), directly or indirectly, by the Corporation
(except by conversion into or exchange for shares of, or options, warrants or
rights to subscribe for or purchase shares of, Junior Stock), nor shall any
other cash or other property otherwise be paid or distributed to or for the
benefit of any holder of shares of Junior Stock in respect thereof, directly or
indirectly, by the Corporation unless, in each case, dividends equal to the
full amount of all accumulated, accrued and unpaid dividends on all outstanding
shares of Class H Preferred Stock have been declared and paid, or such
dividends have been declared and a sum sufficient for the payment thereof has
been set apart for such payment, on all outstanding shares of Class H Preferred
Stock for all Dividend Periods ending on or prior to the date such dividend or
distribution is declared, paid, set apart for payment or made with respect to
such shares of Junior Stock, or the date such shares of Junior Stock are
redeemed, purchased or otherwise acquired or monies paid to or made available
for any sinking fund for such redemption, or the date any such cash or other
property is paid or distributed to or for the benefit of any holders of Junior
Stock in respect thereof, as the case may be.
Notwithstanding the provisions of this Section 3, the
Corporation shall not be prohibited from (i) declaring or paying or setting
apart for payment any dividend or distribution on any shares of Parity Stock or
(ii) or redeeming, purchasing or otherwise acquiring any Parity Stock, in each
case, if such declaration, payment, redemption, purchase or other acquisition
is necessary in order to maintain the continued qualification of the
Corporation as a REIT under Section 856 of the Code.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, before any
payment or distribution by
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the Corporation (whether of capital, surplus or otherwise) shall be made to or
set apart for the holders of Junior Stock, the holders of shares of Class H
Preferred Stock shall be entitled to receive Twenty-Five Dollars ($25) per
share of Class H Preferred Stock (the "Liquidation Preference"), plus an amount
equal to all dividends (whether or not earned or declared) accumulated, accrued
and unpaid thereon to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment. Until the holders of the
Class H Preferred Stock have been paid the Liquidation Preference in full, plus
an amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final distribution to
such holders, no payment will be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of Class H
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of any class or series
of Parity Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of Class H Preferred Stock and any such other
Parity Stock ratably in the same proportion as the respective amounts that
would be payable on such Class H Preferred Stock and any such other Parity
Stock if all amounts payable thereon were paid in full. For the purposes of
this Section 4, (i) a consolidation or merger of the Corporation with one or
more corporations, (ii) a sale or transfer of all or substantially all of the
Corporation's assets, or (iii) a statutory share exchange shall not be deemed
to be a liquidation, dissolution or winding up, voluntary or involuntary, of
the Corporation.
(b) Upon any liquidation, dissolution or winding up of
the Corporation, after payment shall have been made in full to the holders of
Class H Preferred Stock and any Parity Stock, as provided in this Section 4,
any other series or class or classes of Junior Stock shall, subject to the
respective terms thereof, be entitled to receive any and all assets remaining
to be paid or distributed, and the holders of the Class H Preferred Stock and
any Parity Stock shall not be entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class H Preferred Stock shall not be
redeemable by the Corporation prior to August 14, 2003, except as set forth in
Section 10.2 of this Article. On and after August 14, 2003, the Corporation,
at its option, may redeem shares of Class H Preferred Stock, in whole or from
time to time in part, at a redemption price payable in cash equal to 100% of
the Liquidation Preference thereof, plus all accumulated, accrued and unpaid
dividends to the date fixed for redemption (the "Redemption Date"); provided,
however, that in the event of a redemption of shares of Class H Preferred
Stock, if the Redemption Date occurs after a dividend record date and on or
prior to the related Dividend Payment Date, the dividend payable on such
Dividend Payment Date in respect of such shares called for redemption shall be
payable on such Dividend Payment Date to the holders of record at the close of
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business on such dividend record date, and shall not be payable as part of the
redemption price for such shares. In connection with any redemption pursuant
to this Section 5(a), the redemption price of the Class H Preferred Stock
(other than any portion thereof consisting of accumulated, accrued and unpaid
dividends) shall be payable solely with the proceeds from the sale by the
Corporation or the Operating Partnership, of other capital shares of the
Corporation or the Operating Partnership (whether or not such sale occurs
concurrently with such redemption). For purposes of the preceding sentence,
"capital shares" means any common stock, preferred stock, depositary shares,
partnership or other interests, participations or other ownership interests
(however designated) and any rights (other than debt securities convertible
into or exchangeable at the option of the holder for equity securities (unless
and to the extent such debt securities are subsequently converted into capital
shares)) or options to purchase any of the foregoing of or in the Corporation
or the Operating Partnership.
(b) The Redemption Date shall be selected by the
Corporation, shall be specified in the notice of redemption and shall be not
less than 30 days nor more than 60 days after the date notice of redemption is
sent by the Corporation.
(c) If full cumulative dividends on all outstanding shares
of Class H Preferred Stock have not been declared and paid, or declared and set
apart for payment, no shares of Class H Preferred Stock may be redeemed unless
all outstanding shares of Class H Preferred Stock are simultaneously redeemed
and neither the Corporation nor any affiliate of the Corporation may purchase
or acquire shares of Class H Preferred Stock, otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of shares of
Class H Preferred Stock.
(d) If the Corporation shall redeem shares of Class H
Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such
redemption shall be given to each holder of record of the shares to be
redeemed. Such notice shall be provided by first class mail, postage prepaid,
at such holder's address as the same appears on the stock records of the
Corporation. Neither the failure to mail any notice required by this paragraph
(d), nor any defect therein or in the mailing thereof to any particular holder,
shall affect the sufficiency of the notice or the validity of the proceedings
for redemption with respect to the other holders. Any notice which was mailed
in the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives the notice. Each
such notice shall state, as appropriate: (1) the Redemption Date; (2) the
number of shares of Class H Preferred Stock to be redeemed and, if fewer than
all such shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (3) the place or places at which
certificates for such shares are to be surrendered for cash; and (4) the
redemption price payable on such Redemption Date, including, without
limitation, a statement as to whether or not accumulated, accrued and unpaid
dividends will be (x) payable as part of the redemption price, or (y) payable
on the next Dividend Payment Date to the record holder at the close of business
on the relevant record date as described in the next succeeding sentence.
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Notice having been mailed as aforesaid, from and after the Redemption Date
(unless the Corporation shall fail to make available the amount of cash
necessary to effect such redemption), (i) dividends on the shares of Class H
Preferred Stock so called for redemption shall cease to accumulate or accrue on
the shares of Class H Preferred Stock called for redemption, (ii) said shares
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class H Preferred Stock of the Corporation shall
cease except the rights to receive the cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required; provided, however, that if the Redemption Date for any shares
of Class H Preferred Stock occurs after any dividend record date and on or
prior to the related Dividend Payment Date, the full dividend payable on such
Dividend Payment Date in respect of such shares of Class H Preferred Stock
called for redemption shall be payable on such Dividend Payment Date to the
holders of record of such shares at the close of business on the corresponding
dividend record date notwithstanding the prior redemption of such shares. The
Corporation's obligation to make available the redemption price in accordance
with the preceding sentence shall be deemed fulfilled if, on or before the
applicable Redemption Date, the Corporation shall irrevocably deposit in trust
with a bank or trust company (which may not be an affiliate of the Corporation)
that has, or is an affiliate of a bank or trust company that has, a capital and
surplus of at least $50,000,000, such amount of cash as is necessary for such
redemption plus, if such Redemption Date occurs after any dividend record date
and on or prior to the related Dividend Payment Date, such amount of cash as is
necessary to pay the dividend payable on such Dividend Payment Date in respect
of such shares of Class H Preferred Stock called for redemption, with
irrevocable instructions that such cash be applied to the redemption of the
shares of Class H Preferred Stock so called for redemption and, if applicable,
the payment of such dividend. No interest shall accrue for the benefit of the
holders of shares of Class H Preferred Stock to be redeemed on any cash so set
aside by the Corporation. Subject to applicable escheat laws, any such cash
unclaimed at the end of two years from the Redemption Date shall revert to the
general funds of the Corporation, after which reversion the holders of shares
of Class H Preferred Stock so called for redemption shall look only to the
general funds of the Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class H Preferred Stock to be
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which such shares have been
redeemed in accordance with such notice. If fewer than all the outstanding
shares of Class H Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class H
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class H Preferred Stock held of record by each holder
of such shares, pro rata (as nearly as may be) or by any other method as may be
determined by the Board of Directors in its discretion to be equitable. If
fewer than all the shares of Class H Preferred Stock represented by any
certificate are redeemed,
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then a new certificate representing the unredeemed shares shall be issued
without cost to the holders thereof.
6. STATUS OF REACQUIRED STOCK.
All shares of Class H Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class H Preferred Stock.
7. RANKING.
Any class or series of capital stock of the Corporation shall be deemed
to rank:
(a) prior or senior to the Class H Preferred Stock, as to
the payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class H Preferred Stock ("Senior Stock");
(b) on a parity with the Class H Preferred Stock, as to
the payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share thereof be different from
those of the Class H Preferred Stock, if (i) such capital stock is Class B
Cumulative Convertible Preferred Stock, Class C Cumulative Preferred Stock,
Class D Cumulative Preferred Stock, or Class G Cumulative Preferred Stock of
the Corporation, or (ii) the holders of such class of stock or series and the
Class H Preferred Stock shall be entitled to the receipt of dividends and of
amounts distributable upon liquidation, dissolution or winding up in proportion
to their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority of one over the other
(the capital stock referred to in clauses (i) and (ii) of this paragraph being
hereinafter referred to, collectively, as "Parity Stock"); and
(c) junior to the Class H Preferred Stock, as to the
payment of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if (i) such capital stock or series shall be Common
Stock or (ii) the holders of Class H Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
shares of such class or series (the capital stock referred to in clauses (i)
and (ii) of this paragraph being hereinafter referred to, collectively, as
"Junior Stock").
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8. VOTING.
(a) If and whenever six quarterly dividends (whether or
not consecutive) payable on the Class H Preferred Stock or any series or class
of Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of directors then constituting
the Board of Directors shall be increased by two (if not already increased by
reason of similar types of provisions with respect to shares of Parity Stock of
any other class or series which is entitled to similar voting rights (the
"Voting Preferred Stock")) and the holders of shares of Class H Preferred
Stock, together with the holders of shares of all other Voting Preferred Stock
then entitled to exercise similar voting rights, voting as a single class
regardless of series, shall be entitled to elect the two additional directors
to serve on the Board of Directors at any annual meeting of stockholders or
special meeting held in place thereof, or at a special meeting of the holders
of the Class H Preferred Stock and the Voting Preferred Stock called as
hereinafter provided. Whenever all arrears in dividends on the Class H
Preferred Stock and the Voting Preferred Stock then outstanding shall have been
paid and dividends thereon for the current quarterly dividend period shall have
been declared and paid, or declared and set apart for payment, then the right
of the holders of the Class H Preferred Stock and the Voting Preferred Stock to
elect such additional two directors shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearages), and the terms of office of all persons elected as directors
by the holders of the Class H Preferred Stock and the Voting Preferred Stock
shall forthwith terminate and the number of directors constituting the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of Class H Preferred Stock and the
Voting Preferred Stock, if applicable, the Secretary of the Corporation may,
and upon the written request of any holder of Class H Preferred Stock
(addressed to the Secretary at the principal office of the Corporation) shall,
call a special meeting of the holders of the Class H Preferred Stock and of the
Voting Preferred Stock for the election of the two directors to be elected by
them as herein provided, such call to be made by notice similar to that
provided in the Bylaws of the Corporation for a special meeting of the
stockholders or as required by law. If any such special meeting required to be
called as above provided shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of Class H Preferred Stock
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors elected
at any such special meeting shall hold office until the next annual meeting of
the stockholders or special meeting held in lieu thereof if such office shall
not have previously terminated as above provided. If any vacancy shall occur
among the directors elected by the holders of the Class H Preferred Stock and
the Voting Preferred Stock, a successor shall be elected by the Board of
Directors, upon the nomination of the then-remaining director elected by the
holders of the Class H Preferred Stock and the Voting Preferred Stock or the
successor of such remaining director, to serve until the next annual meeting of
the stockholders or special meeting held in place thereof if such office shall
not have previously terminated as provided above.
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(b) So long as any shares of Class H Preferred Stock are
outstanding, in addition to any other vote or consent of stockholders required
by law or by the Charter of the Corporation, the affirmative vote of at least
66- 2/3% of the votes entitled to be cast by the holders of the Class H
Preferred Stock voting as a single class with the holders of all other classes
or series of Parity Stock entitled to vote on such matters, given in person or
by proxy, either in writing without a meeting or by vote at any meeting called
for the purpose, shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of
the provisions of, or the addition of any provision to, these Articles
Supplementary, the Charter or the By-Laws of the Corporation that materially
adversely affects the voting powers, rights or preferences of the holders of
the Class H Preferred Stock; provided, however, that the amendment of the
provisions of the Charter so as to authorize or create, or to increase the
authorized amount of, or issue any Junior Stock or any shares of any class of
Parity Stock shall not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class H Preferred Stock; or
(ii) The authorization, creation of, increase in
the authorized amount of, or issuance of any shares of any class or series of
Senior Stock or any security convertible into shares of any class or series of
Senior Stock (whether or not such class or series of Senior Stock is currently
authorized);
provided, however, that no such vote of the holders of Class H Preferred Stock
shall be required if, at or prior to the time when such amendment, alteration
or repeal is to take effect, or when the issuance of any such Senior Stock or
convertible or exchangeable security is to be made, as the case may be,
provision is made for the redemption of all shares of Class H Preferred Stock
at the time outstanding to the extent such redemption is authorized by Section
5 of this Article.
For purposes of the foregoing provisions and all other voting rights
under these Articles Supplementary, each share of Class H Preferred Stock shall
have one (1) vote per share, except that when any other class or series of
preferred stock of the Corporation shall have the right to vote with the Class
H Preferred Stock as a single class on any matter, then the Class H Preferred
Stock and such other class or series shall have with respect to such matters
one quarter of one (.25) vote per $25 of stated liquidation preference. Except
as otherwise required by applicable law or as set forth herein or in the
Charter, the Class H Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers other than as
set forth herein, and the consent of the holders thereof shall not be required
for the taking of any corporate action.
9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record
holder of any share of Class H Preferred Stock as the true and lawful owner
thereof for all
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purposes, and neither the Corporation nor the Transfer Agent shall be affected
by any notice to the contrary.
10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided
in Section 10.8, from and after the Issue Date, no Person (other than the
Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class
H Preferred Stock in excess of the Ownership Limit, the Initial Holder shall
not Beneficially Own shares of Class H Preferred Stock in excess of the Initial
Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class
H Preferred Stock in excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as
provided in Section 10.8, from and after the Issue Date (and subject to Section
10.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in any Person (other than the Initial Holder or a
Look-Through Entity) Beneficially Owning shares of Class H Preferred Stock in
excess of the Ownership Limit shall be void ab initio as to the Transfer of
such shares of Class H Preferred Stock that would be otherwise Beneficially
Owned by such Person in excess of the Ownership Limit, and the intended
transferee shall acquire no rights in such shares of Class H Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as
provided in Section 10.8, from and after the Issue Date (and subject to Section
10.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in the Initial Holder Beneficially Owning shares of
Class H Preferred Stock in excess of the Initial Holder Limit shall be void ab
initio as to the Transfer of such shares of Class H Preferred Stock that would
be otherwise Beneficially Owned by the Initial Holder in excess of the Initial
Holder limit, and the Initial Holder shall acquire no rights in such shares of
Class H Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT.
Except as provided in Section 10.8 from and after the Issue Date (and subject
to Section 10.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in any Look-Through Entity Beneficially Owning shares
of Class H Preferred Stock in excess of the Look-Through Ownership limit shall
be void ab initio as to the Transfer of such shares of Class H Preferred Stock
that would be otherwise Beneficially Owned by such Look-Through Entity in
excess of the Look- Through Ownership Limit and such Look-Through Entity shall
acquire no rights in such shares of Class H Preferred Stock.
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(E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and
after the Issue Date, any Transfer that, if effective would result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or would otherwise result in the Corporation failing to qualify as a REIT
(including, without limitation, a Transfer or other event that would result in
the Corporation owning (directly 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) shall be
void ab initio as to the Transfer of shares of Class H Preferred Stock that
would cause the Corporation (i) to be "closely held" within the meaning of
Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the
case may be, and the intended transferee shall acquire no rights in such shares
of Class H Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share
of Class H Preferred Stock that is null and void under Sections 10.1(B), (C),
(D), or (E) of this Article because it would, if effective, result in (i) the
ownership of Class H Preferred Stock in excess of the Initial Holder Limit, the
Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation
being "closely held" within the meaning of Section 856(h) of the Code or (iii)
the Corporation otherwise failing to qualify as a REIT, shall not adversely
affect the validity of the Transfer of any other share of Class H Preferred
Stock in the same or any other related transaction.
10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee
thereof shall at any time determine in good faith that a Transfer or other
event has taken place in violation of Section 10.1 of this Article or that a
Person intends to acquire or has attempted to acquire Beneficial Ownership of
any shares of Class H Preferred Stock in violation of Section 10.1 of this
Article (whether or not such violation is intended), the Board of Directors or
a committee thereof shall be empowered to take any action as it deems advisable
to refuse to give effect to or to prevent such Transfer or other event,
including, but not limited to, refusing to give effect to such Transfer or
other event on the books of the Corporation, causing the Corporation to redeem
such shares at the then current Market Price and upon such terms and conditions
as may be specified by the Board of Directors in its sole discretion
(including, but not limited to, by means of the issuance of long-term
indebtedness for the purpose of such redemption), demanding the repayment of
any distributions received in respect of shares of Class H Preferred Stock
acquired in violation of Section 10.1 of this Article or instituting
proceedings to enjoin such Transfer or to rescind such Transfer or attempted
Transfer; provided, however, that any Transfers or attempted Transfers (or, in
the case of events other than a Transfer, Beneficial Ownership) in violation of
Section 10.1 of this Article, regardless of any action (or non-action) by the
Board of Directors or such committee, (a) shall be void ab initio or (b) shall
automatically result in the transfer described in Section 10.3 of this Article;
provided, further, that the provisions of this Section 10.2 shall be subject to
the provisions of Section 10.12 of this Article; provided, further, that
neither the Board of Directors nor any committee thereof may
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exercise such authority in a manner that interferes with any ownership or
transfer of Class H Preferred Stock that is expressly authorized pursuant to
Section 10.8(C) of this Article.
10.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other
provisions contained in this Article, at any time after the Issue Date there is
a purported Transfer (an "Excess Transfer") (whether or not such Transfer is
the result of transactions entered into through the facilities of the NYSE or
other securities exchange or an automated inter-dealer quotation system) or
other change in the capital structure of the Corporation (including, but not
limited to, any redemption of Equity Stock) or other event (including, but not
limited to, any acquisition of any share of Equity Stock) such that (a) any
Person (other than the Initial Holder or a Look-Through Entity) would
Beneficially Own shares of Class H Preferred Stock in excess of the Ownership
Limit, or (b) the Initial Holder would Beneficially Own shares of Class H
Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that
is a Look-Through Entity would Beneficially Own shares of Class H Preferred
Stock in excess of the Look-Through Ownership Limit (in any such event, the
Person, Initial Holder or Look-Through Entity that would Beneficially Own
shares of Class H Preferred Stock in excess of the Ownership Limit, the Initial
Holder Limit or the Look-Through Entity Limit, respectively, is referred to as
a "Prohibited Transferee"), then, except as otherwise provided in Section 10.8
of this Article, such shares of Class H Preferred Stock in excess of the
Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit,
as the case may be, (rounded up to the nearest whole share) shall be
automatically transferred to a Trustee in his capacity as trustee of a Trust
for the exclusive benefit of one or more Charitable Beneficiaries. Such
transfer to the Trustee shall be deemed to be effective as of the close of
business on the Business Day prior to the Excess Transfer, change in capital
structure or another event giving rise to a potential violation of the
Ownership Limit, the Initial Holder Limit or the Look-Through Entity Ownership
Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed
by the Corporation and shall be a Person unaffiliated with either the
Corporation or any Prohibited Transferee. The Trustee may be an individual or
a bank or trust company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class H
Preferred Stock held by the Trustee shall be issued and outstanding shares of
capital stock of the Corporation. Except to the extent provided in Section
10.3(E), the Prohibited Transferee shall have no rights in the Class H
Preferred Stock held by the Trustee, and the Prohibited Transferee shall not
benefit economically from ownership of any shares held in trust by the Trustee,
shall have no rights to dividends and shall not possess any rights to vote or
other rights attributable to the shares held in the Trust.
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(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all
voting rights and rights to dividends with respect to shares of Class H
Preferred Stock held in the Trust, which rights shall be exercised for the
benefit of the Charitable Beneficiary. Any dividend or distribution paid prior
to the discovery by the Corporation that the shares of Class H Preferred Stock
have been transferred to the Trustee shall be repaid to the Corporation upon
demand, and any dividend or distribution declared but unpaid shall be rescinded
as void ab initio with respect to such shares of Class H Preferred Stock. Any
dividends or distributions so disgorged or rescinded shall be paid over to the
Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a
Prohibited Transferee prior to the discovery by the Corporation that the shares
of Class H Preferred Stock have been transferred to the Trustee will be
rescinded as void ab initio and shall be recast in accordance with the desires
of the Trustee acting for the benefit of the Charitable Beneficiary. The owner
of the shares at the time of the Excess Transfer, change in capital structure
or other event giving rise to a potential violation of the Ownership Limit,
Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to
have given an irrevocable proxy to the Trustee to vote the shares of Class H
Preferred Stock for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may
sell the shares held in the Trust to a Person, designated by the Trustee, whose
ownership of the shares will not violate the Ownership Restrictions. If such a
sale is made, the interest of the Charitable Beneficiary shall terminate and
proceeds of the sale shall be payable to the Prohibited Transferee and to the
Charitable Beneficiary as provided in this Section 10.3(E). The Prohibited
Transferee shall receive the lesser of (1) the price paid by the Prohibited
Transferee for the shares or, if the Prohibited Transferee did not give value
for the shares (through a gift, devise or other transaction), the Market Price
of the shares on the day of the event causing the shares to be held in the
Trust and (2) the price per share received by the Trustee from the sale or
other disposition of the shares held in the Trust. Any proceeds in excess of
the amount payable to the Prohibited Transferee shall be payable to the
Charitable Beneficiary. If any of the transfer restrictions set forth in this
Section 10.3(E) or any application thereof is determined in a final judgment to
be void, invalid or unenforceable by any court having jurisdiction over the
issue, the Prohibited Transferee may be deemed, at the option of the
Corporation, to have acted as the agent of the Corporation in acquiring the
Class H Preferred Stock as to which such restrictions would, by their terms,
apply, and to hold such Class H Preferred Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE.
Shares of Class H Preferred Stock transferred to the Trustee shall be deemed to
have been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market Price
on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of
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90 days after the later of (i) the date of the Excess Transfer or other event
resulting in a transfer to the Trust and (ii) the date that the Board of
Directors determines in good faith that an Excess Transfer or other event
occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written
notice to the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
relating to such Prohibited Transferee if (i) the shares of Class H Preferred
Stock held in the Trust would not violate the Ownership Restrictions in the
hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an
organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the
Code.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or
attempts to acquire shares of Class H Preferred Stock in violation of Section
10.1 of this Article, or any Person that is a Prohibited Transferee such that
stock is transferred to the Trustee under Section 10.3 of this Article, shall
immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such Transfer or attempted
Transfer or other event on the Corporation's status as a REIT. Failure to give
such notice shall not limit the rights and remedies of the Board of Directors
provided herein in any way.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the
Issue Date certain record and Beneficial Owners and transferees of shares of
Class H Preferred Stock will be required to provide certain information as set
out below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of
more than 5% (or such other percentage between 0.5% and 5%, as provided in the
applicable regulations adopted under the Code) of the number of Outstanding
shares of Class H Preferred Stock shall, within 30 days after January 1 of each
year, give written notice to the Corporation stating the name and address of
such record or Beneficial Owner, the number of shares of Class H Preferred
Stock Beneficially Owned, and a full description of how such shares are held.
Each such record or Beneficial Owner of Class H Preferred Stock shall, upon
demand by the Corporation, disclose to the Corporation in writing such
additional information with respect to the Beneficial Ownership of the Class H
Preferred Stock as the Board of Directors, in its sole discretion, deems
appropriate or necessary to (i) comply with the provisions of the Code
regarding the qualification of the Corporation as a REIT under the Code and
(ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as applicable. Each stockholder of record,
including without limitation any Person that holds shares of Class H Preferred
Stock on behalf of a Beneficial Owner, shall take all reasonable steps to
obtain the written notice described in this Section 10.5 from the Beneficial
Owner.
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(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person
that is a Beneficial Owner of shares of Class H Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class H
Preferred Stock for a Beneficial Owner, and any proposed transferee of shares,
shall provide such information as the Corporation, in its sole discretion, may
request in order to determine the Corporation's status as a REIT, to comply
with the requirements of any taxing authority or other governmental agency, to
determine any such compliance or to ensure compliance with the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit, and shall
provide a statement or affidavit to the Corporation setting forth the number of
shares of Class H Preferred Stock already Beneficially Owned by such
stockholder or proposed transferee and any related persons specified, which
statement or affidavit shall be in the form prescribed by the Corporation for
that purpose.
10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall
limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable (subject to the provisions of Section 10.12 of
this Article) (i) to protect the Corporation and the interests of its
stockholders in the preservation of the Corporation's status as a REIT and (ii)
to insure compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit.
10.7 AMBIGUITY. In the case of an ambiguity in the application of
any of the provisions of Section 10 of this Article, or in the case of an
ambiguity in any definition contained in Section 10 of this Article, the Board
of Directors shall have the power to determine the application of the
provisions of this Article with respect to any situation based on its
reasonable belief, understanding or knowledge of the circumstances.
10.8 EXCEPTIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 10.1 of this Article.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of tax
counsel or other evidence or undertaking acceptable to it, may waive the
application, in whole or in part, of the Ownership Limit to a Person subject to
the Ownership Limit, if such person is not an individual for purposes of
Section 542(a) of the Code and is a corporation, partnership, estate or trust.
In connection with any such exemption, the Board of Directors may require such
representations and undertakings from such Person and may impose such other
conditions as the Board of Directors deems necessary, in its sole discretion,
to determine the effect, if any, of the proposed Transfer on the Corporation's
status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other
provision of this Article, the pledge by the Initial Holder of all or any
portion of the Class H Preferred Stock directly owned at any time or from time
to time shall not constitute a violation of Section 10.1 of this Article and
the pledgee shall not be subject to the
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Ownership Limit with respect to the Class H Preferred Stock so pledged to it
either as a result of the pledge or upon foreclosure.
(C) UNDERWRITERS. For a period of 270 days (or such longer
period of time as any underwriter described below shall hold an unsold
allotment of Class H Preferred Stock) following the purchase of Class H
Preferred Stock by an underwriter that (i) is a corporation, partnership or
other legal entity and (ii) participates in an offering of the Class H
Preferred Stock, such underwriter shall not be subject to the Ownership Limit
with respect to the Class H Preferred Stock purchased by it as a part of or in
connection with such offering and with respect to any Class H Preferred Stock
purchased in connection with market making activities.
10.9 LEGEND. Each certificate for Class H Preferred Stock shall
bear substantially the following legend:
"The shares of Class H Cumulative Preferred Stock
represented by this certificate are subject to restrictions on
transfer. No person may Beneficially Own shares of Class H Cumulative
Preferred Stock in excess of the Ownership Restrictions, as
applicable, with certain further restrictions and exceptions set forth
in the Charter (including the Articles Supplementary setting forth the
terms of the Class H Cumulative Preferred Stock). Any Person that
attempts to Beneficially Own shares of Class H Cumulative Preferred
Stock in excess of the applicable limitation must immediately notify
the Corporation. All capitalized terms in this legend have the
meanings ascribed to such terms in the Charter (including the Articles
Supplementary setting forth the terms of the Class H Cumulative
Preferred Stock), 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 stockholder that so requests. If the restrictions on
transfer are violated (i) the transfer of the shares of Class H
Cumulative Preferred Stock represented hereby will be void in
accordance with the Charter (including the Articles Supplementary
setting forth the terms of the Class H Cumulative Preferred Stock) or
(ii) the shares of Class H Cumulative Preferred Stock represented
hereby will automatically be transferred to a Trustee of a Trust for
the benefit of one or more Charitable Beneficiaries."
10.10 SEVERABILITY. If any provision of this Article or any
application of any such provision is determined in a final and unappealable
judgment to be void, invalid or unenforceable by any Federal or state court
having jurisdiction over the issues, the validity and enforceability 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.
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10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit in the event of a
change in law.
10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall
be interpreted to preclude the settlement of any transaction entered into
through the facilities of the NYSE or other securities exchange or an automated
inter- dealer quotation system.
FOURTH: The terms of the Class H Cumulative Preferred Stock set forth
in Article Third hereof shall become Article XVII of the Charter.
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IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Senior Vice President and Chief
Financial Officer and witnessed by its Assistant Secretary on August 12,
1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ KATHLEEN HARVEY /s/ TROY D. BUTTS
- - ---------------------------------- -------------------------------------
Kathleen Harvey Troy D. Butts
Assistant Secretary Senior Vice President and
Chief Financial Officer
THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the
Corporation the 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 hereby certifies that the matters and facts set forth herein with respect
to the authorization and approval thereof are true in all material respects
under the penalties of perjury.
/s/ TROY D. BUTTS
-------------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
<PAGE> 146
ARTICLES OF MERGER
MERGING
INSIGNIA FINANCIAL GROUP, INC.
(A CORPORATION OF THE STATE OF DELAWARE)
WITH AND INTO
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(A CORPORATION OF THE STATE OF MARYLAND)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a corporation organized and
existing under the laws of the State of Maryland ("AIMCO"), and INSIGNIA
FINANCIAL GROUP, INC., a corporation organized and existing under the laws of
the State of Delaware ("IFG"), do hereby certify to the State Department of
Assessments and Taxation of Maryland (the "Department") as follows:
FIRST: AIMCO and IFG agree that IFG shall be merged with and into AIMCO and
AIMCO shall be the surviving corporation (the "Merger"). The terms and
conditions of the Merger and the mode of carrying the same into effect are as
hereinafter set forth.
SECOND: IFG was incorporated under the Delaware General Corporation Law
("DGCL") on July 20, 1990. IFG qualified to do business in the State of Maryland
on May 11, 1998.
THIRD: The principal office of each of AIMCO and IFG in the State of
Maryland is, and the principal office of AIMCO immediately following the
effective time of the Merger will be, located in the City of Baltimore.
FOURTH: IFG owns no interest in land located in the State of Maryland.
FIFTH: The charter of AIMCO (the "Charter") will be amended as a result of
the Merger as set forth in Article NINTH below, and the Charter, as amended,
shall continue in full force and effect until duly amended in accordance with
its terms and applicable law.
SIXTH: These Articles of Merger, which may be executed in counterparts,
shall become effective immediately upon the acceptance thereof for record by the
Department (the "Effective Time").
SEVENTH: The total number of shares of all classes of stock which each
corporation party to these Articles of Merger has the authority to issue, and
the number of shares of each class, are as follows:
(a) IFG
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The total number of shares of all classes of stock which IFG has authority
to issue is One Hundred Three Million (103,000,000) shares (the "IFG Stock"),
consisting of 100,000,000 shares of Class A Common Stock, par value $.01 per
share (the "IFG Common Stock"); 2,000,000 shares of Class B Common Stock, par
value $.01 per share; and 1,000,000 shares of preferred stock, par value $.01
per share, of which 15,000 shares have been designated as 7.5% Step- Up Rate
Convertible Preferred Stock. The aggregate par value of all classes of stock of
IFG having par value is One Million Thirty Thousand Dollars ($1,030,000).
(b) AIMCO
The total number of shares of all classes of stock which AIMCO has
authority to issue is Five Hundred Ten Million Seven Hundred Fifty Thousand
(510,750,000) shares, consisting of 486,027,500 shares of Class A Common Stock,
par value $.01 per share (the "AIMCO Common Stock"); 262,500 shares of Class B
Common Stock, par value $.01 per share; and 24,460,000 shares of Preferred
Stock, par value $.01 per share, of which 750,000 shares have been designated as
Class B Cumulative Convertible Preferred Stock, par value $.01 per share;
2,760,000 shares have been designated as Class C Cumulative Preferred Stock, par
value $.01 per share; 4,600,000 shares have been designated as Class D
Cumulative Preferred Stock, par value $.01 per share; 10,000,000 shares have
been designated as Class E Cumulative Convertible Preferred Stock, par value
$.01 per share (the "Class E Stock"); 4,050,000 shares have been designated as
Class G Cumulative Preferred Stock, par value $.01 per share; and 2,300,000
shares have been designated as Class H Cumulative Preferred Stock, par value
$.01 per share. The aggregate par value of all classes of stock of AIMCO having
par value is Five Million One Hundred Seven Thousand Five Hundred Dollars
($5,107,500).
EIGHTH: At the Effective Time, IFG shall be merged with and into AIMCO, and
thereupon, AIMCO shall possess any and all purposes and powers of IFG, and all
leases, licenses, property, rights, privileges and powers and assets of whatever
nature or description of IFG shall be transferred to, vest in and devolve on
AIMCO, without further act or deed, subject to all of the debts and obligations
of IFG.
NINTH: At the Effective Time, the Charter shall be amended by inserting the
following Article after Article XIX in the Charter:
ARTICLE XIX
In accordance with Section 15.4 of the Indenture, dated as of November 1,
1996, by and between Insignia Financial Group, Inc. ("Insignia"), a Delaware
corporation (as Issuer) and First Union National Bank of South Carolina (as
Trustee) (the "Indenture"), upon effectiveness of the Merger (as defined in the
Amended and Restated Agreement and Plan of Merger, dated as May 26, 1998, by and
among the Corporation, Insignia, Insignia/ESG Holdings, Inc., a Delaware
corporation, and AIMCO Properties, L.P., a Delaware limited partnership (the
"Merger Agreement")), the 6 1/2 % Convertible Subordinated Debentures due 2016
issued by Insignia (the "Convertible Debentures") will become convertible into
the same consideration received by holders of Class A Common Stock, par value
$.01 per share, of Insignia, pursuant to the Merger (i.e., shares of Class E
Cumulative Preferred Stock, par value $.01 per share, of AIMCO (the "AIMCO Class
E Preferred Stock"), (or shares of Class A Common Stock, par value $.01 per
share, of the Corporation
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(the "AIMCO Common Stock"), if such Convertible Debentures are converted after
the AIMCO Class E Preferred Stock has been converted into AIMCO Common Stock),
the Cash Amount (as defined in the Merger Agreement), if any, and cash in lieu
of fractional shares). Furthermore, the consideration to be received by holders
of Convertible Debentures who convert such Convertible Debentures subsequent to
the effectiveness of the Merger shall be adjusted as required by Article XV of
the Indenture.
TENTH: The issued and outstanding securities of IFG upon the Effective
Time shall be converted as follows:
(a) Subject to the provisions of Paragraph (f) below, at the Effective
Time each share of IFG Common Stock issued and outstanding immediately prior to
the Effective Time, other than shares of IFG Common Stock beneficially owned by
IFG, AIMCO or any wholly owned subsidiary of AIMCO or IFG, and shares of IFG
Common Stock owned by stockholders who have properly demanded appraisal rights
under Section 262 of the Delaware General Corporation Law ("Section 262") shall
be converted into and become the right to receive .262 shares of Class E Stock
(the "Stock Consideration"), and no ($0) Dollars (the "Cash Amount") (together,
the "Merger Consideration"), all as further described in that certain Amended
and Restated Agreement and Plan of Merger dated as of May 26, 1998, by and among
AIMCO, IFG, Insignia/ESG Holdings, Inc., a Delaware corporation, and AIMCO
Properties, L.P., a Delaware Limited Partnership (the "Merger Agreement").
(b) At the Effective Time, each 6 1/2 % Convertible Subordinated
Debenture (the "Convertible Debentures") issued by IFG pursuant to that certain
Indenture dated November 1, 1996 (the "Indenture"), by and between IFG (as
Issuer) and First Union National Bank of South Carolina (as Trustee) convertible
into shares of IFG Common Stock will become convertible, with such adjustments
as required by Article XV of the Indenture, into the Merger Consideration as
provided for and calculated pursuant to Paragraph (a) of this Article TENTH, as
further set forth in the Merger Agreement.
(c) At the Effective Time, each outstanding security issued by IFG or
any subsidiary thereof (excluding stock options issued under the Insignia 1992
Stock Incentive Plan, as amended, or the Insignia 1995 Non-Employee Director
Stock Option Plan (collectively, the "IFG Stock Plan") and the 6 1/2 % Trust
Convertible Preferred Securities issued by Insignia Financing I as described in
its prospectus dated January 22, 1997 (the "TOPRs")) which is exercisable,
convertible or exchangeable for or into a share or shares of IFG Common Stock
(the "IFG Convertible Securities"), shall be assumed by AIMCO and exercisable,
convertible or exchangeable, with such adjustments as provided by the terms of
each such security, into the Merger Consideration as provided for and calculated
pursuant to Paragraph (a) of this Article TENTH, as further set forth in the
Merger Agreement.
(d) At the Effective Time, each then outstanding, unexercised option
to purchase a share of IFG Common Stock, whether vested or unvested, granted
under the IFG Stock Plan shall be assumed by AIMCO and shall be converted into
an option to purchase .262 shares of AIMCO Common Stock, as further set forth
in the Merger Agreement.
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(e) At the Effective Time, each unvested restricted share of IFG
Common Stock awarded under the IFG Stock Plan shall entitle the holder thereof
to receive the Cash Amount and shall be assumed by AIMCO and shall be converted
into .262 restricted shares of AIMCO Common Stock, as further set forth in the
Merger Agreement.
(f) At the Effective Time, each outstanding certificate or
certificates which prior thereto represented shares of IFG Common Stock (other
than a certificate or certificates representing (i) shares of IFG Common Stock
owned by IFG or AIMCO directly or through wholly-owned subsidiaries and (ii)
shares of IFG Common Stock owned by stockholders who have properly demanded
appraisal rights under Section 262 (an "IFG Certificate") shall represent the
right to receive in exchange therefor, upon surrender of the same, certificates
representing that number of shares of Stock Consideration, and the Cash Amount,
if any, as provided for in and calculated pursuant to this Article TENTH,
together with the cash payable in respect of fractional shares or fractional
interests of the Stock Consideration as provided for and calculated pursuant to
Paragraph (g) of this Article TENTH. Until so surrendered, each IFG Certificate
outstanding prior to the Effective Time shall represent the ownership of the
Merger Consideration, which the holder of the shares of IFG Common Stock
represented by such IFG Certificates is entitled to receive in connection with
the Merger, except that, anything herein to the contrary notwithstanding, no
dividends or other distributions on the Merger Consideration shall be paid with
respect to any shares of IFG Common Stock represented by a IFG Certificate until
such IFG Certificate is surrendered for exchange as provided herein. Following
surrender of any such IFG Certificate, there shall be paid to the holder of the
certificates representing whole shares of Stock Consideration issued in
consideration therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Stock
Consideration, less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of the Stock Consideration, less the amount of any withholding
taxes which may be required thereon.
(g) Notwithstanding any other provision hereof, no fractional shares
of Stock Consideration shall be issued in connection with the Merger. Instead,
each holder of an outstanding security of IFG giving rise to a fractional
interest in shares of Stock Consideration, upon the conversion or exchange of
such shares in connection with the Merger shall, at the time of surrender of its
IFG Certificate(s) in respect of such shares, be paid an amount in cash (without
interest) equal to the aggregate of the daily average (computed based on the sum
of the high and low sales prices of AIMCO Common Stock (as reported on the NYSE
Composite Transactions reporting System) as published in the Wall Street Journal
or, if not published therein, in another authoritative source, divided by two)
on each of the twenty consecutive NYSE trading days ending on the fifth NYSE
trading day immediately preceding the Effective Time, divided by twenty,
multiplied by the fraction of such share to which such holder would otherwise be
entitled. No such holder shall be entitled to dividends or other distributions,
voting rights or any other shareholder rights in respect of any fractional share
or interest.
(h) As of the Effective Time, all shares of capital stock of IFG shall
be canceled and retired and shall cease to exist and no Merger Consideration or
other consideration shall be issued or delivered in exchange therefor except as
set forth in this Article TENTH.
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ELEVENTH: IFG Certificates shall be exchanged for certificates representing
the Merger Consideration, and cash in lieu of fractional interests in shares of
Stock Consideration, as follows:
(a) As of the Effective Time, AIMCO shall deposit or shall cause to be
deposited with Bank Boston, N.A. (the "Exchange Agent"), for the benefit of the
holders of shares of IFG Common Stock for exchange in accordance with these
Articles of Merger, certificates representing the Stock Consideration, the Cash
Amount, if any, and cash in lieu of fractional interests in shares of Stock
Consideration, to be issued or delivered in connection with the Merger and in
exchange for outstanding shares of IFG Common Stock.
(b) Promptly after the Effective Time, AIMCO shall cause the Exchange
Agent to mail to each holder of record of IFG Certificate(s) (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the IFG Certificate(s) shall pass, only upon delivery of the
IFG Certificate(s) to the Exchange Agent and (ii) instructions for use in
effecting the surrender of the IFG Certificate(s) in exchange for Merger
Consideration, and cash in lieu of fractional interests in shares of Stock
Consideration. Upon surrender of a IFG Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
certificate shall be entitled to receive in exchange therefor, and AIMCO will
cause the Exchange Agent to deliver to such holder, certificates representing
the number of whole shares of Stock Consideration into which the IFG Common
Stock is convertible in the Merger and a check representing the Cash Amount, if
any, and the amount of cash in lieu of fractional interests in shares of Stock
Consideration, if any, and unpaid dividends and distributions, if any, which
such holder has the right to receive in respect of the IFG Certificate(s)
surrendered, after giving effect to any required withholding tax, and the IFG
Certificate(s) so surrendered shall forthwith be canceled. No interest will be
paid or accrued on the Cash Amount, cash in lieu of fractional shares of Merger
Consideration, or unpaid dividends and distributions, if any, payable to the
holders of the IFG Certificate(s). In the event of a transfer of ownership of
IFG Common Stock which is not registered in the transfer records of IFG,
certificates representing the proper number of shares of Stock Consideration,
together with a check for the Cash Amount, and cash to be paid in lieu of
fractional interests in shares of Stock Consideration, may be issued to such
transferee if the IFG Certificate is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
together with evidence that any applicable stock transfer taxes have been paid.
(c) At and after the Effective Time, there shall be no transfers on
the stock transfer books of IFG of IFG Common Stock which was outstanding
immediately prior to the Effective Time. If, after the Effective Time, IFG
Certificate(s) are presented to AIMCO, they shall be canceled and exchanged for
certificates for whole shares of Stock Consideration, the Cash Amount and cash
in lieu of fractional interests in shares of Stock Consideration, if any, and
unpaid dividends and distributions deliverable in respect thereof, if any, in
accordance with the procedures set forth in the Agreement of Merger and these
Articles of Merger.
(d) Any portion of the Merger Consideration held by the Exchange Agent
(together with any Cash Amount or cash in lieu of fractional interests in shares
of Stock Consideration and the proceeds of any investments thereof) that remains
unclaimed by the former holders of securities of IFG one year after the
Effective Time shall be delivered to AIMCO. Any
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former holders of securities of IFG who have not theretofore complied with the
provisions hereof and Article 2 of the Merger Agreement shall thereafter look to
AIMCO for payment of their shares or receipts constituting the Merger
Consideration, cash in lieu of fractional interests in shares of Stock
Consideration and unpaid dividends and distributions on the Merger Consideration
deliverable in respect of each share of IFG Common Stock which such stockholder
holds, as determined pursuant to Article 2 of the Merger Agreement and these
Articles of Merger, in each case, without any interest thereon.
(e) None of AIMCO, IFG, the Exchange Agent or any other person shall
be liable to any former holder of securities of IFG for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(f) In the event any IFG Certificate shall have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
such to be lost, stolen or destroyed, and if required by AIMCO, the posting by
such person of a bond in such reasonable amount as AIMCO may direct as indemnity
against any claim that may be made against it with respect to such IFG
Certificate, the Exchange Agent or AIMCO will deliver in exchange for such lost,
stolen or destroyed certificate, the Merger Consideration and cash in lieu of
fractional interests in shares of Stock Consideration, and unpaid dividends and
distributions on shares of the Merger Consideration as provided in the Agreement
of Merger and these Articles of Merger, deliverable in respect thereof pursuant
hereto.
TWELFTH: The terms and conditions of the transaction described in these
Articles of Merger were duly advised, authorized and approved by IFG in the
manner and by the vote required by the laws of the State of Delaware and the
charter and bylaws of IFG, as follows:
(a) The Board of Directors of IFG, by vote of the members of the Board
of Directors thereof, at a meeting duly called and held, adopted a resolution
declaring that the terms and conditions of the Merger described herein were
advisable and directing that the proposed transaction be submitted for
consideration by the stockholders of IFG.
(b) The stockholders of IFG entitled to vote on the proposed Merger,
at a meeting duly called and held, adopted a resolution approving the Merger, in
all respects by the vote required by and in the manner prescribed under the DGCL
and the charter and bylaws of IFG.
The terms and conditions of the Merger were duly authorized and approved by
AIMCO in the manner and by the vote required by the laws of the State of
Maryland and the Charter and bylaws of AIMCO, as follows:
(a) The Board of Directors of AIMCO, by vote of the members of the
Board of Directors thereof, at a meeting duly called and held, adopted a
resolution declaring that the terms and
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conditions of the Merger described herein were advisable and directing that the
proposed Merger be submitted for consideration by the stockholders of AIMCO.
(b) The stockholders of AIMCO entitled to vote on the proposed Merger,
at a meeting duly called and held, adopted a resolution approving the Merger, in
all respects by the vote required by and in the manner prescribed under the MGCL
and the Charter and bylaws of AIMCO.
THIRTEENTH: Each undersigned President and Chairman of the Board
acknowledges these Articles of Merger to be the corporate act of the respective
corporate party on whose behalf he has signed, and further, as to all matters
and facts required to be verified under oath, each President and Chairman of the
Board acknowledges that to the best of his knowledge, information and belief,
these matters and facts relating to the corporation on whose behalf he has
signed are true in all material respects and that this statement is made under
the penalties for perjury.
IN WITNESS WHEREOF, these Articles of Merger have been duly executed on
behalf of Apartment Investment and Management Company by Peter Kompaniez, its
President, and acknowledged by Joel F. Bonder, its Secretary and these Articles
of Merger have been duly executed on behalf of Insignia Financial Group, Inc.,
by Andrew L. Farkas, its Chairman of the Board and acknowledged by Adam B.
Gilbert, its Secretary as of this 1st day of October, 1998.
ATTEST: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ JOEL F. BONDER By: /s/ PETER KOMPANIEZ
- - ----------------------- ---------------------------
Joel F. Bonder Name: Peter Kompaniez
Secretary Title: President
ATTEST: INSIGNIA FINANCIAL GROUP, INC.
/s/ ADAM B. GILBERT By: /s/ ANDREW L. FARKAS
- - ------------------------ ---------------------------
Adam B. Gilbert Name: Andrew L. Farkas
Secretary Title: Chairman of the Board
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ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS E CUMULATIVE CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in
Baltimore City, Maryland, hereby certifies to the Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of the
Corporation (the "Charter"), the Board of Directors has duly divided and
classified 10,000,000 authorized but unissued shares of Common Stock into a
class designated as Class E Cumulative Convertible Preferred Stock, par value
$.01 per share, and has provided for the issuance of such class.
SECOND: The reclassification increases the number of shares classified
as Class E Cumulative Convertible Preferred Stock, par value $.01 per share,
from no shares immediately prior to the reclassification to 10,000,000 shares
immediately after the reclassification. The reclassification decreases the
number of shares classified as Common Stock from 496,027,500 shares immediately
prior to the reclassification to 486,027,500 shares immediately after the
reclassification. The number of shares classified as Class E Cumulative
Convertible Preferred Stock will be decreased pursuant to Section 7 of Article
Third of these Articles Supplementary upon reacquisition thereof in any manner,
or by retirement thereof, by the Corporation.
THIRD: The terms of the Class E Cumulative Convertible Preferred Stock
(including the preferences, conversions or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications, or terms or conditions of redemption) as set by the Board of
Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class E
Cumulative Convertible Preferred Stock (the "Class E Preferred Stock") and ten
million (10,000,000) shall be the authorized number of shares of such Class E
Preferred Stock constituting such class.
2. DEFINITIONS.
For purposes of the Class E Preferred Stock, the following terms shall
have the meanings indicated:
<PAGE> 154
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Class E
Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Class E Preferred Stock" shall have the meaning set forth in Section
1 of this Article.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation or such shares of the Corporation's capital
stock into which outstanding shares of Common Stock shall be
reclassified.
"Conversion Date" shall mean the date on which the Series E Preferred
Stock is converted into issued and outstanding Common Stock.
"Current Market Price" per share of Common Stock on any date shall
mean the average of the daily market prices of a share of Common Stock
for the five consecutive trading days preceding such date. The market
price for each such day shall mean the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the NYSE or, if
the Common Stock is not listed or admitted to trading on the NYSE, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the Common Stock is listed or admitted to trading
or, if the Common 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 the Common Stock is not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common
Stock selected by the Board of Directors of the Corporation.
"Dividend Payment Date" shall mean, with respect to each Dividend
Period, (a) the date on which cash dividends are paid on the Common
Stock with respect to such Dividend Period, but excluding any such
dates after the Conversion Date; or (b) if such dividends have not
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been paid on the Common Stock by 9:00 a.m, New York City time, on the
sixtieth day from and including the last day of such Dividend Period,
then on such day; provided, further, that if any Dividend Payment Date
falls on any day other than a Business Day, the dividend payment
payable on such Dividend Payment Date shall be paid on the Business
Day immediately following such Dividend Payment Date.
"Dividend Periods" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including
January 1, April 1, July 1, and October 1 of each year and ending on
and including the day immediately preceding the last day of the
succeeding Dividend Period, other than the Dividend Period during
which any Class E Preferred Stock shall be redeemed pursuant to
Section 6 hereof, which shall end on and include the Call Date with
respect to the Class E Stock being redeemed.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Issue Date" shall mean the Effective Time under the Merger Agreement.
"Initial Dividend" shall mean the first dividend paid to holders of
the Common Stock after the Issue Date.
"Initial Dividend Period" shall mean the period commencing on and
including the Issue Date and ending on and including the record date
for the Initial Dividend.
"Junior Stock" shall have the meaning set forth in paragraph (c) of
Section 8 of this Article. The Common Stock issued by the Corporation
shall be Junior Stock.
"Merger Agreement" shall mean the Amended and Restated Agreement and
Plan of Merger, dated as of May 26, 1998, by and among the
Corporation, Insignia Financial Group, Inc., a Delaware corporation,
Insignia/ESG Holdings, Inc., a Delaware corporation, and AIMCO
Properties, L.P., a Delaware limited partnership.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Stock" shall have the meaning set forth in paragraph (b) of
Section 8 of this Article.
"Prohibited Transferee" has the meaning set forth in Section 11.3(A)
of this Article.
"Senior Stock" shall have the meaning set forth in paragraph (a) of
Section 8 of this Article. The Class B Cumulative Convertible
Preferred Stock, Class C 9% Cumulative Preferred Stock, Class D 8.75%
Cumulative Preferred Stock, Class G 9.375% Cumulative Preferred Stock
and Class H 9.50% Cumulative Preferred Stock previously issued by the
Corporation shall each be a Senior Stock.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or
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bookkeeping entry which indicates, pursuant to a declaration of
dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital
stock of the Corporation; provided, however, that if any funds for any
class or series of Parity Stock are placed in a separate account of
the Corporation or delivered to a disbursing, paying or other similar
agent, then "set apart for payment" with respect to the Class E
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Special Dividend" shall mean, if and when declared by the Board of
Directors, in its sole discretion, the distribution, whether in one or
more disbursements, of an amount per share of Class E Preferred Stock
equal to the Special Dividend Amount divided by the Series E
Conversion Ratio (each as defined in the Merger Agreement) (subject to
proportional adjustment upon the occurrence of any of the events
described in Section 5(b) hereof), to the holders of Class E Preferred
Stock.
"Special Dividend Date" shall mean any date on which the Special
Dividend, or any portion thereof, is paid to the holders of the Class
E Preferred Stock.
"Transfer Agent" means such transfer agent as may be designated by the
Board of Directors or their designee as the transfer agent for the
Class E Preferred Stock; provided, that if the Corporation has not
designated a transfer agent then the Corporation shall act as the
transfer agent for the Class E Preferred Stock.
3. DIVIDENDS AND THE SPECIAL DIVIDEND DISTRIBUTION.
(a) On every Dividend Payment Date, the holders of Class E
Preferred Stock shall be entitled to receive cumulative dividends payable in
cash in an amount per share of Class E Preferred Stock equal to the per share
dividend payable on Common Stock on such Dividend Payment Date. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable quarterly in arrears on the Dividend Payment Dates, commencing on the
first Dividend Payment Date after the Issue Date. Each such dividend shall be
payable in arrears to the holders of record of the Class E Preferred Stock as
they appear on the records of the Corporation at the close of business on the
record date fixed by the Board of Directors with respect to such Dividend
Payment Date which shall be not more than 60 days prior to the applicable
Dividend Payment Date and, within such 60 day period, shall be the same date as
the record date for the regular quarterly dividend payable with respect to the
Common Stock for the Dividend Period to which such Dividend Payment Date
relates (or, if there is no such record date for Common Stock, then such date
as the Board of Directors may fix). Accumulated, accrued and unpaid dividends
for any past Dividend Periods may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of record on such
date, which date shall not precede by more than 45 days the payment date
thereof, as may be fixed by the Board of Directors.
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(b) The amount of dividends payable per share of Class E
Preferred Stock for the Initial Dividend Period, or any other period shorter
than a full Dividend Period, shall be computed ratably on the basis of twelve
30-day months and a 360-day year. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
the Class E Preferred Stock that may be in arrears.
(c) On any Special Dividend Date, the holders of Class E
Preferred Stock shall be entitled to receive the Special Dividend, or any
portion thereof, as determined by the Board of Directors, with respect to each
share of Class E Preferred Stock. The Special Dividend payment shall be payable
to the holders of record of the Class E Preferred Stock as they appear on the
records of the Corporation at the close of business on the record date fixed by
the Board of Directors with respect to such Special Dividend Date.
(d) After January 15, 1999, if any portion of the Special
Dividend or any other dividend payable pursuant to section 3(a) hereof has yet
to be declared and paid to the holders of Class E Preferred Stock, no dividends
shall be declared or paid or set apart for payment by the Corporation and no
other distribution of cash or other property shall be declared or made,
directly or indirectly, by the Corporation with respect to any shares of Common
Stock, nor shall any shares of Common Stock be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Common
Stock made for purposes of an employee incentive or benefit plan of the
Corporation or any subsidiary) for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any shares of any
such stock), directly or indirectly, by the Corporation (except by conversion
into or exchange for shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock), nor shall any other cash or other
property otherwise be paid or distributed to or for the benefit of any holder
of shares of Common Stock in respect thereof, directly or indirectly, by the
Corporation.
4. LIQUIDATION.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the Corporation (whether capital or surplus) shall be made to
or set apart for the holders of Common Stock, the holders of shares of Class E
Preferred Stock shall be entitled to receive $1.00 per share of Class E
Preferred Stock plus the Special Dividend if such dividend is unpaid on the
date of final distribution to such holders, thereafter each share of Class E
Preferred Stock shall have the same rights with respect to assets of the
Corporation as one share of Common Stock.
5. CONVERSION.
(a) On the close of business on the day on which the Special
Dividend, or any remaining unpaid portion thereof, is paid to the holders of
the Class E Preferred Stock, each share of Class E Preferred Stock shall be
automatically converted into one share of Common Stock without any action on
the part of the Corporation or the holder of such share of Class E Preferred
Stock.
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(b) If the Corporation shall after the Issue Date (i) pay a
dividend or make a distribution on its Common Stock in shares of Common Stock,
(ii) subdivide its outstanding Common Stock into a greater number of shares,
(iii) combine its outstanding Common Stock into a smaller number of shares,
(iv) issue any shares of capital stock by reclassification of its outstanding
Common Stock, (v) issue rights, options or warrants to all holders of Common
Stock entitling them to subscribe for or purchase Common Stock or (vi) make a
distribution on its Common Stock other than in cash or shares of Common Stock
(including any distribution in securities (other than rights, options or
warrants described in clause (v) of this sentence)) then the Corporation shall
contemporaneously do the same with respect to the Class E Preferred Stock.
(c) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of effecting the conversion
of the Class E Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Class E Preferred
Stock.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the shares of Class E Preferred Stock shall be validly issued,
fully paid and nonassessable.
The Corporation shall list the shares of Common Stock required to be
delivered upon conversion of the shares of Class E Preferred Stock, prior to
such delivery, upon the NYSE and each other national securities exchange, if
any, upon which the outstanding shares of Common Stock are listed at the time
of such delivery.
(d) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock upon conversion of shares of Class E Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issue or delivery of shares of Common Stock in a name other than that of the
holder of the shares of Class E Preferred Stock to be converted, and no such
issue or delivery shall be made unless and until the Person requesting such
issue or delivery has paid to the Corporation the amount of any such tax or
established, to the reasonable satisfaction of the Corporation, that such tax
has been paid.
6. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class E Preferred Stock shall not be redeemable
by the Corporation prior to October 1, 2018. On or after October 1, 2018, the
Corporation, at its option, may redeem shares of Class E Preferred Stock, in
whole or from time to time in part, at a redemption price per share payable in
cash equal to the sum of (i) the greater of (A) the Current Market Price of the
Common Stock on the Call Date or (B) the AIMCO Index Price (as defined in the
Merger Agreement, but determined without giving effect to the proviso to the
definition thereof for this purpose), plus (ii) all accrued and unpaid
dividends to the Call Date.
(b) Shares of Class E Preferred Stock shall be redeemed by
the Corporation on the date specified in the notice to holders required under
paragraph (d) of this Section 6 (the "Call Date"). The Call Date shall be
selected by the Corporation, shall be specified in the notice of
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redemption and shall be not less than 30 days nor more than 60 days after the
date notice of redemption is sent by the Corporation.
(c) If full cumulative dividends on all outstanding shares of
Class E Preferred Stock and any other class or series of Parity Stock of the
Corporation have not been paid or declared and set apart for payment, no shares
of Class E Preferred Stock may be redeemed unless all outstanding shares of
Class E Preferred Stock are simultaneously redeemed and neither the Corporation
nor any affiliate of the Corporation may purchase or acquire shares of Class E
Preferred Stock, otherwise than pursuant to a purchase or exchange offer made
on the same terms to all holders of shares of Class E Preferred Stock.
(d) If the Corporation shall redeem shares of Class E
Preferred Stock pursuant to paragraph (a) of this Section 6, notice of such
redemption shall be given to each holder of record of the shares to be
redeemed. Such notice shall be provided by first class mail, postage prepaid,
at such holder's address as the same appears on the stock records of the
Corporation. Neither the failure to mail any notice required by this paragraph
(d), nor any defect therein or in the mailing thereof to any particular holder,
shall affect the sufficiency of the notice or the validity of the proceedings
for redemption with respect to the other holders. Any notice which was mailed
in the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives the notice. Each
such notice shall state, as appropriate: (1) the Call Date, (2) the number of
shares of Class E Preferred Stock to be redeemed and, if fewer than all such
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder and (3) the place or places at which certificates for
such shares are to be surrendered for cash. Notice having been mailed as
aforesaid, from and after the Call Date (unless the Corporation shall fail to
make available the amount of cash necessary to effect such redemption), (i)
except as otherwise provided herein, dividends on the shares of Class E
Preferred Stock so called for redemption shall cease to accumulate or accrue on
the shares of Class E Preferred Stock called for redemption (except that, in
the case of a Call Date after a dividend record date and prior to the related
Dividend Payment Date, holders of Class E Preferred Stock on the dividend
record date will be entitled on such Dividend Payment Date to receive the
dividend payable on such shares), (ii) said shares shall no longer be deemed to
be outstanding, and (iii) all rights of the holders thereof as holders of Class
E Preferred Stock of the Corporation shall cease (except the rights to receive
the cash payable upon such redemption, without interest thereon, upon surrender
and endorsement of their certificates if so required and to receive any
dividends payable thereon). The Corporation's obligation to make available the
redemption price in accordance with the preceding sentence shall be deemed
fulfilled if, on or before the Call Date, the Corporation shall deposit with a
bank or trust company (which may be an affiliate of the Corporation) that has,
or is an affiliate of a bank or trust company that has, a capital and surplus
of at least $50,000,000, such amount of cash as is necessary for such
redemption, in trust, with irrevocable instructions that such cash be applied
to the redemption of the shares of Class E Preferred Stock so called for
redemption. No interest shall accrue for the benefit of the holders of shares
of Class E Preferred Stock to be redeemed on any cash so set aside by the
Corporation. Subject to applicable escheat laws, any such cash unclaimed at the
end of two years from the Call Date shall revert to the general funds of the
Corporation, after which reversion the holders of shares of Class E Preferred
Stock so called for redemption shall look only to the general funds of the
Corporation for the payment of such cash.
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As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class E Preferred Stock to be
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which such shares have been
redeemed in accordance with such notice. If fewer than all the outstanding
shares of Class E Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class E
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class E Preferred Stock held of record by each holder
of such shares, pro rata (as nearly as may be) or by any other method as may be
determined by the Board of Directors in its discretion to be equitable. If
fewer than all the shares of Class E Preferred Stock represented by any
certificate are redeemed, than a new certificate representing the unredeemed
shares shall be issued without cost to the holders thereof.
7. STATUS OF REACQUIRED STOCK.
All shares of Class E Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be retired and cannot be
reissued.
8. RANKING.
Any class or series of capital stock of the Corporation shall be
deemed to rank:
(a) prior or senior to the Class E Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if (i) such class or series shall be Class B
Cumulative Convertible Preferred Stock, Class C Cumulative Preferred Stock,
Class D Cumulative Preferred Stock, Class G Cumulative Preferred Stock or Class
H Cumulative Preferred Stock, or (ii) the holders of such class or series of
capital stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of Class E Preferred Stock ("Senior
Stock");
(b) on a parity with the Class E Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share thereof shall be different
from those of the Class E Preferred Stock, if the holders of such class or
series of capital stock and the Class E Preferred Stock shall be entitled to
the receipt of dividends and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid dividends per share or liquidation preferences, without preference
or priority one over the other ("Parity Stock"); and
(c) junior to the Class E Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series of capital stock shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class E Preferred Stock ("Junior Stock").
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9. VOTING.
(a) Each share of Class E Preferred Stock shall entitle its
holder to one-half (1/2) of one vote with respect to all matters in which
holders of Common Stock shall be entitled to vote thereon.
(b) The holders of the Class E Preferred Stock and the
holders of Common Stock shall vote together as a single class with respect to
all matters, except for any matter relating to the liquidation, dissolution or
winding up of the Corporation or amendment of these Articles Supplementary, in
which case the holders of the Class E Preferred Stock shall vote as a single
class. Approval of two-thirds of the outstanding shares of Class E Preferred
Stock shall be required with respect to any proposed amendment which would
materially affect the existing terms of the Class E Preferred Stock.
(c) If any portion of the Special Dividend has yet to be
declared and paid to the holders of Class E Preferred Stock on January 15,
1999, or if the equivalent of six quarterly dividends payable on the Class E
Preferred Stock or any other class or series of preferred stock are in default,
the number of directors of the Company will be increased by two (without
duplication of any increase made pursuant to the terms of any other series of
preferred stock of the Company), and the holders of the Class E Preferred
Stock, voting as a single class with the holders of shares of any other class
of the Company's preferred stock ranking on a parity with the Class E Preferred
Stock either as to dividends or distribution of assets and upon which like
voting rights have been conferred and are exercisable, will be entitled to
elect such two directors to fill such newly-created directorships. Such right
shall continue until full cumulative dividends for all past dividend periods on
all preferred shares of the Company, including any shares of Class E Preferred
Stock, have been paid or declared and set apart for payment. Any such elected
directors shall serve until the Company's next annual meeting of stockholders
(notwithstanding that prior to the end of such term the dividend default shall
cease to exist) or until their respective successors shall be elected and
qualify.
10. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record
holder of any share of Class E Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor the Transfer Agent
shall be affected by any notice to the contrary.
11. ADDITIONAL ISSUANCES.
The shares of Series E Preferred Stock designated by these Articles
Supplementary may not be issued other than pursuant to the terms of the Merger
Agreement.
FOURTH: The terms of the Class E Preferred Stock set forth in Article
Third hereof shall become Article XVIII of the Charter.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and Vice Chairman of the
Board and witnessed by its Secretary on October 1, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ JOEL BONDER /s/ PETER KOMPANIEZ
- - --------------------------- ---------------------------------------------
Joel Bonder, Peter Kompaniez
Secretary President and Vice Chairman of the
Board
THE UNDERSIGNED, President of APARTMENT INVESTMENT AND MANAGEMENT
COMPANY, who executed on behalf of the Corporation the 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 hereby certifies that the matters and
facts set forth herein with respect to the authorization and approval thereof
are true in all material respects under the penalties of perjury.
/s/ PETER KOMPANIEZ
---------------------------------------------
Peter Kompaniez
President and Vice Chairman of the
Board
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ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS J CUMULATIVE CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in
Baltimore City, Maryland, hereby certifies to the Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of the
Corporation, as amended to date (the "Charter"), the Board of Directors has
duly divided and classified 2,000,000 authorized but unissued shares of Class A
Common Stock of the Corporation, par value $.01 per share (the "Class A Common
Stock"), into a class designated as Class J Cumulative Convertible Preferred
Stock, par value $.01 per share, and has provided for the issuance of such
class.
SECOND: The reclassification increases the number of shares classified
as Class J Cumulative Convertible Preferred Stock, par value $.01 per share,
from no shares immediately prior to the reclassification to 2,000,000 shares
immediately after the reclassification. The reclassification decreases the
number of shares classified as Class A Common Stock from 486,027,500 shares
immediately prior to the reclassification to 484,027,500 shares immediately
after the reclassification.
THIRD: The terms of the Class J Cumulative Convertible Preferred Stock
(including the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends and other distributions and
qualifications) as set by the Board of Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class J
Cumulative Convertible Preferred Stock, par value $.01 per share (the "Class J
Preferred Stock") and Two Million (2,000,000) shall be the authorized number of
shares of such Class J Preferred Stock constituting such class.
<PAGE> 164
2. DEFINITIONS.
For purposes of the Class J Preferred Stock, the following terms shall
have the meanings indicated:
"ABP Subscription Agreement" shall mean the Subscription Agreement
dated as of November 6, 1998 between the Corporation and Stichting
Pensioenfonds ABP.
"Act" shall mean the Securities Act of 1933, as amended.
"affiliate" of a Person means a Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or
is under common control with, the Person specified.
"Aggregate Value" shall mean, with respect to any block of Equity
Stock, the sum of the products of (i) the number of shares of each
class of Equity Stock within such block multiplied by (ii) the
corresponding Market Price of one share of Equity Stock of such class.
"Beneficial Ownership" shall mean, with respect to any Person,
ownership of shares of Equity Stock equal to the sum of (i) the number
of shares of Equity Stock directly owned by such Person, (ii) the
number of shares of Equity Stock indirectly owned by such Person (if
such Person is an "individual" as defined in Section 542(a)(2) of the
Code) taking into account the constructive ownership rules of Section
544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and
(iii) the number of shares of Equity Stock that such Person is deemed
to beneficially own pursuant to Rule 13d-3 under the Exchange Act or
that is attributed to such Person pursuant to Section 318 of the Code,
as modified by Section 856(d)(5) of the Code, provided that when
applying this definition of Beneficial Ownership to the Initial
Holder, clause (iii) of this definition, and clause (a) (ii) of the
definition of "Person" shall be disregarded. The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Class J
Preferred Stock; provided that, for purposes of paragraph (a) of
Section 8 of this Article, the term "Board of Directors" shall not
include any such committee.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
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<PAGE> 165
"Charitable Beneficiary" shall mean one or more beneficiaries of the
Trust as determined pursuant to Section 11.3 of this Article, each of
which shall be an organization described in Section 170(b)(1)(A),
170(c)(2) and 501(c)(3) of the Code.
"Class E Articles Supplementary" shall have the meaning set forth in
Section 7.3 of this Article.
"Class J Preferred Stock" shall have the meaning set forth in Section
1 of this Article.
"Closing Price" shall mean, when used with respect to a share of any
Equity Stock and for any date, the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case, as reported
in the principal consolidated transac tion reporting system with
respect to securities listed or admitted to trading on the NYSE or, if
the Equity Stock is not listed or admitted to trading on the NYSE, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the Equity Stock is listed or admitted to trading
or, if the Equity 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 ("NASDAQ") or, if
such system is no longer in use, the principal other automated
quotations system that may then be in use or, if the Equity Stock is
not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a
market in the Equity Stock selected by the Board of Directors of the
Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation, and the Class B Common Stock, $.01 par
value per share, of the Corporation and such other shares of the
Corporation's capital stock into which outstanding shares of such
Class A Common Stock or Class B Common Stock shall be reclassified.
"Conversion Price" shall mean the conversion price per share of Class
A Common Stock for which each share of Class J Preferred Stock is
convertible,
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<PAGE> 166
as such Conversion Price may be adjusted pursuant to Section 7 of this
Article. The initial Conversion Price shall be $40 (equivalent to a
conversion rate of 2.50 shares of Class A Common Stock for each share
of Class J Preferred Stock).
"Current Market Price" of a share of any Equity Stock shall mean the
closing price, regular way on such day, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices,
regular way, on such day, in either case as reported on the principal
national securities exchange on which such securities are listed or
admitted for trading, or, if such security is not quoted on any
national securities exchange, on the NASDAQ National Market or if such
security is not quoted on the NASDAQ National Market, the average of
the closing bid and asked prices on such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for each
security on such day shall not have been reported through NASDAQ, the
average of the bid and asked prices on such day as furnished by any
New York Stock Exchange or National Association of Securities Dealers,
Inc. member firm regularly making a market in such security selected
for such purpose by the Chief Executive Officer of the Corporation or
the Board of Directors of the Corporation or if any class or series of
securities are not publicly traded, the fair value of the shares of
such class as determined reasonably and in good faith by the Board of
Directors of the Corporation.
"distribution" shall have the meaning set forth in paragraph (a)(iii)
of Section 7.3 of this Article.
"Dividend Payment Date" shall mean, with respect to each Dividend
Period, (a) the date that cash dividends are paid on the Class A
Common Stock with respect to such Dividend Period; or (b) if such
dividends have not been paid on the Class A Common Stock by 9:00 a.m.,
New York City time, on the sixtieth day from and including the last
day of such Dividend Period, then on such day; provided, that if any
Dividend Payment Date falls on any day other than a Business Day, the
dividend payment payable on such Dividend Payment Date shall be paid
on the Business Day immediately following such Dividend Payment Date
and no interest shall accrue on such dividend from such date to such
Dividend Payment Date.
"Dividend Periods" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including
February 15, May 15, August 15 and November 15 of each year and ending
on and including the day preceding the first day of the next
succeeding Dividend Period.
"Equity Stock" shall mean one or more shares of any class of capital
stock of the Corporation.
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<PAGE> 167
"Excess Transfer" has the meaning set forth in Section 11.3(a) of this
Article.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of Class A Common Stock during five (5) consecutive
Trading Days selected by the Corporation commencing not more than
twenty (20) Trading Days before, and ending not later than, the
earlier of the day in question and the day before the "ex" date, if
any, with respect to any issuance or distribution requiring such
computation. The term "'ex' date," when used with respect to any
issuance or distribution, means the first day on which the share of
Class A Common Stock trades regular way, without the right to receive
such issuance or distribution, on the exchange or in the market, as
the case may be, used to determine that day's Current Market Price.
"Issue Date" shall mean the date on which shares of Class J Preferred
Stock are issued pursuant to the ABP Subscription Agreement and the OP
Subscription Agreement.
"Initial Dividend Period" shall mean the period commencing on and
including the Issue Date and ending on and including November 14,
1998.
"Initial Holder" shall mean Terry Considine.
"Initial Holder Limit" shall mean a number of the Outstanding shares
of Class J Preferred Stock of the Corporation having an Aggregate
Value not in excess of the excess of (x) 15% of the Aggregate Value of
all Outstanding shares of Equity Stock over (y) the Aggregate Value of
all shares of Equity Stock other than Class J Preferred Stock that are
Beneficially Owned by the Initial Holder. From the Issue Date, the
secretary of the Corporation, or such other person as shall be
designated by the Board of Directors, shall upon request make
available to the representative(s) of the Initial Holder and the Board
of Directors, a schedule that sets forth the then-current Initial
Holder Limit applicable to the Initial Holder.
"Internal Rate of Return" shall mean, as of any determination date,
the effective discount rate under which the present value of the
Inflows associated with an outstanding share of Class J Preferred
Stock equals the Outflow on the Issue Date associated with such share.
For purposes of calculation of Internal Rate of Return:
(i) "Inflows" shall mean (a) all dividends (whether paid in
cash, property or stock) that have been received on such share, (b)
any other distributions that have been received on such share, and (c)
as of the determination date, the average of the daily Current Market
Prices of a share
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<PAGE> 168
of the Corporation's Class A Common Stock during the five most recent
Trading Days, such average multiplied by the Liquidation Preference
(excluding any accumulated, accrued and unpaid dividends) per share of
Class J Preferred Stock, and such product divided by the Conversion
Price. For purposes of calculating the amounts of any Inflows, all
dividends or distributions received in property or stock shall be
deemed to have a value equal to the fair market value of such
dividends or distributions as of the date such dividend or
distribution is received, as determined in good faith by the Board of
Directors. All Inflows shall be deemed to have taken place on the date
on which payment was actually received by the holder.
(ii) "Outflow" shall mean $100 plus an amount equal to one
one-millionth of any and all out-of-pocket costs of Stichting
Pensioenfonds ABP relating to the acquisition of 1,000,000 shares of
the Corporation's Class J Preferred Stock on the Issue Date. Outflow
shall be deemed to have taken place on the Closing Date of the ABP
Subscription Agreement and the OP Subscription Agreement, and
(iii) Neither the fact of any transfer of Class J Preferred
Stock nor the amount of any consideration received by the holder
thereof or paid by any successor holder in connection with any
transfer shall affect the calculation of Internal Rate of Return.
Schedule A attached hereto shows the calculation of Internal Rate of
Return at certain hypothetical dates of determination and given a
certain hypothetical aggregate purchase price, certain hypothetical
Inflows and certain hypothetical levels of the Current Market Price of
the Corporation's Class A Common Stock.
"Junior Stock" shall have the meaning set forth in paragraph (c) of
Section 8 of this Article.
"Liquidation Preference" shall have the meaning set forth in paragraph
(a) of Section 4 of this Article.
"Market Price" on any date shall mean, with respect to any share of
Equity Stock, the Closing Price of a share of that class of Equity
Stock on the Trading Day immediately preceding such date.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OP Subscription Agreement" shall mean the Stock Purchase Agreement
dated as of November 6, 1998 between the Corporation and AIMCO
Properties, L.P.
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"Outstanding" shall mean issued and outstanding shares of Equity Stock
of the Corporation, provided that for purposes of the application of
the Ownership Limit or the Initial Holder Limit to any Person, the
term "Outstanding" shall be deemed to include the number of shares of
Equity Stock that such Person alone, at that time, could acquire
pursuant to any options or convertible securities.
"Ownership Limit" shall mean, for any Person other than the Initial
Holder, a number of the Outstanding shares of Class J Preferred Stock
of the Corporation having an Aggregate Value not in excess of the
excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of
Equity Stock over (y) the Aggregate Value of all shares of Equity
Stock other than Class J Preferred Stock that are Beneficially Owned
by the Person.
"Ownership Restrictions" shall mean, collectively, the Ownership Limit
as applied to Persons other than the Initial Holder and the Initial
Holder Limit as applied to the Initial Holder.
"Parity Stock" shall have the meaning set forth in paragraph (b) of
Section 8 of this Article.
"Person" shall mean (a) for purposes of Section 11 of this Article,
(i) an individual, corporation, partnership, estate, trust (including
a trust qualifying under Section 401(a) or 501(c) of the Code),
association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity, and (ii) also
includes a group as that term is used for purposes of Section 13(d)(3)
of the Exchange Act and (b) for purposes of the remaining Sections of
this Article, any individual, firm, partnership, corporation or other
entity and shall include any successor (by merger or otherwise) of
such entity.
"Prohibited Transferee" has the meaning set forth in Section 11.3(a)
of this Article.
"REIT" shall mean a "real estate investment trust" as defined in
Section 856 of the Code.
"Senior Stock" shall have the meaning set forth in paragraph (a) of
Section 8 of this Article.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other
distribution by the Board of Directors, the allocation of funds to be
so paid on any series or class of capital stock of the Corporation;
provided, however, that if any funds for any class or series of
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<PAGE> 170
Junior Stock or any class or series of Parity Stock are placed in a
separate account of the Corporation or delivered to a disbursing,
paying or other similar agent, then "set apart for payment" with
respect to the Class J Preferred Stock shall mean placing such funds
in a separate account or delivering such funds to a disbursing, paying
or other similar agent.
"Trading Day" shall mean, when used with respect to the Closing Price
of a share of any Equity Stock, (i) if the Equity Stock is listed or
admitted to trading on the NYSE, a day on which the NYSE is open for
the transaction of business, (ii) if the Equity Stock is not listed or
admitted to trading on the NYSE but is listed or admitted to trading
on another national securities exchange or automated quotation system,
a day on which the principal national securities exchange or automated
quotation system, as the case may be, on which the Equity Stock is
listed or admitted to trading is open for the transaction of business,
or (iii) if the Equity Stock is not listed or admitted to trading on
any national securities exchange or automated quotation system, any
day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by
law or executive order to close.
"Transaction" shall have the meaning set forth in Section 7.3 of this
Article.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of a share of Class J Preferred Stock (including (i)
the granting of an option or any series of such options or entering
into any agreement for the sale, transfer or other disposition of
Class J Preferred Stock or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or
exchangeable for Class J Preferred Stock), whether voluntary or
involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any
transfer of an interest in other entities that results in a change in
the Beneficial Ownership of shares of Class J Preferred Stock). The
term "Transfers" and "Transferred" shall have correlative meanings.
"Transfer Agent" means such transfer agent as may be designated by the
Board of Directors or their designee as the transfer agent for the
Class J Preferred Stock; provided, that if the Corporation has not
designated a transfer agent then the Corporation shall act as the
transfer agent for the Class J Preferred Stock.
"Trust" shall mean the trust created pursuant to Section 11.3 of this
Article.
"Trustee" shall mean the Person unaffiliated with either the
Corporation or the Prohibited Transferee that is appointed by the
Corporation to serve as trustee of the Trust.
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"Voting Preferred Stock" shall have the meaning set forth in Section 9
of this Article.
3. DIVIDENDS.
(a) The holders of Class J Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Class J Preferred Stock equal to (i) 7% per annum of the per share
Liquidation Preference (as hereinafter defined) for the period beginning on and
including the Issue Date and lasting until November 15, 1998; (ii) 8% per annum
of the per share Liquidation Preference for the period beginning on and
including November 15, 1998 and lasting until November 15, 1999; (iii) 9% per
annum of the per share Liquidation Preference for the period beginning on and
including November 15, 1999 and lasting until November 15, 2000; and (iv) 9.5%
per annum of the per share Liquidation Preference thereafter. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable quarterly in arrears on each Dividend Payment Date, commencing on
November 15, 1998. Each such dividend shall be payable in arrears to the
holders of record of the Class J Preferred Stock, as they appear on the stock
records of the Corporation at the close of business on a record date fixed by
the Board of Directors which shall not be more than 60 days prior to the
applicable Dividend Payment Date and, within such 60 day period, shall be the
same date as the record date for the regular quarterly dividend payable with
respect to the Class A Common Stock for the Dividend Period to which such
Dividend Payment Date relates (or if there is no such record date for Class A
Common Stock, then such date as the Board of Directors may fix). Accumulated,
accrued and unpaid dividends for any past Dividend Periods may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on such date, which date shall not precede by more than 45
days the payment date thereof, as may be fixed by the Board of Directors.
(b) Any dividend payable on the Class J Preferred Stock for
any partial dividend period shall be computed ratably on the basis of twelve
30-day months and a 360-day year. Holders of Class J Preferred Stock shall not
be entitled to any dividends, whether payable in cash, property or stock, in
excess of full cumulative dividends, as herein provided, on the Class J
Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Class J Preferred
Stock that may be in arrears.
(c) So long as any of the shares of Class J Preferred Stock
are outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the Corporation
and no other
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distribution of cash or other property shall be declared or made, directly or
indirectly, by the Corporation with respect to any shares of Parity Stock
unless, in each case, dividends equal to the full amount of accumulated,
accrued and unpaid dividends on all outstanding shares of Class J Preferred
Stock have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof has been or contemporaneously is set
apart for payment of such dividends on the Class J Preferred Stock for all
Dividend Periods ending on or prior to the date such dividend or distribution
is declared, paid, set apart for payment or made, as the case may be, with
respect to such shares of Parity Stock. When dividends are not paid in full or
a sum sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon the Class J Preferred Stock and all dividends declared upon any
shares of Parity Stock shall be declared ratably in proportion to the
respective amounts of dividends accumulated, accrued and unpaid on the Class J
Preferred Stock and accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class J Preferred Stock
are outstanding, no dividends (other than dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Stock) shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made, directly or indirectly, by the Corporation with respect to
any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock), directly or indirectly, by the Corporation
(except by conversion into or exchange for shares of, or options, warrants or
rights to subscribe for or purchase shares of, Junior Stock), nor shall any
other cash or other property otherwise be paid or distributed to or for the
benefit of any holder of shares of Junior Stock in respect thereof, directly or
indirectly, by the Corporation unless, in each case, dividends equal to the
full amount of all accumulated, accrued and unpaid dividends on all outstanding
shares of Class J Preferred Stock have been declared and paid, or such
dividends have been declared and a sum sufficient for the payment thereof has
been set apart for such payment, on all outstanding shares of Class J Preferred
Stock for all Dividend Periods ending on or prior to the date such dividend or
distribution is declared, paid, set apart for payment or made with respect to
such shares of Junior Stock, or the date such shares of Junior Stock are
redeemed, purchased or otherwise acquired or monies paid to or made available
for any sinking fund for such redemption, or the date any such cash or other
property is paid or distributed to or for the benefit of any holders of Junior
Stock in respect thereof, as the case may be.
Notwithstanding the provisions of this Section 3, the
Corporation shall not be prohibited from (i) declaring or paying or setting
apart for payment any dividend or distribution on any shares of Parity Stock or
(ii) redeeming, purchasing
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or otherwise acquiring any Parity Stock, in each case, if such declaration,
payment, setting apart for payment, redemption, purchase or other acquisition
is necessary in order to maintain the continued qualification of the
Corporation as a REIT under Section 856 of the Code.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, before any payment or
distribution by the Corporation (whether of capital, surplus or otherwise)
shall be made to or set apart for the holders of Junior Stock, the holders of
shares of Class J Preferred Stock shall be entitled to receive One Hundred
Dollars ($100) per share of Class J Preferred Stock (the "Liquidation
Preference"), plus an amount equal to all dividends (whether or not earned or
declared) accumulated, accrued and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payment. Until the holders of the Class J Preferred Stock have been
paid the Liquidation Preference in full, plus an amount equal to all dividends
(whether or not earned or declared) accumulated, accrued and unpaid thereon to
the date of final distribution to such holders, no payment will be made to any
holder of Junior Stock upon the liquidation, dissolution or winding up of the
Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of Class J Preferred Stock shall be insufficient to pay in
full the preferential amount aforesaid and liquidating payments on any other
shares of any class or series of Parity Stock, then such assets, or the
proceeds thereof, shall be distributed among the holders of Class J Preferred
Stock and any such other Parity Stock ratably in the same proportion as the
respective amounts that would be payable on such Class J Preferred Stock and
any such other Parity Stock if all amounts payable thereon were paid in full.
For the purposes of this Section 4, (i) a consolidation or merger of the
Corporation with one or more corporations, (ii) a sale or transfer of all or
substantially all of the Corporation's assets, or (iii) a statutory share
exchange shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of Class
J Preferred Stock and any Parity Stock, as provided in this Section 4, any
other series or class or classes of Junior Stock shall, subject to the
respective terms thereof, be entitled to receive any and all assets remaining
to be paid or distributed, and the holders of the Class J Preferred Stock and
any Parity Stock shall not be entitled to share therein.
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5. REDEMPTION.
The Class J Preferred Stock is not redeemable, other than as
specified in Section 11.2 hereof.
6. STATUS OF REACQUIRED STOCK.
All shares of Class J Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation (including without limitation
shares of Class J Preferred Stock which have been surrendered for conversion
into Class A Common Stock) shall be returned to the status of authorized, but
unissued shares of Class J Preferred Stock.
7. CONVERSION.
7.1 CONVERSION AT HOLDERS' OPTION.
At any time on or after the Issue Date, holders of shares of
Class J Preferred Stock shall have the right to convert all or a portion of
such shares into shares of Class A Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of
this Section 7, a holder of shares of Class J Preferred Stock shall have the
right, at such holder's option, at any time on or after the Issue Date to
convert such shares, in whole or in part, into the number of fully paid and
non-assessable shares of authorized but previously unissued shares of Class A
Common Stock per each share of Class J Preferred Stock obtained by dividing the
Liquidation Preference (excluding any accumulated accrued and unpaid dividends)
per share of Class J Preferred Stock by the Conversion Price (as in effect at
the time and on the date provided for in subparagraph (b)(iv) of this Section
7.1) and by surrendering such shares to be converted, such surrender to be made
in the manner provided in paragraph (b) of this Section 7.1.
(b) (i) In order to exercise the conversion right, the holder
of each share of Class J Preferred Stock to be converted shall surrender the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent, accompanied by
written notice to the Corporation that the holder thereof elects to convert
such share of Class J Preferred Stock. Unless the shares issuable on conversion
are to be issued in the same name as the name in which such share of Class J
Preferred Stock is registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar tax (or
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evidence reasonably satisfactory to the Corporation demonstrating that such
taxes have been paid).
(ii) A holder of shares of Class J Preferred Stock shall,
as of the date of the conversion of such shares to shares of Class A Common
Stock, be entitled to receive cash payment in respect of any dividends (whether
or not earned or declared) that are accumulated, accrued and unpaid thereon as
of the time of such conversion, provided, however, that payment in respect of
any dividend on such shares that has been declared but for which the Dividend
Payment Date has not yet been reached shall be payable as of such Dividend
Payment Date. Except as provided above, the Corporation shall make no payment
or allowance for unpaid dividends, whether or not in arrears, on converted
shares.
(iii) As promptly as practicable after the surrender of
certificates for shares of Class J Preferred Stock as aforesaid, the
Corporation shall issue and shall deliver at such office to such holder, or
send on such holder's written order, a certificate or certificates for the
number of full shares of Class A Common Stock issuable upon the conversion of
such shares of Class J Preferred Stock in accordance with provisions of this
Section 7, and any fractional interest in respect of a share of Class A Common
Stock arising upon such conversion shall be settled as provided in paragraph
(c) of this Section 7.1.
(iv) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which the
certificates for shares of Class J Preferred Stock shall have been surrendered
and such notice received by the Corporation as aforesaid, and the Person or
Persons in whose name or names any certificate or certificates for shares of
Class A Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby
at such time on such date and such conversion shall be at the Conversion Price
in effect at such time on such date unless the stock transfer books of the
Corporation shall be closed on that date, in which event such Person or Persons
shall be deemed to have become such holder or holders of record at the close of
business on the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in effect on the
date on which such shares shall have been surrendered and such notice received
by the Corporation. If the dividend payment record date for the Class J
Preferred Stock and Class A Common Stock do not coincide, and the preceding
sentence does not operate to ensure that a holder of shares of Class J
Preferred Stock whose shares are converted into Class A Common Stock does not
receive dividends on both the shares of Class J Preferred Stock and the Class A
Common Stock into which such shares are converted for the same Dividend Period,
then notwithstanding anything herein to the contrary, it is the intent, and the
Transfer Agent is authorized to ensure, that no conversion after the earlier of
such record dates will be accepted until after the latter of such record dates.
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(c) No fractional share of Class A Common Stock or scrip
representing fractions of a share of Class A Common Stock shall be issued upon
conversion of the shares of Class J Preferred Stock. Instead of any fractional
interest in a share of Class A Common Stock that would otherwise be deliverable
upon the conversion of shares of Class J Preferred Stock, the Corporation shall
pay to the holder of such share an amount in cash based upon the Current Market
Price of the Class A Common Stock on the Trading Day immediately preceding the
date of conversion. If more than one share shall be surrendered for conversion
at one time by the same holder, the number of full shares of Class A Common
Stock issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Class J Preferred Stock so surrendered.
7.2 MANDATORY CONVERSION.
(a) The Corporation shall have the right to require that all
or part of the issued and outstanding shares of Class J Preferred Stock be
converted into shares of Class A Common Stock under the following
circumstances:
(i) At any time on or prior to the fourth anniversary of
the Issue Date, in the event that the Internal Rate of Return exceeds 12.5%,
the Corporation shall have the right to require the issued and outstanding
shares of Class J Preferred Stock to be converted, in whole or in part, into
shares of Class A Common Stock as set forth in this Section 7.2.
(ii) At any time after the fourth anniversary of the
Issue Date, so long as the average of the daily Current Market Prices of the
issued and outstanding shares of Class A Common Stock during the five most
recent Trading Days is equal to or greater than $40, the Corporation shall have
the right to require the issued and outstanding shares of Class J Preferred
Stock to be converted, in whole or in part, into shares of Class A Common Stock
as set forth in this Section 7.2.
(b) Subject to and upon compliance with the provisions of
this Section 7, the Corporation shall have the right, under the circumstances
set forth in (a) (i) or (ii) above, to convert such shares, in whole or in
part, into the number of fully paid and non-assessable shares of authorized but
previously unissued shares of Class A Common Stock per each share of Class J
Preferred Stock obtained by dividing the Liquidation Preference (excluding any
accumulated accrued and unpaid dividends) per share of Class J Preferred Stock
by the Conversion Price (as in effect at the time and on the date provided for
in subparagraph (c)(v) of this Section 7.2).
(c) (i) In order to exercise the conversion right, the
Corporation shall, promptly upon the occurrence of an event described in (a)(i)
or (ii) above, and in no event later than the close of business on the next
succeeding business day, give notice of such conversion to each holder of
record of the shares to be converted. Such
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notice shall be provided by facsimile or, if facsimile is not available, then
by first class mail, postage prepaid, at such holder's address as the same
appears on the stock records of the Corporation. Any notice which was
transmitted or mailed in the manner herein provided shall be conclusively
presumed to have been duly given on the date received by the holder. Each such
notice shall state, as appropriate: (1) the date of conversion, which date may
be any date within one business day following the date on which the notice is
transmitted or mailed; (2) the number of shares of Class J Preferred Stock to
be converted and, if fewer than all such shares held by such holder are to be
converted, the number of such shares to be converted; (3) the event which gave
rise to the conversion right; and (4) the then current Conversion Price.
(ii) Upon receiving such notice of conversion, each such
holder shall promptly surrender the certificates representing such shares of
Class J Preferred Stock as are being converted on the conversion date, duly
endorsed or assigned to the Corporation or in blank, at the office of the
Transfer Agent; provided, however, that the failure to so surrender any such
certificates shall not in any way affect the validity of the conversion of the
underlying shares of Class J Preferred Stock into shares of Class A Common
Stock. Unless the shares issuable on conversion are to be issued in the same
name as the name in which such shares of Class J Preferred Stock are
registered, each such share surrendered following conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar tax (or
evidence reasonably satisfactory to the Corporation demonstrating that such
taxes have been paid).
(iii) A holder of shares of Class J Preferred Stock
shall, as of the date of the conversion of such shares to shares of Class A
Common Stock, be entitled to receive cash payment in respect of any dividends
(whether or not earned or declared) that are accumulated, accrued and unpaid
thereon as of the time of such conversion, provided, however, that payment in
respect of any dividend on such shares that has been declared but for which the
Dividend Payment Date has not yet been reached shall be payable as of such
Dividend Payment Date. Except as provided above, the Corporation shall make no
payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares.
(iv) As promptly as practicable after the surrender of
certificates for shares of Class J Preferred Stock as aforesaid, and in any
event no later than three business days after the date of such surrender, the
Corporation shall issue and shall deliver at such office to such holder, or
send on such holder's written order, a certificate or certificates for the
number of full shares of Class A Common Stock issuable upon the conversion of
such shares of Class J Preferred Stock in accordance with the provisions of
this Section 7.2, and any fractional interest in respect of a share of Class A
Common Stock arising upon such conversion shall be settled as provided in
paragraph (d) of this Section 7.2.
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(v) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date identified as the
conversion date in the notice of conversion sent by the Corporation as
aforesaid, and the Person or Persons in whose name or names any certificate or
certificates for shares of Class A Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the shares represented thereby at such time on such date and such conversion
shall be at the Conversion Price in effect at such time on such date unless the
stock transfer books of the Corporation shall be closed on that date, in which
event such Person or Persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date identified as the conversion date in the
notice of conversion sent by the Corporation as aforesaid. If the dividend
payment record dates for the Class J Preferred Stock and Class A Common Stock
do not coincide, and the preceding sentence does not operate to ensure that a
holder of shares of Class J Preferred Stock whose shares are converted into
Class A Common Stock does not receive dividends on both the shares of Class J
Preferred Stock and the Class A Common Stock into which such shares are
converted for the same Dividend Period, then notwithstanding anything herein to
the contrary, it is the intent, and the Transfer Agent is authorized to ensure,
that no conversion after the earlier of such record dates will be accepted
until after the latter of such record dates.
(d) No fractional share of Class A Common Stock or scrip
representing fractions of a share of Class A Common Stock shall be issued upon
conversion of the shares of Class J Preferred Stock. Instead of any fractional
interest in a share of Class A Common Stock that would otherwise be deliverable
upon the conversion of shares of Class J Preferred Stock, the Corporation shall
pay to the holder of such share an amount of cash based upon the Current Market
Price of the Class A Common Stock on the Trading Day immediately preceding the
date of conversion. If more than one of any holder's shares shall be converted
at one time, the number of full shares of Class A Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Class J Preferred Stock so surrendered.
7.3 ADJUSTMENTS TO CONVERSION PRICE
(a) The Conversion Price shall be adjusted from time to time
as follows:
(i) If the Corporation shall after the Issue Date (A) pay
a dividend or make a distribution on its capital stock in shares of Class A
Common Stock, (B) subdivide its outstanding Class A Common Stock into a greater
number of shares, (C) combine its outstanding Class A Common Stock into a
smaller number of shares or (D) issue any shares of capital stock by
reclassification of its outstanding Class A Common Stock, the Conversion Price
in effect at the opening of business on
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the day following the date fixed for the determination of stockholders entitled
to receive such dividend or distribution or at the opening of business on the
day following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be adjusted so
that the holder of any share of Class J Preferred Stock thereafter converted
shall be entitled to receive the number of shares of Class A Common Stock (or
fraction of a share of Class A Common Stock) that such holder would have owned
or have been entitled to receive after the happening of any of the events
described above had such share of Class J Preferred Stock been converted
immediately prior to the record date in the case of a dividend or distribution
or the effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this paragraph (a)(i) of this
Section 7.3 shall become effective immediately after the opening of business on
the day next following the record date (except as provided in paragraph (e)
below) in the case of a dividend or distribution and shall become effective
immediately after the opening of business on the day next following the
effective date in the case of a subdivision, combination or reclassification.
(ii) If the Corporation shall, after the Issue Date,
issue rights, options or warrants to all holders of Class A Common Stock
entitling them (for a period expiring within 45 days after the record date
described below in this paragraph (a)(ii) of this Section 7.3) to subscribe for
or purchase Class A Common Stock at a price per share less than the Fair Market
Value per share of the Class A Common Stock on the record date for the
determination of stockholders entitled to receive such rights, options or
warrants, then the Conversion Price in effect at the opening of business on the
day next following such record date shall be adjusted to equal the price
determined by multiplying (A) the Conversion Price in effect immediately prior
to the opening of business on the day following the date fixed for such
determination by (B) a fraction, the numerator of which shall be the sum of (X)
the number of shares of Class A Common Stock outstanding on the close of
business on the date fixed for such determination and (Y) the number of shares
that could be purchased at such Fair Market Value from the aggregate proceeds
to the Corporation from the exercise of such rights, options or warrants for
Class A Common Stock, and the denominator of which shall be the sum of (XX) the
number of shares of Class A Common Stock outstanding on the close of business
on the date fixed for such determination and (YY) the number of additional
shares of Class A Common Stock offered for subscription or purchase pursuant to
such rights, options or warrants. Such adjustment shall become effective
immediately after the opening of business on the day next following such record
date (except as provided in paragraph (e) below). In determining whether any
rights, options or warrants entitle the holders of Class A Common Stock to
subscribe for or purchase Class A Common Stock at less than such Fair Market
Value, there shall be taken into account any consideration received by the
Corporation upon issuance and upon exercise of such rights, options or
warrants, the value of such consideration, if other than cash, to be determined
in good faith by the Board of Directors.
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(iii) If the Corporation shall after the Issue Date make
a distribution on its Class A Common Stock other than in cash or shares of
Class A Common Stock (including any distribution in securities (other than
rights, options or warrants referred to in paragraph (a)(ii) of this Section
7.3)) (each of the foregoing being referred to herein as a "distribution"),
then the Conversion Price in effect at the opening of business on the next day
following the record date for determination of stockholders entitled to receive
such distribution shall be adjusted to equal the price determined by
multiplying (A) the Conversion Price in effect immediately prior to the opening
of business on the day following the record date by (B) a fraction, the
numerator of which shall be the difference between (X) the number of shares of
Class A Common Stock outstanding on the close of business on the record date
and (Y) the number of shares determined by dividing (aa) the aggregate value of
the property being distributed by (bb) the Fair Market Value per share of Class
A Common Stock on the record date, and the denominator of which shall be the
number of shares of Class A Common Stock outstanding on the close of business
on the record date. Such adjustment shall become effective immediately after
the opening of business on the day next following such record date (except as
provided below). The value of the property being distributed shall be as
determined in good faith by the Board of Directors; provided, however, if the
property being distributed is a publicly traded security, its value shall be
calculated in accordance with the procedure for calculating the Fair Market
Value of a share of Class A Common Stock (calculated for a period of five
consecutive Trading Days commencing on the twentieth Trading Day after the
distribution). Neither the issuance by the Corporation of rights, options or
warrants to subscribe for or purchase securities of the Corporation nor the
exercise thereof shall be deemed a distribution under this paragraph.
(iv) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative increase or decrease
of at least 1% in such price: provided, however, that any adjustments that by
reason of this paragraph (a)(iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in accordance
with the provisions of this Section 7.3 (other than this paragraph (a)(iv)) not
later than such time as may be required in order to preserve the tax-free
nature of a distribution to the holders of shares of Class A Common Stock.
Notwithstanding any other provisions of this Section 7, the Corporation shall
not be required to make any adjustment of the Conversion Price for the issuance
of (A) any shares of Class A Common Stock pursuant to any plan providing for
the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of optional amounts in shares of Class A Common
Stock under such plan or (B) any options, rights or shares of Class A Common
Stock pursuant to any stock option, stock purchases or other stock-based plan
maintained by the Corporation. All calculations under this Section 7 shall be
made to the nearest cent ($.005 being rounded upward) or to the nearest
one-tenth of a share (with .05 of a share being rounded upward), as the case
may be. Anything in this paragraph (a) of this Section 7 to the contrary
notwithstanding, the Corporation
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shall be entitled, to the extent permitted by law, to make such reductions in
the Conversion Price, in addition to those required by this paragraph (a), as
it in its discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, reclassification or combination of shares,
distribution of rights or warrants to purchase stock or securities, or a
distribution of other assets (other than cash dividends) hereafter made by the
Corporation to its stockholders shall not be taxable, or if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
(b) If the Corporation shall be a party to any transaction
(including with limitation a merger, consolidation, statutory share exchange,
sale of all or substantially all of the Corporation's assets or
recapitalization of the Class A Common Stock, but excluding any transaction as
to which paragraph (a)(i) of this Section 7.3 applies) (each of the foregoing
being referred to herein as a "Transaction"), in each case as a result of which
shares of Class A Common Stock shall be converted into the right to receive
stock, securities or other property (including cash or any combination
thereof), each share of Class J Preferred Stock which is not converted into the
right to receive stock, securities or other property in connection with such
Transaction shall thereupon be convertible into the kind and amount of shares
of stock, securities and other property (including cash or any combination
thereof) receivable upon such consummation by a holder of that number of shares
of Class A Common Stock into which one share of Class J Preferred Stock was
convertible immediately prior to such Transaction. The Corporation shall not be
a party to any Transaction unless the terms of such Transaction are consistent
with the provisions of this paragraph (b), and it shall not consent or agree to
the occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Class J Preferred Stock that will contain
provisions enabling the holders of the Class J Preferred Stock that remain
outstanding after such Transaction to convert into the consideration received
by holders of Class A Common Stock at the Conversion Price in effect
immediately apply to successive Transactions:
(c) If:
(i) the Corporation shall declare a dividend (or any
other distribution) on the Class A Common Stock (other than cash dividends and
cash distributions); or
(ii) the Corporation shall authorize the granting to all
holders of the Class A Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or series of capital stock or any other rights
or warrants; or
(iii) there shall be any reclassification of the
outstanding Class A Common Stock or any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of the
Corporation is required, or a statutory share exchange, or the sale or transfer
of all or substantially all of the assets of the Corporation as an entirety; or
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(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to each holder of shares of Class J Preferred Stock at such
holder's address as shown on the stock records of the Corporation, as promptly
as possible, a notice stating (A) the record date for the payment of such
dividend, distribution or rights or warrants, or, if a record date is not
established, the date as of which the holders of Class A Common Stock of record
to be entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Class A Common Stock of record shall be entitled to
exchange their shares of Class A Common Stock for securities or other property,
if any, deliverable upon such reclassification, consolidation, merger, statutory
share exchange, sale, transfer, liquidation, dissolution or winding up. Failure
to give or receive such notice or any defect therein shall not affect the
legality or validity of the proceedings described in this Section 7.
(d) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly file with the Transfer Agent an
officer's certificate setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment
which certificate shall be conclusive evidence of the correctness of such
adjustment absent manifest error. Promptly after delivery of such certificate,
the Corporation shall prepare a notice of such adjustment of the Conversion
Price setting forth the adjusted Conversion Price and the effective date such
adjustment becomes effective and shall mail such notice of such adjustment of
the Conversion Price to each holder of shares of Class J Preferred Stock at
such holder's address as shown on the stock record of the Corporation.
(e) In any case in which paragraph (a) of this Section 7.3
provides that an adjustment shall become effective on the day next following
the record date for an event, the Corporation may defer until the occurrence of
such event (A) issuing to the holder of any share of Class J Preferred Stock
converted after such record date and before the occurrence of such event the
additional Class A Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Class A Common Stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount of cash in lieu of any fraction pursuant to
Section 7.2(d) or Section 7.1(c).
(f) There shall be no adjustment of the Conversion Price in
case of the issuance of any capital stock of the Corporation except as
specifically set forth in
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this Section 7. In addition, notwithstanding any other provision contained
in this Section 7, there shall be no adjustment of the Conversion Price upon
the payment of any cash dividends or distributions on any capital stock of the
Corporation, including, without limitation, the Special Dividend (as such term
is defined in the Class E Articles Supplementary) on the Corporation's Class E
Preferred Stock or upon the automatic conversion of the shares of such
Preferred Stock into shares of Class A Common Stock, as provided in the Class E
Articles Supplementary.
(g) If the Corporation shall take any action affecting the
Class A Common Stock, other than action described in this Section 7, that in
the opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of Class J Preferred Stock, the Conversion
Price for the Class J Preferred Stock may be adjusted, to the extent permitted
by law in such manner, if any, and at such time as the Board of Directors, in
its sole discretion, may determine to be equitable under the circumstances.
(h) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Class A Common Stock solely for the purpose of effecting
conversion of the Class J Preferred Stock, the full number of shares of Class A
Common Stock deliverable upon the conversion of all outstanding shares of Class
J Preferred Stock not theretofore converted into Class A Common Stock. For
purposes of this paragraph (h), the number of shares of Class A Common Stock
that shall be deliverable upon the conversion of all outstanding shares of
Class J Preferred Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single holder (and without regard to the
Ownership Limit).
The Corporation covenants that any shares of Class A Common Stock
issued upon conversion of the shares of Class J Preferred Stock shall be
validly issued, fully paid and nonassessable.
The Corporation shall use its best efforts to list the shares of Class
A Common Stock required to be delivered upon conversion of the shares of Class
J Preferred Stock, prior to such delivery, upon each national securities
exchange, if any, upon which the outstanding shares of Class A Common Stock are
listed at the time of such delivery.
(i) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Class A Common Stock or other securities or property on conversion of
shares of Class J Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of shares of Class A Common
Stock or other securities or property in a name other than that of the holder
of the shares of Class J Preferred Stock to be converted, and no such issue or
delivery shall be made unless
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and until the Person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
(j) In addition to any other adjustment required hereby, to
the extent permitted by law, the Corporation from time to time may decrease the
Conversion Price by any amount, permanently or for a period of at least twenty
Business Days, if the decrease is irrevocable during the period.
(k) Notwithstanding anything to the contrary contained in
this Section 7, conversion of Class J Preferred Stock pursuant to this Section
7 shall be permitted only to the extent that such conversion would not result
in a violation of the Ownership Restrictions (as defined in the Charter), after
taking into account any waiver of such limitation granted to any holder of the
shares of Class J Preferred Stock.
8. RANKING.
Any class or series of capital stock of the Corporation shall be
deemed to rank:
(a) prior or senior to the Class J Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class J Preferred Stock ("Senior Stock");
(b) on a parity with the Class J Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend payment
dates or liquidation prices per share thereof be different from those of the
Class J Preferred Stock, if (i) such capital stock is Class B Cumulative
Convertible Preferred Stock, Class C Cumulative Preferred Stock, Class D
Cumulative Preferred Stock, Class G Cumulative Preferred Stock, or Class H
Cumulative Preferred Stock of the Corporation, or (ii) the holders of such
class of stock or series and the Class J Preferred Stock shall be entitled to
the receipt of dividends and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid dividends per share or liquidation preferences, without preference
or priority of one over the other (the capital stock referred to in clauses (i)
and (ii) of this paragraph being hereinafter referred to, collectively, as
"Parity Stock"); and
(c) junior to the Class J Preferred Stock, as to the payment
of dividends and as to the distribution of assets upon liquidation, dissolution
or winding up, if (i) such capital stock or series shall be Common Stock, (ii)
such capital stock is Class E Cumulative Convertible Preferred Stock or (iii)
the holders of Class J
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Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such class or series (the
capital stock referred to in clauses (i), (ii) and (iii) of this paragraph
being hereinafter referred to, collectively, as "Junior Stock").
9. VOTING.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Class J Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of directors then constituting
the Board of Directors shall be increased by two (if not already increased by
reason of similar types of provisions with respect to shares of Parity Stock of
any other class or series which is entitled to similar voting rights (the
"Voting Preferred Stock")) and the holders of shares of Class J Preferred
Stock, together with the holders of shares of all other Voting Preferred Stock
then entitled to exercise similar voting rights, voting as a single class
regardless of series, shall be entitled to elect the two additional directors
to serve on the Board of Directors at any annual meeting of stockholders or
special meeting held in place thereof, or at a special meeting of the holders
of the Class J Preferred Stock and the Voting Preferred Stock called as
hereinafter provided. Whenever all arrears in dividends on the Class J
Preferred Stock and the Voting Preferred Stock then outstanding shall have been
paid and dividends thereon for the current quarterly dividend period shall have
been declared and paid, or declared and set apart for payment, then the right
of the holders of the Class J Preferred Stock and the Voting Preferred Stock to
elect such additional two directors shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearages), and the terms of office of all persons elected as directors
by the holders of the Class J Preferred Stock and the Voting Preferred Stock
shall forthwith terminate and the number of directors constituting the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of Class J Preferred Stock and the
Voting Preferred Stock, if applicable, the Secretary of the Corporation may,
and upon the written request of any holder of Class J Preferred Stock
(addressed to the Secretary at the principal office of the Corporation) shall,
call a special meeting of the holders of the Class J Preferred Stock and of the
Voting Preferred Stock for the election of the two directors to be elected by
them as herein provided, such call to be made by notice similar to that
provided in the Bylaws of the Corporation for a special meeting of the
stockholders or as required by law. If any such special meeting required to be
called as above provided shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of Class J Preferred Stock
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors elected
at any such special meeting shall hold office until the next annual meeting of
the stockholders or special meeting held in lieu
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thereof if such office shall not have previously terminated as above provided.
If any vacancy shall occur among the directors elected by the holders of the
Class J Preferred Stock and the Voting Preferred Stock, a successor shall be
elected by the Board of Directors, upon the nomination of the then-remaining
director elected by the holders of the Class J Preferred Stock and the Voting
Preferred Stock or the successor of such remaining director, to serve until the
next annual meeting of the stockholders or special meeting held in place
thereof if such office shall not have previously terminated as provided above.
(b) So long as any shares of Class J Preferred Stock are
outstand ing, in addition to any other vote or consent of stockholders required
by law or by the Charter of the Corporation, the affirmative vote of at least
66-2/3% of the votes entitled to be cast by the holders of the Class J
Preferred Stock voting as a single class with the holders of all other classes
or series of Parity Stock entitled to vote on such matters, given in person or
by proxy, either in writing without a meeting or by vote at any meeting called
for the purpose, shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of, or the addition of any provision to, these Articles
Supplementary, the Charter or the By-Laws of the Corporation that materially
adversely affects the voting powers, rights or preferences of the holders of
the Class J Preferred Stock; provided, however, that the amendment of or
supplement to the provisions of the Charter so as to authorize or create, or to
increase or decrease the authorized amount of, or to issue any Junior Stock,
Class J Preferred Stock or any shares of any class of Parity Stock shall not be
deemed to materially adversely affect the voting powers, rights or preferences
of the holders of Class J Preferred Stock; or
(ii) The authorization, creation of, increase in the
authorized amount of, or issuance of any shares of any class or series of
Senior Stock or any security convertible into shares of any class or series of
Senior Stock (whether or not such class or series of Senior Stock is currently
authorized).
For purposes of the foregoing provisions and all other voting rights
under these Articles Supplementary, each share of Class J Preferred Stock shall
have one (1) vote per share, except that when any other class or series of
preferred stock of the Corporation shall have the right to vote with the Class
J Preferred Stock as a single class on any matter, then the Class J Preferred
Stock and such other class or series shall have with respect to such matters
one quarter of one (.25) vote per $25 of stated liquidation preference. Except
as otherwise required by applicable law or as set forth herein or in the
Charter, the Class J Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers other than as
set forth herein, and the consent of the holders thereof shall not be required
for the taking of any corporate action.
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10. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record
holder of any share of Class J Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor the Transfer Agent
shall be affected by any notice to the contrary.
11. OWNERSHIP AND TRANSFERS.
11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(a) Limitation on Beneficial Ownership. Except as
provided in Section 11.8, from and after the Issue Date, no Person (other than
the Initial Holder) shall Beneficially Own shares of Class J Preferred Stock in
excess of the Ownership Limit and the Initial Holder shall not Beneficially Own
shares of Class J Preferred Stock in excess of the Initial Holder Limit.
(b) Transfers in Excess of Ownership Limit. Except as
provided in Section 11.8, from and after the Issue Date (and subject to Section
11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in any Person (other than the Initial Holder)
Beneficially Owning shares of Class J Preferred Stock in excess of the
Ownership Limit shall be void ab initio as to the Transfer of such shares of
Class J Preferred Stock that would be otherwise Beneficially Owned by such
Person in excess of the Ownership Limit, and the intended transferee shall
acquire no rights in such shares of Class J Preferred Stock.
(c) Transfers in Excess of Initial Holder Limit. Except
as provided in Section 11.8, from and after the Issue Date (and subject to
Section 11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in the Initial Holder Beneficially Owning shares of
Class J Preferred Stock in excess of the Initial Holder Limit shall be void ab
initio as to the Transfer of such shares of Class J Preferred Stock that would
be otherwise Beneficially Owned by the Initial Holder in excess of the Initial
Holder limit, and the Initial Holder shall acquire no rights in such shares of
Class J Preferred Stock.
(d) Transfers Resulting in "Closely Held" Status. From
and after the Issue Date, any Transfer that, if effective would result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or would otherwise result in the Corporation failing to qualify as a REIT
(including, without limitation, a Transfer or other event that would result in
the Corporation owning (directly or constructively) an interest in a tenant
that is described in Section
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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) shall be void ab initio as to the
Transfer of shares of Class J Preferred Stock that would cause the Corporation
(i) to be "closely held" within the meaning of Section 856(h) of the Code or
(ii) otherwise fail to qualify as a REIT, as the case may be, and the intended
transferee shall acquire no rights in such shares of Class J Preferred Stock.
(e) Severability on Void Transactions. A Transfer of a
share of Class J Preferred Stock that is null and void under Sections 11.1(b),
(c) or (d) of this Article because it would, if effective, result in (i) the
ownership of Class J Preferred Stock in excess of the Initial Holder Limit or
the Ownership Limit, (ii) the Corporation being "closely held" within the
meaning of Section 856(h) of the Code or (iii) the Corporation otherwise
failing to qualify as a REIT, shall not adversely affect the validity of the
Transfer of any other share of Class J Preferred Stock in the same or any other
related transaction.
11.2 REMEDIES FOR BREACH. If the Board of Directors or a
committee thereof shall at any time determine in good faith that a Transfer or
other event has taken place in violation of Section 11.1 of this Article or
that a Person intends to acquire or has attempted to acquire Beneficial
Ownership of any shares of Class J Preferred Stock in violation of Section 11.1
of this Article (whether or not such violation is intended), the Board of
Directors or a committee thereof shall be empowered to take any action as it
deems advisable to refuse to give effect to or to prevent such Transfer or
other event, including, but not limited to, refusing to give effect to such
Transfer or other event on the books of the Corporation, causing the
Corporation to redeem such shares at the then Current Market Price and upon
such terms and conditions as may be specified by the Board of Directors in its
sole discretion (including, but not limited to, by means of the issuance of
long-term indebtedness for the purpose of such redemption), demanding the
repayment of any distributions received in respect of shares of Class J
Preferred Stock acquired in violation of Section 11.1 of this Article or
instituting proceedings to enjoin such Transfer or to rescind such Transfer or
attempted Transfer; provided, however, that any Transfers or attempted
Transfers (or, in the case of events other than a Transfer, Beneficial
Ownership) in violation of Section 11.1 of this Article, regardless of any
action (or non-action) by the Board of Directors or such committee, (a) shall
be void ab initio or (b) shall automatically result in the transfer described
in Section 11.3 of this Article; provided, further, that the provisions of this
Section 11.2 shall be subject to the provisions of Section 11.12 of this
Article; provided, further, that neither the Board of Directors nor any
committee thereof may exercise such authority in a manner that interferes with
any ownership or transfer of Class J Preferred Stock that is expressly
authorized pursuant to Section 11.8(c) of this Article.
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11.3 TRANSFER IN TRUST.
(a) Establishment of Trust. If, notwithstanding the
other provisions contained in this Article, at any time after the Issue Date
there is a purported Transfer (an "Excess Transfer") (whether or not such
Transfer is the result of transactions entered into through the facilities of
the NYSE or other securities exchange or an automated inter-dealer quotation
system) or other change in the capital structure of the Corporation (including,
but not limited to, any redemption of Equity Stock) or other event (including,
but not limited to, any acquisition of any share of Equity Stock) such that (a)
any Person (other than the Initial Holder) would Beneficially Own shares of
Class J Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class J Preferred Stock in excess of
the Initial Holder Limit (in either such event, the Person or Initial Holder
that would Beneficially Own shares of Class J Preferred Stock in excess of the
Ownership Limit or the Initial Holder Limit, respectively, is referred to as a
"Prohibited Transferee"), then, except as otherwise provided in Section 11.8 of
this Article, such shares of Class J Preferred Stock in excess of the Ownership
Limit or the Initial Holder Limit, as the case may be, (rounded up to the
nearest whole share) shall be automatically transferred to a Trustee in his
capacity as trustee of a Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the Excess
Transfer, change in capital structure or another event giving rise to a
potential violation of the Ownership Limit or the Initial Holder Limit.
(b) Appointment of Trustee. The Trustee shall be
appointed by the Corporation and shall be a Person unaffiliated with either the
Corporation or any Prohibited Transferee. The Trustee may be an individual or a
bank or trust company duly licensed to conduct a trust business.
(c) Status of Shares Held by the Trustee. Shares of
Class J Preferred Stock held by the Trustee shall be issued and outstanding
shares of capital stock of the Corporation. Except to the extent provided in
Section 11.3(e), the Prohibited Transferee shall have no rights in the Class J
Preferred Stock held by the Trustee, and the Prohibited Transferee shall not
benefit economically from ownership of any shares held in trust by the Trustee,
shall have no rights to dividends and shall not possess any rights to vote or
other rights attributable to the shares held in the Trust.
(d) Dividend and Voting Rights. The Trustee shall have
all voting rights and rights to dividends with respect to shares of Class J
Preferred Stock held in the Trust, which rights shall be exercised for the
benefit of the Charitable Beneficiary. Any dividend or distribution paid prior
to the discovery by the Corporation that the shares of Class J Preferred Stock
have been transferred to the Trustee shall be repaid to the Corporation upon
demand, and any dividend or distribution declared but unpaid shall be rescinded
as void ab initio with respect to such shares of Class J Preferred Stock. Any
dividends or distributions so disgorged or rescinded shall be paid over to the
Trustee and held in trust for the Charitable
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Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by
the Corporation that the shares of Class J Preferred Stock have been
transferred to the Trustee will be rescinded as void ab initio and shall be
recast in accordance with the desires of the Trustee acting for the benefit of
the Charitable Beneficiary. The owner of the shares at the time of the Excess
Transfer, change in capital structure or other event giving rise to a potential
violation of the Ownership Limit or the Initial Holder Limit shall be deemed to
have given an irrevocable proxy to the Trustee to vote the shares of Class J
Preferred Stock for the benefit of the Charitable Beneficiary.
(e) Restrictions on Transfer. The Trustee of the Trust
may sell the shares held in the Trust to a Person, designated by the Trustee,
whose ownership of the shares will not violate the Ownership Restrictions. If
such a sale is made, the interest of the Charitable Beneficiary shall terminate
and proceeds of the sale shall be payable to the Prohibited Transferee and to
the Charitable Beneficiary as provided in this Section 11.3(e). The Prohibited
Transferee shall receive the lesser of (1) the price paid by the Prohibited
Transferee for the shares or, if the Prohibited Transferee did not give value
for the shares (through a gift, devise or other transaction), the Market Price
of the shares on the day of the event causing the shares to be held in the
Trust and (2) the price per share received by the Trustee from the sale or
other disposition of the shares held in the Trust. Any proceeds in excess of
the amount payable to the Prohibited Transferee shall be payable to the
Charitable Beneficiary. If any of the transfer restrictions set forth in this
Section 11.3(e) or any application thereof is determined in a final judgment to
be void, invalid or unenforceable by any court having jurisdiction over the
issue, the Prohibited Transferee may be deemed, at the option of the
Corporation, to have acted as the agent of the Corporation in acquiring the
Class J Preferred Stock as to which such restrictions would, by their terms,
apply, and to hold such Class J Preferred Stock on behalf of the Corporation.
(f) Purchase Right in Stock Transferred to the Trustee.
Shares of Class J Preferred Stock transferred to the Trustee shall be deemed to
have been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market Price
on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of 90 days
after the later of (i) the date of the Excess Transfer or other event resulting
in a transfer to the Trust and (ii) the date that the Board of Directors
determines in good faith that an Excess Transfer or other event occurred.
(g) Designation of Charitable Beneficiaries. By written
notice to the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
relating to such Prohibited Transferee if (i) the shares of Class J Preferred
Stock held in the Trust would not violate the Ownership Restrictions in the
hands of such Charitable Beneficiary and (ii)
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each Charitable Beneficiary is an organization described in Sections
170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires
or attempts to acquire shares of Class J Preferred Stock in violation of
Section 11.1 of this Article, or any Person that is a Prohibited Transferee
such that stock is transferred to the Trustee under Section 11.3 of this
Article, shall immediately give written notice to the Corporation of such event
and shall provide to the Corporation such other information as the Corporation
may request in order to determine the effect, if any, of such Transfer or
attempted Transfer or other event on the Corporation's status as a REIT.
Failure to give such notice shall not limit the rights and remedies of the
Board of Directors provided herein in any way.
11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after
the Issue Date certain record and Beneficial Owners and transferees of shares
of Class J Preferred Stock will be required to provide certain information as
set out below.
(a) Annual Disclosure. Every record and Beneficial Owner
of more than 5% (or such other percentage between 0.5% and 5%, as provided in
the applicable regulations adopted under the Code) of the number of Outstanding
shares of Class J Preferred Stock shall, within 30 days after January 1 of each
year, give written notice to the Corporation stating the name and address of
such record or Beneficial Owner, the number of shares of Class J Preferred
Stock Beneficially Owned, and a full description of how such shares are held.
Each such record or Beneficial Owner of Class J Preferred Stock shall, upon
demand by the Corporation, disclose to the Corporation in writing such
additional information with respect to the Beneficial Ownership of the Class J
Preferred Stock as the Board of Directors, in its sole discretion, deems
appropriate or necessary to (i) comply with the provisions of the Code
regarding the qualification of the Corporation as a REIT under the Code and
(ii) ensure compliance with the Ownership Limit or the Initial Holder Limit, as
applicable. Each stockholder of record, including without limitation any Person
that holds shares of Class J Preferred Stock on behalf of a Beneficial Owner,
shall take all reasonable steps to obtain the written notice described in this
Section 11.5 from the Beneficial Owner.
(b) Disclosure at the Request of the Corporation. Any
Person that is a Beneficial Owner of shares of Class J Preferred Stock and any
Person (including the stockholder of record) that is holding shares of Class J
Preferred Stock for a Beneficial Owner, and any proposed transferee of shares,
shall provide such information as the Corporation, in its sole discretion, may
request in order to determine the Corporation's status as a REIT, to comply
with the requirements of any taxing authority or other governmental agency, to
determine any such compliance or to ensure compliance with the Ownership Limit
and the Initial Holder Limit, and shall provide a statement or affidavit to the
Corporation setting forth the number of shares of Class J Preferred Stock
already Beneficially Owned by such stockholder or
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proposed transferee and any related persons specified, which statement or
affidavit shall be in the form prescribed by the Corporation for that purpose.
11.6 REMEDIES NOT LIMITED. Nothing contained in this Article
shall limit the authority of the Board of Directors to take such other action
as it deems necessary or advisable (subject to the provisions of Section 11.12
of this Article) (i) to protect the Corporation and the interests of its
stockholders in the preservation of the Corporation's status as a REIT and (ii)
to insure compliance with the Ownership Limit and the Initial Holder Limit.
11.7 AMBIGUITY. In the case of an ambiguity in the
application of any of the provisions of Section 11 of this Article, or in the
case of an ambiguity in any definition contained in Section 11 of this Article,
the Board of Directors shall have the power to determine the application of the
provisions of this Article with respect to any situation based on its
reasonable belief, understanding or knowledge of the circumstances.
11.8 EXCEPTIONS. The following exceptions shall apply or may
be established with respect to the limitations of Section 11.1 of this Article.
(a) Waiver of Ownership Limit. The Board of Directors,
upon receipt of a ruling from the Internal Revenue Service or an opinion of tax
counsel or other evidence or undertaking acceptable to it, may, but shall not
be required to, waive the application, in whole or in part, of the Ownership
Limit to a Person subject to the Ownership Limit, if such person is not an
individual for purposes of Section 542(a) of the Code and is a corporation,
partnership, estate or trust. In connection with any such exemption, the Board
of Directors may require such representations and undertakings from such Person
and may impose such other conditions as the Board of Directors deems necessary,
in its sole discretion.
(b) Pledge by Initial Holder. Notwithstanding any other
provision of this Article, the pledge by the Initial Holder of all or any
portion of the Class J Preferred Stock directly owned at any time or from time
to time shall not constitute a violation of Section 11.1 of this Article and
the pledgee shall not be subject to the Ownership Limit with respect to the
Class J Preferred Stock so pledged to it either as a result of the pledge or
upon foreclosure.
(c) Underwriters. For a period of 270 days (or such
longer period of time as any underwriter described below shall hold an unsold
allotment of Class J Preferred Stock) following the purchase of Class J
Preferred Stock by an underwriter that (i) is a corporation, partnership or
other legal entity and (ii) participates in an offering of the Class J
Preferred Stock, such underwriter shall not be subject to the Ownership Limit
with respect to the Class J Preferred Stock purchased by it as a part of or in
connection with such offering and with respect to any Class J Preferred Stock
purchased in connection with market making activities.
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11.9 LEGEND. Each certificate for Class J Preferred Stock
shall bear substantially the following legend:
"The shares of Class J Cumulative Convertible Preferred
Stock represented by this certificate are subject to restrictions on
transfer. No person may Beneficially Own shares of Class J Cumula tive
Convertible Preferred Stock in excess of the Ownership Restric tions,
as applicable, with certain further restrictions and exceptions set
forth in the Charter (including the Articles Supplementary setting
forth the terms of the Class J Cumulative Convertible Preferred
Stock). Any Person that attempts to Beneficially Own shares of Class J
Cumulative Convertible Preferred Stock in excess of the applicable
limitation must immediately notify the Corporation. All capitalized
terms in this legend have the meanings ascribed to such terms in the
Charter (including the Articles Supplementary setting forth the terms
of the Class J Cumulative Convertible Preferred Stock), 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
stockholder that so requests. If the restrictions on transfer are
violated (i) the transfer of the shares of Class J Cumulative
Convertible Preferred Stock repre sented hereby will be void in
accordance with the Charter (including the Articles Supplementary
setting forth the terms of the Class J Cumulative Convertible
Preferred Stock) or (ii) the shares of Class J Cumulative Convertible
Preferred Stock represented hereby will automatically be transferred
to a Trustee of a Trust for the benefit of one or more Charitable
Beneficiaries."
11.10 SEVERABILITY. If any provision of this Article or any
application of any such provision is determined in a final and unappealable
judgment to be void, invalid or unenforceable by any Federal or state court
having jurisdiction over the issues, the validity and enforceability 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.
11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article
to the contrary notwithstanding, the Board of Directors shall be entitled to
take or omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit
and the Initial Holder Limit in the event of a change in law.
11.12 SETTLEMENT. Nothing in this Section 11 of this Article
shall be interpreted to preclude the settlement of any transaction entered into
through the facilities of the NYSE or other securities exchange or an automated
inter-dealer quotation system.
31
<PAGE> 194
FOURTH: The terms of the Class J Cumulative Convertible Preferred
Stock set forth in Article Third hereof shall become Article XX of the Charter.
32
<PAGE> 195
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Senior Vice President and Chief
Financial Officer and witnessed by its Assistant Secretary on November 6, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ LUCY CORDOVA /s/ TROY D. BUTTS
- - ------------------------- ---------------------------------------------
Lucy Cordova Troy D. Butts
Assistant Secretary Senior Vice President and
Chief Financial Officer
THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the
Corporation the 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 hereby certifies that the matters and facts set forth herein with respect
to the authorization and approval thereof are true in all material respects
under the penalties of perjury.
/s/ TROY D. BUTTS
---------------------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.5
PAYMENT GUARANTY
OF NON-PREFERRED STOCK SUBSIDIARIES
This Payment Guaranty ("Guaranty") is made as of October 1, 1998, by the
undersigned entities (each a "Guarantor") in favor of BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION ("BofA"), as the agent for itself and the lenders
("Lenders") from time to time party to the Credit Agreement (as hereinafter
defined) (in such capacity, the "Agent").
Factual Background
The Lenders intend to make a $100,000,000 unsecured revolver to term
credit facility available to AIMCO Properties L.P., a Delaware limited
partnership (the "Borrower") in accordance with the Amended and Restated Credit
Agreement (the "Credit Agreement"), dated of the date herewith, by and among
Borrower, BofA (as Agent and as a Lender) and the other Lenders from time to
time party thereto. In connection with the Credit Agreement, the Borrower has
obtained this Guaranty from the Guarantor. Capitalized terms used but not
defined herein will have the meanings set forth in the Credit Agreement. As
used herein, the term "Facility" shall refer individually to each of the credit
facilities available to the Borrower under the Credit Agreement.
Guaranty
1. Guaranty of Loan.
(a) Absolute Guaranty. Guarantor absolutely,
unconditionally and irrevocably guaranties to Agent and the Lenders the full
payment of the Indebtedness (as hereinafter defined), and unconditionally
agrees to pay to Agent and the Lenders the full amount of the Indebtedness.
This is a guaranty of payment, not of collection. If Borrower defaults in the
payment when due of the Indebtedness or any part of it, Guarantor will in
lawful money of the United States pay to Agent and the Lenders, on demand, all
sums due and owing on the Indebtedness, including all interest, charges, fees
and other sums, costs and expenses.
(b) Guaranty Prohibition. If, in accordance with Section
6.13(c) of the Credit Agreement, any Guarantor is prohibited from providing
this Guaranty under its existing financing arrangements, current as of even
date herewith , such Guarantor shall have no obligation under this Guaranty.
2. Loan. In this Guaranty, the term "Indebtedness" is broadly
defined to mean and include all primary, secondary, direct, indirect, fixed and
contingent obligations of Borrower to pay principal, interest, prepayment
charges, breakage costs, late charges, loan fees and any other fees, charges,
sums, costs and expenses that
<PAGE> 2
may be owing at any time under the Loan Documents (as such term is defined in
the Credit Agreement), and shall include, without limitation, all liabilities
and obligations of the Borrower with respect to Letters of Credit issued under
the Credit Agreement, as any or all of such obligations may from time to time
be modified, amended, extended or renewed. If the amount outstanding under the
Indebtedness is determined by a court of competent jurisdiction or in any
arbitration proceeding described in Section 10.17 of the Credit Agreement, that
determination shall be conclusive and binding on Guarantor, regardless of
whether Guarantor was a party to the proceeding in which the determination was
made or not.
3. Rights of Agent and the Lenders. Guarantor authorizes Agent
or any Lender to perform any or all of the following acts at any time in its
sole discretion, all without notice to Guarantor and without affecting
Guarantor's obligations under this Guaranty:
(a) Agent or the Requisite Lenders may alter any terms of
the Indebtedness or any part of it, including renewing, compromising, extending
or accelerating, or otherwise changing the time for payment of, or increasing
or decreasing the rate of interest on, the Indebtedness or any part of it.
(b) Agent or any Lender may take and hold security for
the Indebtedness or this Guaranty, accept additional or substituted security
for either, and subordinate, exchange, enforce, waive, release, compromise,
fail to perfect and sell or otherwise dispose of any such security in
accordance with the terms of the Indebtedness.
(c) Agent or any Lender may direct the order and manner
of any sale of all or any part of any security now or later to be held for the
Indebtedness or this Guaranty, and Agent or any Lender may also bid at any such
sale.
(d) Agent or any Lender may apply any payments or
recoveries from Borrower, Guarantor or any other source, and any proceeds of
any security, to Borrower's obligations under the Loan Documents in such
manner, order and priority as Agent or such Lender may elect, whether or not
those obligations are guarantied by this Guaranty or secured at the time of the
application.
(e) Agent or any Lender may release Borrower of its
liability for the Indebtedness or any part of it.
(f) Agent or any Lender may substitute, add or release
any one or more Guarantors, other guarantors or endorsers.
2
<PAGE> 3
(g) In addition to the Indebtedness, Agent or any Lender
may extend other credit to Borrower, and may take and hold security for the
credit so extended, all without affecting Guarantor's liability under this
Guaranty.
4. Guaranty to be Absolute. Guarantor expressly agrees that
until the Indebtedness is paid and performed in full and each and every term,
covenant and condition of this Guaranty is fully performed, Guarantor shall not
be released by or because of:
(a) Any act or event which might otherwise discharge,
reduce, limit or modify Guarantor's obligations under this Guaranty;
(b) Any waiver, extension, modification, forbearance,
delay or other act or omission of Agent or any Lender, or its failure to
proceed promptly or otherwise as against Borrower, Guarantor or any security;
(c) Any action, omission or circumstance that might
increase the likelihood that Guarantor may be called upon to perform under this
Guaranty or that might affect the rights or remedies of Guarantor as against
Borrower;
(d) Any dealings occurring at any time between Borrower
and Agent or any Lender, whether relating to the Indebtedness or otherwise; or
(e) Any action of Agent or any Lender described in
Section 3 above.
Guarantor hereby acknowledges that absent this Section 4,
Guarantor might have a defense to the enforcement of this Guaranty as a result
of one or more of the foregoing acts, omissions, agreement, waivers or matters.
Guarantor hereby expressly waives and surrenders any defense to its liability
under this Guaranty based upon any of the foregoing acts, omissions,
agreements, waivers or matters. It is the purpose and intent of this Guaranty
that the obligations of Guarantor under it shall be absolute and unconditional
under any and all circumstances.
5. Guarantor's Waivers. Guarantor waives:
(a) All statutes of limitations as a defense to any
action or proceeding brought against Guarantor by Agent or any Lender, to the
fullest extent permitted by law;
(b) Any right it may have to require Agent or any Lender
to proceed against Borrower, proceed against or exhaust any security held from
Borrower,
3
<PAGE> 4
or pursue any other remedy in Agent's or any Lender's power to pursue;
(c) Any defense based on any claim that Guarantor's
obligations exceed or are more burdensome than those of Borrower;
(d) Any defense based on: (i) any legal disability of
Borrower, (ii) any release, discharge, modification, impairment or limitation
of the liability of Borrower to Agent or any Lender from any cause, whether
consented to by Agent or any Lender or arising by operation of law or from any
bankruptcy or other voluntary or involuntary proceeding, in or out of court,
for the adjustment of debtor-creditor relationships ("Insolvency Proceeding"),
and (iii) any rejection or disaffirmance of the Indebtedness, or any part of
it, or any security held for it, in any such Insolvency Proceeding;
(e) Any defense based on any action taken or omitted by
Agent or any Lender in any Insolvency Proceeding involving Borrower, including
any election to have Agent's or that Lender's claim allowed as being secured,
partially secured or unsecured, any extension of credit by Lender to Borrower
in any Insolvency Proceeding, and the taking and holding by Agent or any Lender
of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty and of the existence, creation, or incurring of new
or additional indebtedness, and demands and notices of every kind except for
any demand or notice by Agent or any Lender to Guarantor expressly provided for
in Section 1;
(g) Any defense based on or arising out of any defense
that Borrower may have to the payment or performance of the Indebtedness or any
part of it; and
(h) Any defense based on or arising out of any action of
Agent or any Lender described in Sections 3 or 4 above.
6. Waivers of Subrogation and Other Rights.
(a) During the existence of an Event of Default by
Borrower, Agent or any Lender, without prior notice to or consent of Guarantor,
may elect to: (i) foreclose either judicially or nonjudicially against any real
or personal property security it may hold for the Indebtedness, (ii) accept a
transfer of any such security in lieu of
4
<PAGE> 5
foreclosure, (iii) compromise or adjust the Indebtedness or any part of it or
make any other accommodation with Borrower or Guarantor, or (iv) exercise any
other remedy against Borrower or any security. No such action by Agent or any
Lender shall release or limit the liability of Guarantor, who shall remain
liable under this Guaranty after the action, even if the effect of the action
is to deprive Guarantor of any subrogation rights, rights of indemnity, or
other rights to collect reimbursement from Borrower for any sums paid to Agent
or any Lender, whether contractual or arising by operation of law or otherwise.
Guarantor expressly agrees that under no circumstances shall it be deemed to
have any right, title, interest or claim in or to any real or personal property
to be held by Agent or any Lender or any third party after any foreclosure or
transfer in lieu of foreclosure of any security for the Indebtedness.
(b) Regardless of whether Guarantor may have made any
payments to Lender, Guarantor hereby waives: (i) all rights of subrogation, all
rights of indemnity, and any other rights to collect reimbursement from
Borrower for any sums paid to Agent or any Lender, whether contractual or
arising by operation of law (including the United States Bankruptcy Code or any
successor or similar statute) or otherwise, (ii) all rights to enforce any
remedy that Lender may have against Borrower, and (iii) all rights to
participate in any security now or later to be held by Agent or any Lender for
the Indebtedness, in each case until the full and indefeasible payment and
performance of all Indebtedness, and all obligations of the Guarantors
hereunder.
(c) Guarantor waives all rights and defenses arising out
of an election of remedies by the Agent or any Lender, even though that
election of remedies may affect Guarantor's rights of subrogation and
reimbursement against the Borrower by the operation of law or otherwise. In
addition, Guarantor waives all rights and defenses that Guarantor may have
because the Borrower's indebtedness is secured by real property. This means,
among other things, that Agent and the Lenders may collect from Guarantor
without first foreclosing on any real or personal property collateral pledged
by the Borrower.
7. Revival and Reinstatement. If Agent or any Lender is required
to pay, return or restore to Borrower or any other person any amounts
previously paid on the Indebtedness because of any Insolvency Proceeding of
Borrower, any stop notice or any other reason, the obligations of Guarantor
shall be reinstated and revived and the rights of Agent and such Lender shall
continue with regard to such amounts, all as though they had never been paid.
8. Information Regarding Owner. Before signing this Guaranty,
Guarantor investigated the financial condition and business operations of
Borrower and such other matters as Guarantor deemed appropriate to assure
itself of Borrower's ability to discharge its obligations under the Loan
Documents. Guarantor assumes full responsibility for that due diligence, as
well as for keeping informed of all matters that may affect Borrower's ability
to pay and perform its obligations to the Agent and the
5
<PAGE> 6
Lenders. Neither Agent nor any Lender has any duty to disclose to Guarantor
any information which such party may have or receive about Borrower's financial
condition, business operations, or any other circumstances bearing on its
ability to perform.
9. Subordination. Any rights of Guarantor, whether now existing
or later arising, to receive payment on account of any indebtedness (including
interest) owed to it by Borrower or any Subsidiary thereof or to receive any
payment from Borrower or any such Subsidiary other than those payments or
distributions permitted under Sections 7.9(b) and 7.10 of the Credit Agreement
shall at all times be subordinate as to lien and time of payment and in all
other respects to the full and prior repayment of the Indebtedness. Guarantor
shall not be entitled to enforce or receive payment of any sums hereby
subordinated until the Indebtedness has been paid and performed in full and any
such sums received in violation of this Guaranty shall be received by Guarantor
in trust for the Agent and the Lenders.
10. Financial Information. Guarantor shall keep true and correct
financial books and records, using generally accepted accounting principles
consistently applied, or such other accounting principles as the Requisite
Lenders in their reasonable judgment may find acceptable from time to time.
Guarantor represents, warrants and covenants to Agent and the Lenders that all
financial information with respect to the Guarantor delivered or to be
delivered to Agent and the Lenders by the Borrower with respect to Guarantor
under Section 6.1 of the Credit Agreement is or shall be true and correct and
fairly presents or will fairly present the financial position of the Guarantor
for the applicable period. Guarantor shall promptly provide Agent and the
Lenders with any additional audited financial information that Guarantor may
obtain, and such other information concerning its affairs and properties as
Agent or any Lender may reasonably request, including, without limitation,
signed copies of any tax returns if requested by Agent or the Lenders.
11. Guarantor's Representations and Warranties. Guarantor
represents and warrants that:
(a) All financial statements delivered to Agent or the
Lenders were or will be prepared in accordance with generally accepted
accounting principles, or such other accounting principles as may be acceptable
to the Requisite Lenders at the time of their preparation, consistently
applied;
(b) There has been no material adverse change in
Guarantor's financial condition since the dates of the statements most recently
furnished to Agent and the Lenders; and
(c) All representations and warranties given on behalf of
or with respect to Guarantor contained in Article V of the Credit Agreement and
in any other Loan Document or certification made in connection with the Credit
Agreement are true and correct.
6
<PAGE> 7
12. Covenants of Guarantor. Guarantor covenants and agrees that
it shall comply with and perform all covenants given on behalf of or with
respect to Guarantor (whether expressly or as a Subsidiary) contained in
Articles VI and VII of the Credit Agreement and in all other Loan Documents.
13. Intentionally Omitted.
14. Reference and Arbitration.
(a) Mandatory Arbitration. Any controversy or claim
between or among the parties, including those arising out of or relating to
this Guaranty or the Loan Documents and any claim based on or arising from an
alleged tort, shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in Los Angeles, California, in accordance
with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding
any choice of law provision in this Guaranty, and under the Commercial Rules of
the American Arbitration Association (the "AAA"). The arbitrator(s) shall give
effect to statutes of limitation in determining any claim. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrator(s). Judgment upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.
(b) Provisional Remedies, Self-Help and Foreclosure. No
provision of this Section 14 shall limit the right of any party to exercise
self-help remedies such as setoff, foreclosure against or sale of any real or
personal property collateral or security, or to obtain provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration.
15. Authorization; No Violation. Guarantor is authorized to
execute, deliver and perform under this Guaranty, which is a valid, binding,
and enforceable obligation of Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditor's rights generally. The
execution, delivery and performance of this Guaranty are not in violation of
any applicable law, regulation or ordinance, or any order or ruling of any
court or governmental agency applicable to the Guarantor. The Guaranty does
not conflict with, or constitute a breach or default under, any agreement to
which Guarantor is a party.
7
<PAGE> 8
16. Additional and Independent Obligations. Guarantor's
obligations under this Guaranty are in addition to its obligations under any
future guaranties, each of which shall remain in full force and effect until it
is expressly modified or released in a writing signed by Agent and consented to
by the Lenders. Guarantor's obligations under this Guaranty are independent of
those of Borrower on the Indebtedness. Agent or the Lenders may bring a
separate action, or commence a separate arbitration proceeding against
Guarantor without first proceeding against Borrower, any other person or any
security that Agent or any Lender may hold, and without pursuing any other
remedy. None of Agent's or any Lender's rights under this Guaranty shall be
exhausted by any action by Agent or any Lender until the Indebtedness has been
paid and performed in full in cash.
17. No Waiver; Consents; Cumulative Remedies. Each waiver by
Agent or the Lenders must be in writing, and no waiver shall be construed as a
continuing waiver. No waiver shall be implied from Agent's or any Lender's
delay in exercising or failure to exercise any right or remedy against
Borrower, Guarantor or any security. Consent by Agent or the Lenders to any
act or omission by Borrower or Guarantor shall not be construed as a consent to
any other or subsequent act or omission, or as a waiver of the requirement for
Agent's or the Lenders' consent to be obtained in any future or other instance.
All remedies of Agent and each Lender against Borrower and Guarantor are
cumulative.
18. No Release. Except as otherwise provided in Section 1,
Guarantor shall not be released, in whole or in part, from its obligations
under this Guaranty except by a writing signed by Agent and all the Lenders.
19. Heirs, Successors and Assigns; Participations. The terms of
this Guaranty shall bind and benefit the heirs, legal representatives,
successors and assigns of Agent, the Lenders and Guarantor; provided, however,
that Guarantor may not assign this Guaranty, or assign or delegate any of its
rights or obligations under this Guaranty, without the prior written consent of
Agent in each instance. Without notice to or the consent of Guarantor, Agent
and any Lender may disclose any and all information in its possession
concerning Guarantor, this Guaranty and any security for this Guaranty to any
actual or prospective purchaser of any securities issued or to be issued by
Agent or such Lender, and to any actual or prospective purchaser or assignee of
any participation or other interest in the Indebtedness and this Guaranty.
20. Notices.
(a) Delivery. All notices, requests and other
communications provided for hereunder shall be in writing (including, unless
the context expressly otherwise provides, telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed or
delivered to its address specified on the signature pages hereof, or to such
other address as shall be designated by such party in a written notice to the
other party.
8
<PAGE> 9
(b) Receipt. All such notices and communications shall,
when transmitted by overnight delivery, telegraphed, telecopied by facsimile,
telexed or cabled, be effective when delivered for overnight delivery or to the
telegraph company, transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, or if delivered, upon delivery.
(c) Reliance. Agent and each Lender shall be entitled to
rely on the authority of any person purporting to be a person authorized by
Guarantor to give such notice, and neither Agent nor any Lender shall have any
liability to Guarantor or any other person on account of any action taken or
not taken by Agent or such Lender in reliance upon such telephonic or facsimile
notice. The obligation of Guarantor hereunder shall not be affected in any way
or to any extent by any failure by Lender to receive written confirmation of
any telephonic or facsimile notice or the receipt by Agent or a Lender of a
confirmation which is at variance with the terms understood by Agent or such
Lender to be contained in the telephonic or facsimile notice.
21. Rules of Construction. In this Guaranty, the word "Borrower"
includes both the named Borrower and any other person who at any time assumes
or otherwise becomes primarily liable for all or any part of the obligations of
the named Borrower on the Indebtedness. The word "person" includes any
individual, company, trust or other legal entity of any kind. If this Guaranty
is executed by more than one person, the word "Guarantor" includes all such
persons. The word "include(s)" means "include(s), without limitation," and the
word "including" means "including, but not limited to." When the context and
construction so require, all words used in the singular shall be deemed to have
been used in the plural and vice versa. No listing of specific instances,
items or matters in any way limits the scope or generality of any language of
this Guaranty. All headings appearing in this Guaranty are for convenience
only and shall be disregarded in construing this Guaranty.
22. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to its choice of law rules.
23. Costs and Expenses. If any lawsuit or arbitration is
commenced which arises out of, or which relates to this Guaranty, the Loan
Documents or the Indebtedness, the prevailing party shall be entitled to
recover from each other party such sums as the court or arbitrator may adjudge
to be reasonable attorneys' fees (including allocated costs for services of
in-house counsel) in the action or proceeding, in addition to costs and
expenses otherwise allowed by law. In all other situations, including any
Insolvency Proceeding, Guarantor agrees to pay all of the Agent's and each
Lender's costs and expenses, including attorneys' fees (including allocated
costs for services of the Agent's and each Lender's in-house counsel) which may
be incurred in any effort to collect or enforce the Indebtedness or any part of
it or any term of this Guaranty. Without limiting any rights of the Agent or
Lenders under the Credit Agreement, all amounts of any kind due and payable
under this Guaranty (whether for principal, interest, and other costs under the
Indebtedness, or for costs, fees, and expenses for which the Guarantors are
directly responsible hereunder, or otherwise)
9
<PAGE> 10
shall accrue interest from the time the Agent or the Lenders make demand
therefor hereunder until paid in full in cash to such Agent or the Lenders at
the Base Rate, as defined in the Credit Agreement, plus three (3%) percentage
points, except to the extent that any such amounts are then accruing interest
under the Indebtedness, in which case such Base Rate plus 3% interest rate
shall not be applied if the effect would be to compound the interest to which
such obligations are subject to under the Indebtedness.
24. Covenant. Each Guarantor hereby agrees that it will make
dividend payments on its outstanding preferred stock with its excess cash to
the extent such cash is not required by the Guarantor for its business,
consistent with prudent business practices and its cash requirements.
25. Integration; Modifications. This Guaranty (a) integrates all
the terms and conditions mentioned in or incidental to this Guaranty, (b)
supersedes all oral negotiations and prior writings with respect to its subject
matter, and (c) is intended by Guarantor, Agent and the Lenders as the final
expression of the agreement with respect to the terms and conditions set forth
in this Guaranty and as the complete and exclusive statement of the terms
agreed to by Guarantor, Agent and the Lenders. No representation,
understanding, promise or condition shall be enforceable against any party
hereto unless it is contained in this Guaranty. This Guaranty may not be
modified except in a writing signed by both Agent (with the consent of the
Requisite Lenders) and Guarantor. No course of prior dealing, usage of trade,
parol or extrinsic evidence of any nature shall be used to supplement, modify
or vary any of the terms hereof. As between Agent and the Lenders only,
nothing contained in this Guaranty shall alter the rights and obligations among
Agent and the Lenders set forth in the Credit Agreement.
26. Miscellaneous. The illegality or unenforceability of one or
more provisions of this Guaranty shall not affect any other provision. Time is
of the essence in the performance of this Guaranty by Guarantor.
[Rest of Page Intentionally Left Blank]
10
<PAGE> 11
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Guaranty as of the date on the first page.
GUARANTOR
APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
a Maryland corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
GUARANTOR
AIMCO-GP, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
GUARANTOR
AIMCO-LP, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
GUARANTOR
AIMCO HOLDINGS, L.P.,
a Delaware limited partnership
By: AIMCO HOLDINGS QRS, INC.,
a Delaware corporation,
General Partner
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
11
<PAGE> 12
GUARANTOR
AIMCO HOLDINGS QRS, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
GUARANTOR
AIMCO SOMERSET, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
GUARANTOR
AIMCO PROPERTIES FINANCE CORP.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
GUARANTOR
AIMCO PROPERTIES FINANCE
PARTNERSHIP L.P.,
a Delaware limited partnership
By: AIMCO PROPERTIES FINANCE CORP.,
a Delaware corporation, its General Partner
By: /s/ PETER K. KOMPANIEZ
------------------------------
Name: Peter K. Kompaniez
Its:
12
<PAGE> 13
GUARANTOR
AIMCO/OTC QRS, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Vice Chairman
GUARANTOR
AMBASSADOR IV, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
GUARANTOR
AMBASSADOR V, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
GUARANTOR
AMBASSADOR FLORIDA PARTNERS, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
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<PAGE> 14
GUARANTOR
A.J. TWO, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
GUARANTOR
AMBASSADOR II, L.P.,
a Delaware limited partnership
By: AMBASSADOR II, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
GUARANTOR
AMBASSADOR X, L.P.,
a Delaware limited partnership
By: AMBASSADOR X, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
14
<PAGE> 15
Address Where Notices are to be Sent:
<TABLE>
<S> <C>
To Guarantor: 1873 South Bellaire Street
17th Floor
Denver, Colorado 90071
To Agent: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Attention: Manager - Unit #1357
To Lenders: Per the Credit Agreement
</TABLE>
15
<PAGE> 1
EXHIBIT 10.6
PAYMENT GUARANTY
OF PREFERRED STOCK SUBSIDIARIES
This Payment Guaranty ("Guaranty") is made as of October 1, 1998, by the
undersigned entities (each a "Guarantor") in favor of BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION ("BofA"), as the agent for itself and the lenders
("Lenders") from time to time party to the Credit Agreement (as hereinafter
defined) (in such capacity, the "Agent").
Factual Background
The Lenders intend to make a $100,000,000 unsecured revolver
to term credit facility available to AIMCO Properties L.P., a Delaware limited
partnership (the "Borrower") in accordance with the Amended and Restated Credit
Agreement (the "Credit Agreement"), dated of the date herewith, by and among
Borrower, BofA (as Agent and as a Lender) and the other Lenders from time to
time party thereto. In connection with the Credit Agreement, the Borrower has
obtained this Guaranty from the Guarantor, and the Guarantor has provided this
Guaranty in return for Borrower's payment of a guarantee fee. Capitalized
terms used but not defined herein will have the meanings set forth in the
Credit Agreement. As used herein, the term "Facility" shall refer individually
to each of the credit facilities available to the Borrower under the Credit
Agreement.
Guaranty
1. Guaranty of Loan.
(a) Absolute Guaranty. Guarantor absolutely,
unconditionally and irrevocably guaranties to Agent and the Lenders the full
payment of the Indebtedness (as hereinafter defined), and unconditionally
agrees to pay to Agent and the Lenders the full amount of the Indebtedness.
This is a guaranty of payment, not of collection. If Borrower defaults in the
payment when due of the Indebtedness or any part of it, Guarantor will in
lawful money of the United States pay to Agent and the Lenders, on demand, all
sums due and owing on the Indebtedness, including all interest, charges, fees
and other sums, costs and expenses.
(b) Guaranty Prohibition. If, in accordance with
Section 6.13(c) of the Credit Agreement, any Guarantor is prohibited from
providing this Guaranty under its existing financing arrangements, current as
of even date herewith , such Guarantor shall have no obligation under this
Guaranty.
2. Loan. In this Guaranty, the term "Indebtedness" is
broadly defined to mean and include all primary, secondary, direct, indirect,
fixed and contingent obligations of Borrower to pay principal, interest,
prepayment charges, breakage costs, late charges, loan fees and any other fees,
charges, sums, costs and expenses that
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may be owing at any time under the Loan Documents (as such term is defined in
the Credit Agreement), and shall include, without limitation, all liabilities
and obligations of the Borrower with respect to Letters of Credit issued under
the Credit Agreement, as any or all of such obligations may from time to time
be modified, amended, extended or renewed. If the amount outstanding under the
Indebtedness is determined by a court of competent jurisdiction or in any
arbitration proceeding described in Section 10.17 of the Credit Agreement, that
determination shall be conclusive and binding on Guarantor, regardless of
whether Guarantor was a party to the proceeding in which the determination was
made or not.
3. Rights of Agent and the Lenders. Guarantor
authorizes Agent or any Lender to perform any or all of the following acts at
any time in its sole discretion, all without notice to Guarantor and without
affecting Guarantor's obligations under this Guaranty:
(a) Agent or the Requisite Lenders may alter any
terms of the Indebtedness or any part of it, including renewing, compromising,
extending or accelerating, or otherwise changing the time for payment of, or
increasing or decreasing the rate of interest on, the Indebtedness or any part
of it.
(b) Agent or any Lender may take and hold
security for the Indebtedness or this Guaranty, accept additional or
substituted security for either, and subordinate, exchange, enforce, waive,
release, compromise, fail to perfect and sell or otherwise dispose of any such
security in accordance with the terms of the Indebtedness.
(c) Agent or any Lender may direct the order and
manner of any sale of all or any part of any security now or later to be held
for the Indebtedness or this Guaranty, and Agent or any Lender may also bid at
any such sale.
(d) Agent or any Lender may apply any payments or
recoveries from Borrower, Guarantor or any other source, and any proceeds of
any security, to Borrower's obligations under the Loan Documents in such
manner, order and priority as Agent or such Lender may elect, whether or not
those obligations are guarantied by this Guaranty or secured at the time of the
application.
(e) Agent or any Lender may release Borrower of
its liability for the Indebtedness or any part of it.
(f) Agent or any Lender may substitute, add or
release any one or more Guarantors, other guarantors or endorsers.
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(g) In addition to the Indebtedness, Agent or any
Lender may extend other credit to Borrower, and may take and hold security for
the credit so extended, all without affecting Guarantor's liability under this
Guaranty.
4. Guaranty to be Absolute. Guarantor expressly agrees
that until the Indebtedness is paid and performed in full and each and every
term, covenant and condition of this Guaranty is fully performed, Guarantor
shall not be released by or because of:
(a) Any act or event which might otherwise
discharge, reduce, limit or modify Guarantor's obligations under this Guaranty;
(b) Any waiver, extension, modification,
forbearance, delay or other act or omission of Agent or any Lender, or its
failure to proceed promptly or otherwise as against Borrower, Guarantor or any
security;
(c) Any action, omission or circumstance that
might increase the likelihood that Guarantor may be called upon to perform
under this Guaranty or that might affect the rights or remedies of Guarantor as
against Borrower;
(d) Any dealings occurring at any time between
Borrower and Agent or any Lender, whether relating to the Indebtedness or
otherwise; or
(e) Any action of Agent or any Lender described
in Section 3 above.
Guarantor hereby acknowledges that absent this
Section 4, Guarantor might have a defense to the enforcement of this Guaranty
as a result of one or more of the foregoing acts, omissions, agreement, waivers
or matters. Guarantor hereby expressly waives and surrenders any defense to
its liability under this Guaranty based upon any of the foregoing acts,
omissions, agreements, waivers or matters. It is the purpose and intent of
this Guaranty that the obligations of Guarantor under it shall be absolute and
unconditional under any and all circumstances.
5. Guarantor's Waivers. Guarantor waives:
(a) All statutes of limitations as a defense to
any action or proceeding brought against Guarantor by Agent or any Lender, to
the fullest extent permitted by law;
(b) Any right it may have to require Agent or any
Lender to proceed against Borrower, proceed against or exhaust any security
held from Borrower, or pursue any other remedy in Agent's or any Lender's power
to pursue;
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(c) Any defense based on any claim that
Guarantor's obligations exceed or are more burdensome than those of Borrower;
(d) Any defense based on: (i) any legal
disability of Borrower, (ii) any release, discharge, modification, impairment
or limitation of the liability of Borrower to Agent or any Lender from any
cause, whether consented to by Agent or any Lender or arising by operation of
law or from any bankruptcy or other voluntary or involuntary proceeding, in or
out of court, for the adjustment of debtor-creditor relationships ("Insolvency
Proceeding"), and (iii) any rejection or disaffirmance of the Indebtedness, or
any part of it, or any security held for it, in any such Insolvency Proceeding;
(e) Any defense based on any action taken or
omitted by Agent or any Lender in any Insolvency Proceeding involving Borrower,
including any election to have Agent's or that Lender's claim allowed as being
secured, partially secured or unsecured, any extension of credit by Lender to
Borrower in any Insolvency Proceeding, and the taking and holding by Agent or
any Lender of any security for any such extension of credit;
(f) All presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new or additional indebtedness, and demands and notices of every
kind except for any demand or notice by Agent or any Lender to Guarantor
expressly provided for in Section 1;
(g) Any defense based on or arising out of any
defense that Borrower may have to the payment or performance of the
Indebtedness or any part of it; and
(h) Any defense based on or arising out of any
action of Agent or any Lender described in Sections 3 or 4 above.
6. Waivers of Subrogation and Other Rights.
(a) During the existence of an Event of Default
by Borrower, Agent or any Lender, without prior notice to or consent of
Guarantor, may elect to: (i) foreclose either judicially or nonjudicially
against any real or personal property security it may hold for the
Indebtedness, (ii) accept a transfer of any such security in lieu of
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foreclosure, (iii) compromise or adjust the Indebtedness or any part of it or
make any other accommodation with Borrower or Guarantor, or (iv) exercise any
other remedy against Borrower or any security. No such action by Agent or any
Lender shall release or limit the liability of Guarantor, who shall remain
liable under this Guaranty after the action, even if the effect of the action
is to deprive Guarantor of any subrogation rights, rights of indemnity, or
other rights to collect reimbursement from Borrower for any sums paid to Agent
or any Lender, whether contractual or arising by operation of law or otherwise.
Guarantor expressly agrees that under no circumstances shall it be deemed to
have any right, title, interest or claim in or to any real or personal property
to be held by Agent or any Lender or any third party after any foreclosure or
transfer in lieu of foreclosure of any security for the Indebtedness.
(b) Regardless of whether Guarantor may have made
any payments to Lender, Guarantor hereby waives: (i) all rights of subrogation,
all rights of indemnity, and any other rights to collect reimbursement from
Borrower for any sums paid to Agent or any Lender, whether contractual or
arising by operation of law (including the United States Bankruptcy Code or any
successor or similar statute) or otherwise, (ii) all rights to enforce any
remedy that Lender may have against Borrower, and (iii) all rights to
participate in any security now or later to be held by Agent or any Lender for
the Indebtedness, in each case until the full and indefeasible payment and
performance of all Indebtedness, and all obligations of the Guarantors
hereunder.
(c) Guarantor waives all rights and defenses
arising out of an election of remedies by the Agent or any Lender, even though
that election of remedies may affect Guarantor's rights of subrogation and
reimbursement against the Borrower by the operation of law or otherwise. In
addition, Guarantor waives all rights and defenses that Guarantor may have
because the Borrower's indebtedness is secured by real property. This means,
among other things, that Agent and the Lenders may collect from Guarantor
without first foreclosing on any real or personal property collateral pledged
by the Borrower.
7. Revival and Reinstatement. If Agent or any Lender is
required to pay, return or restore to Borrower or any other person any amounts
previously paid on the Indebtedness because of any Insolvency Proceeding of
Borrower, any stop notice or any other reason, the obligations of Guarantor
shall be reinstated and revived and the rights of Agent and such Lender shall
continue with regard to such amounts, all as though they had never been paid.
8. Information Regarding Owner. Before signing this
Guaranty, Guarantor investigated the financial condition and business
operations of Borrower and such other matters as Guarantor deemed appropriate
to assure itself of Borrower's ability to discharge its obligations under the
Loan Documents. Guarantor assumes full responsibility for that due diligence,
as well as for keeping informed of all matters that may affect Borrower's
ability to pay and perform its obligations to the Agent and the
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Lenders. Neither Agent nor any Lender has any duty to disclose to Guarantor
any information which such party may have or receive about Borrower's financial
condition, business operations, or any other circumstances bearing on its
ability to perform.
9. Subordination. Any rights of Guarantor, whether now
existing or later arising, to receive payment on account of any indebtedness
(including interest) owed to it by Borrower or any Subsidiary thereof or to
receive any payment from Borrower or any such Subsidiary other than those
payments or distributions permitted under Sections 7.9(b) and 7.10 of the
Credit Agreement shall at all times be subordinate as to lien and time of
payment and in all other respects to the full and prior repayment of the
Indebtedness. Guarantor shall not be entitled to enforce or receive payment of
any sums hereby subordinated until the Indebtedness has been paid and performed
in full and any such sums received in violation of this Guaranty shall be
received by Guarantor in trust for the Agent and the Lenders.
10. Financial Information. Guarantor shall keep true and
correct financial books and records, using generally accepted accounting
principles consistently applied, or such other accounting principles as the
Requisite Lenders in their reasonable judgment may find acceptable from time to
time. Guarantor represents, warrants and covenants to Agent and the Lenders
that all financial information with respect to the Guarantor delivered or to be
delivered to Agent and the Lenders by the Borrower with respect to Guarantor
under Section 6.1 of the Credit Agreement is or shall be true and correct and
fairly presents or will fairly present the financial position of the Guarantor
for the applicable period. Guarantor shall promptly provide Agent and the
Lenders with any additional audited financial information that Guarantor may
obtain, and such other information concerning its affairs and properties as
Agent or any Lender may reasonably request, including, without limitation,
signed copies of any tax returns if requested by Agent or the Lenders.
11. Guarantor's Representations and Warranties. Guarantor
represents and warrants that:
(a) All financial statements delivered to Agent
or the Lenders were or will be prepared in accordance with generally accepted
accounting principles, or such other accounting principles as may be acceptable
to the Requisite Lenders at the time of their preparation, consistently
applied;
(b) There has been no material adverse change in
Guarantor's financial condition since the dates of the statements most recently
furnished to Agent and the Lenders; and
(c) All representations and warranties given on
behalf of or with respect to Guarantor contained in Article V of the Credit
Agreement and in any other Loan Document or certification made in connection
with the Credit Agreement are true and correct.
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12. Covenants of Guarantor. Guarantor covenants and
agrees that it shall comply with and perform all covenants given on behalf of
or with respect to Guarantor (whether expressly or as a Subsidiary) contained
in Articles VI and VII of the Credit Agreement and in all other Loan Documents.
13. Intentionally Omitted.
14. Reference and Arbitration.
(a) Mandatory Arbitration. Any controversy or
claim between or among the parties, including those arising out of or relating
to this Guaranty or the Loan Documents and any claim based on or arising from
an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in Los Angeles, California, in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Guaranty, and under the
Commercial Rules of the American Arbitration Association (the "AAA"). The
arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of
an action for judicial relief or pursuit of a provisional or ancillary remedy
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(b) Provisional Remedies, Self-Help and
Foreclosure. No provision of this Section 14 shall limit the right of any
party to exercise self-help remedies such as setoff, foreclosure against or
sale of any real or personal property collateral or security, or to obtain
provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration.
15. Authorization; No Violation. Guarantor is authorized
to execute, deliver and perform under this Guaranty, which is a valid, binding,
and enforceable obligation of Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditor's rights generally. The
execution, delivery and performance of this Guaranty are not in violation of
any applicable law, regulation or ordinance, or any order or ruling of any
court or governmental agency applicable to the Guarantor. The Guaranty does
not conflict with, or constitute a breach or default under, any agreement to
which Guarantor is a party.
16. Additional and Independent Obligations. Guarantor's
obligations under this Guaranty are in addition to its obligations under any
future guaranties, each of which shall remain in full force and effect until it
is expressly modified or released in
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a writing signed by Agent and consented to by the Lenders. Guarantor's
obligations under this Guaranty are independent of those of Borrower on the
Indebtedness. Agent or the Lenders may bring a separate action, or commence a
separate arbitration proceeding against Guarantor without first proceeding
against Borrower, any other person or any security that Agent or any Lender may
hold, and without pursuing any other remedy. None of Agent's or any Lender's
rights under this Guaranty shall be exhausted by any action by Agent or any
Lender until the Indebtedness has been paid and performed in full in cash.
17. No Waiver; Consents; Cumulative Remedies. Each
waiver by Agent or the Lenders must be in writing, and no waiver shall be
construed as a continuing waiver. No waiver shall be implied from Agent's or
any Lender's delay in exercising or failure to exercise any right or remedy
against Borrower, Guarantor or any security. Consent by Agent or the Lenders
to any act or omission by Borrower or Guarantor shall not be construed as a
consent to any other or subsequent act or omission, or as a waiver of the
requirement for Agent's or the Lenders' consent to be obtained in any future or
other instance. All remedies of Agent and each Lender against Borrower and
Guarantor are cumulative.
18. No Release. Except as otherwise provided in Section
1, Guarantor shall not be released, in whole or in part, from its obligations
under this Guaranty except by a writing signed by Agent and all the Lenders.
19. Heirs, Successors and Assigns; Participations. The
terms of this Guaranty shall bind and benefit the heirs, legal representatives,
successors and assigns of Agent, the Lenders and Guarantor; provided, however,
that Guarantor may not assign this Guaranty, or assign or delegate any of its
rights or obligations under this Guaranty, without the prior written consent of
Agent in each instance. Without notice to or the consent of Guarantor, Agent
and any Lender may disclose any and all information in its possession
concerning Guarantor, this Guaranty and any security for this Guaranty to any
actual or prospective purchaser of any securities issued or to be issued by
Agent or such Lender, and to any actual or prospective purchaser or assignee of
any participation or other interest in the Indebtedness and this Guaranty.
20. Notices.
(a) Delivery. All notices, requests and other
communications provided for hereunder shall be in writing (including, unless
the context expressly otherwise provides, telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed or
delivered to its address specified on the signature pages hereof, or to such
other address as shall be designated by such party in a written notice to the
other party.
(b) Receipt. All such notices and communications shall,
when transmitted by overnight delivery, telegraphed, telecopied by facsimile,
telexed or cabled, be effective when delivered for overnight delivery or to the
telegraph company, transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, or if delivered, upon delivery.
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(c) Reliance. Agent and each Lender shall be entitled to
rely on the authority of any person purporting to be a person authorized by
Guarantor to give such notice, and neither Agent nor any Lender shall have any
liability to Guarantor or any other person on account of any action taken or
not taken by Agent or such Lender in reliance upon such telephonic or facsimile
notice. The obligation of Guarantor hereunder shall not be affected in any way
or to any extent by any failure by Lender to receive written confirmation of
any telephonic or facsimile notice or the receipt by Agent or a Lender of a
confirmation which is at variance with the terms understood by Agent or such
Lender to be contained in the telephonic or facsimile notice.
21. Rules of Construction. In this Guaranty, the word
"Borrower" includes both the named Borrower and any other person who at any
time assumes or otherwise becomes primarily liable for all or any part of the
obligations of the named Borrower on the Indebtedness. The word "person"
includes any individual, company, trust or other legal entity of any kind. If
this Guaranty is executed by more than one person, the word "Guarantor"
includes all such persons. The word "include(s)" means "include(s), without
limitation," and the word "including" means "including, but not limited to."
When the context and construction so require, all words used in the singular
shall be deemed to have been used in the plural and vice versa. No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Guaranty. All headings appearing in this Guaranty are
for convenience only and shall be disregarded in construing this Guaranty.
22. Governing Law. This Guaranty shall be governed by,
and construed in accordance with, the laws of the State of California, without
regard to its choice of law rules.
23. Costs and Expenses. If any lawsuit or arbitration is
commenced which arises out of, or which relates to this Guaranty, the Loan
Documents or the Indebtedness, the prevailing party shall be entitled to
recover from each other party such sums as the court or arbitrator may adjudge
to be reasonable attorneys' fees (including allocated costs for services of
in-house counsel) in the action or proceeding, in addition to costs and
expenses otherwise allowed by law. In all other situations, including any
Insolvency Proceeding, Guarantor agrees to pay all of the Agent's and each
Lender's costs and expenses, including attorneys' fees (including allocated
costs for services of the Agent's and each Lender's in-house counsel) which may
be incurred in any effort to collect or enforce the Indebtedness or any part of
it or any term of this Guaranty. Without limiting any rights of the Agent or
Lenders under the Credit Agreement, all amounts of any kind due and payable
under this Guaranty (whether for principal, interest, and other costs under the
Indebtedness, or for costs, fees, and expenses for which the Guarantors are
directly responsible hereunder, or otherwise) shall accrue interest from the
time the Agent or the Lenders make demand therefor hereunder until paid in full
in cash to such Agent or the Lenders at the Base Rate, as
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defined in the Credit Agreement, plus three (3%) percentage points, except to
the extent that any such amounts are then accruing interest under the
Indebtedness, in which case such Base Rate plus 3% interest rate shall not be
applied if the effect would be to compound the interest to which such
obligations are subject to under the Indebtedness.
24. Covenant. Each Guarantor hereby agrees that it will
make dividend payments on its outstanding preferred stock with its excess cash
to the extent such cash is not required by the Guarantor for its business,
consistent with prudent business practices and its cash requirements.
25. Integration; Modifications. This Guaranty (a)
integrates all the terms and conditions mentioned in or incidental to this
Guaranty, (b) supersedes all oral negotiations and prior writings with respect
to its subject matter, and (c) is intended by Guarantor, Agent and the Lenders
as the final expression of the agreement with respect to the terms and
conditions set forth in this Guaranty and as the complete and exclusive
statement of the terms agreed to by Guarantor, Agent and the Lenders. No
representation, understanding, promise or condition shall be enforceable
against any party hereto unless it is contained in this Guaranty. This
Guaranty may not be modified except in a writing signed by both Agent (with the
consent of the Requisite Lenders) and Guarantor. No course of prior dealing,
usage of trade, parol or extrinsic evidence of any nature shall be used to
supplement, modify or vary any of the terms hereof. As between Agent and the
Lenders only, nothing contained in this Guaranty shall alter the rights and
obligations among Agent and the Lenders set forth in the Credit Agreement.
26. Miscellaneous. The illegality or unenforceability of
one or more provisions of this Guaranty shall not affect any other provision.
Time is of the essence in the performance of this Guaranty by Guarantor.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned has executed and delivered
this Guaranty as of the date on the first page.
GUARANTOR:
PROPERTY ASSET MANAGEMENT SERVICES, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
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GUARANTOR:
PROPERTY ASSET MANAGEMENT SERVICES, L.P.,
a Delaware limited partnership
By: Property Asset Management Services, Inc.
Its: General Partner
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
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GUARANTOR:
NHP MANAGEMENT COMPANY,
a District of Columbia corporation
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
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GUARANTOR:
PROPERTY ASSET MANAGEMENT SERVICES-CALIFORNIA, L.L.C.,
a California limited liability company
By:
------------------------------
Its Member
By: /s/ PETER K. KOMPANIEZ
------------------------------
Peter K. Kompaniez
Its:
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Address Where Notices are to be Sent:
To Guarantor: 1873 South Bellaire Street
17th Floor
Denver, Colorado 90071
To Agent: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Attention: Manager - Unit #1357
To Lenders: Per the Credit Agreement
<PAGE> 1
EXHIBIT 10.7
PAYMENT GUARANTY
OF NON-PREFERRED STOCK SUBSIDIARIES
This Payment Guaranty ("Guaranty") is made as of October 29, 1998, by the
undersigned entities (each a "Guarantor") in favor of BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION ("BofA"), as the agent for itself and the lenders
("Lenders") from time to time party to the Credit Agreement (as hereinafter
defined) (in such capacity, the "Agent").
Factual Background
The Lenders intend to make a $100,000,000 unsecured revolver
to term credit facility available to AIMCO Properties L.P., a Delaware limited
partnership (the "Borrower") in accordance with the Amended and Restated Credit
Agreement (the "Credit Agreement"), dated October 1, 1998, by and among
Borrower, BofA (as Agent and as a Lender) and the other Lenders from time to
time party thereto. In connection with the Credit Agreement, the Borrower has
obtained this Guaranty from the Guarantor. Capitalized terms used but not
defined herein will have the meanings set forth in the Credit Agreement. As used
herein, the term "Facility" shall refer individually to each of the credit
facilities available to the Borrower under the Credit Agreement.
Guaranty
1. Guaranty of Loan.
(a) Absolute Guaranty. Guarantor absolutely,
unconditionally and irrevocably guaranties to Agent and the Lenders the full
payment of the Indebtedness (as hereinafter defined), and unconditionally agrees
to pay to Agent and the Lenders the full amount of the Indebtedness. This is a
guaranty of payment, not of collection. If Borrower defaults in the payment when
due of the Indebtedness or any part of it, Guarantor will in lawful money of the
United States pay to Agent and the Lenders, on demand, all sums due and owing on
the Indebtedness, including all interest, charges, fees and other sums, costs
and expenses.
(b) Guaranty Prohibition. If, in accordance
with Section 6.13(c) of the Credit Agreement, any Guarantor is prohibited from
providing this Guaranty under its existing financing arrangements, current as of
even date herewith, such Guarantor shall have no obligation under this
Guaranty.
2. Loan. In this Guaranty, the term "Indebtedness" is broadly
defined to mean and include all primary, secondary, direct, indirect, fixed and
contingent obligations of Borrower to pay principal, interest, prepayment
charges, breakage costs, late charges, loan fees and any other fees, charges,
sums, costs and expenses that may be owing at any time under the Loan Documents
(as such term is defined in the Credit Agreement), and shall include, without
limitation, all liabilities and obligations of the Borrower with respect to
Letters of Credit issued under the Credit Agreement, as any or all of such
obligations may from time to time be modified, amended, extended or renewed. If
the amount outstanding under the Indebtedness is determined
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by a court of competent jurisdiction or in any arbitration proceeding described
in Section 10.17 of the Credit Agreement, that determination shall be conclusive
and binding on Guarantor, regardless of whether Guarantor was a party to the
proceeding in which the determination was made or not.
3. Rights of Agent and the Lenders. Guarantor authorizes Agent
or any Lender to perform any or all of the following acts at any time in its
sole discretion, all without notice to Guarantor and without affecting
Guarantor's obligations under this Guaranty:
(a) Agent or the Requisite Lenders may alter
any terms of the Indebtedness or any part of it, including renewing,
compromising, extending or accelerating, or otherwise changing the time for
payment of, or increasing or decreasing the rate of interest on, the
Indebtedness or any part of it.
(b) Agent or any Lender may take and hold
security for the Indebtedness or this Guaranty, accept additional or substituted
security for either, and subordinate, exchange, enforce, waive, release,
compromise, fail to perfect and sell or otherwise dispose of any such security
in accordance with the terms of the Indebtedness.
(c) Agent or any Lender may direct the order
and manner of any sale of all or any part of any security now or later to be
held for the Indebtedness or this Guaranty, and Agent or any Lender may also bid
at any such sale.
(d) Agent or any Lender may apply any
payments or recoveries from Borrower, Guarantor or any other source, and any
proceeds of any security, to Borrower's obligations under the Loan Documents in
such manner, order and priority as Agent or such Lender may elect, whether or
not those obligations are guarantied by this Guaranty or secured at the time of
the application.
(e) Agent or any Lender may release Borrower of
its liability for the Indebtedness or any part of it.
(f) Agent or any Lender may substitute, add or
release any one or more Guarantors, other guarantors or endorsers.
(g) In addition to the Indebtedness, Agent or
any Lender may extend other credit to Borrower, and may take and hold security
for the credit so extended, all without affecting Guarantor's liability under
this Guaranty.
4. Guaranty to be Absolute. Guarantor expressly agrees that
until the
2
<PAGE> 3
Indebtedness is paid and performed in full and each and every term, covenant and
condition of this Guaranty is fully performed, Guarantor shall not be released
by or because of:
(a) Any act or event which might otherwise
discharge, reduce, limit or modify Guarantor's obligations under this Guaranty;
(b) Any waiver, extension, modification,
forbearance, delay or other act or omission of Agent or any Lender, or its
failure to proceed promptly or otherwise as against Borrower, Guarantor or any
security;
(c) Any action, omission or circumstance that
might increase the likelihood that Guarantor may be called upon to perform under
this Guaranty or that might affect the rights or remedies of Guarantor as
against Borrower;
(d) Any dealings occurring at any time between
Borrower and Agent or any Lender, whether relating to the Indebtedness or
otherwise; or
(e) Any action of Agent or any Lender described
in Section 3 above.
Guarantor hereby acknowledges that absent this
Section 4, Guarantor might have a defense to the enforcement of this Guaranty as
a result of one or more of the foregoing acts, omissions, agreement, waivers or
matters. Guarantor hereby expressly waives and surrenders any defense to its
liability under this Guaranty based upon any of the foregoing acts, omissions,
agreements, waivers or matters. It is the purpose and intent of this Guaranty
that the obligations of Guarantor under it shall be absolute and unconditional
under any and all circumstances.
5. Guarantor's Waivers. Guarantor waives:
(a) All statutes of limitations as a defense to
any action or proceeding brought against Guarantor by Agent or any Lender, to
the fullest extent permitted by law;
(b) Any right it may have to require Agent or
any Lender to proceed against Borrower, proceed against or exhaust any security
held from Borrower, or pursue any other remedy in Agent's or any Lender's power
to pursue;
(c) Any defense based on any claim that
Guarantor's obligations exceed or are more burdensome than those of Borrower;
(d) Any defense based on: (i) any legal
disability of Borrower, (ii) any
3
<PAGE> 4
release, discharge, modification, impairment or limitation of the liability of
Borrower to Agent or any Lender from any cause, whether consented to by Agent or
any Lender or arising by operation of law or from any bankruptcy or other
voluntary or involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships ("Insolvency Proceeding"), and (iii) any rejection
or disaffirmance of the Indebtedness, or any part of it, or any security held
for it, in any such Insolvency Proceeding;
(e) Any defense based on any action taken or
omitted by Agent or any Lender in any Insolvency Proceeding involving Borrower,
including any election to have Agent's or that Lender's claim allowed as being
secured, partially secured or unsecured, any extension of credit by Lender to
Borrower in any Insolvency Proceeding, and the taking and holding by Agent or
any Lender of any security for any such extension of credit;
(f) All presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new or additional indebtedness, and demands and notices of every
kind except for any demand or notice by Agent or any Lender to Guarantor
expressly provided for in Section 1;
(g) Any defense based on or arising out of any
defense that Borrower may have to the payment or performance of the Indebtedness
or any part of it; and
(h) Any defense based on or arising out of any
action of Agent or any Lender described in Sections 3 or 4 above.
6. Waivers of Subrogation and Other Rights.
(a) During the existence of an Event of Default
by Borrower, Agent or any Lender, without prior notice to or consent of
Guarantor, may elect to: (i) foreclose either judicially or nonjudicially
against any real or personal property security it may hold for the Indebtedness,
(ii) accept a transfer of any such security in lieu of foreclosure, (iii)
compromise or adjust the Indebtedness or any part of it or make any other
accommodation with Borrower or Guarantor, or (iv) exercise any other remedy
against Borrower or any security. No such action by Agent or any Lender shall
release or limit the liability of Guarantor, who shall remain liable under this
Guaranty after the action, even if the effect of the action is to deprive
Guarantor of any subrogation rights, rights of indemnity, or other rights to
collect reimbursement from Borrower for any sums paid to Agent or any Lender,
whether contractual or arising by operation of law or otherwise. Guarantor
expressly agrees that under no circumstances shall it be deemed to have any
right, title, interest or claim in or to any real or personal property to be
held by Agent or any Lender or any third party after any foreclosure or transfer
in lieu of foreclosure of any security for the Indebtedness.
4
<PAGE> 5
(b) Regardless of whether Guarantor may have
made any payments to Lender, Guarantor hereby waives: (i) all rights of
subrogation, all rights of indemnity, and any other rights to collect
reimbursement from Borrower for any sums paid to Agent or any Lender, whether
contractual or arising by operation of law (including the United States
Bankruptcy Code or any successor or similar statute) or otherwise, (ii) all
rights to enforce any remedy that Lender may have against Borrower, and (iii)
all rights to participate in any security now or later to be held by Agent or
any Lender for the Indebtedness, in each case until the full and indefeasible
payment and performance of all Indebtedness, and all obligations of the
Guarantors hereunder.
(c) Guarantor waives all rights and defenses
arising out of an election of remedies by the Agent or any Lender, even though
that election of remedies may affect Guarantor's rights of subrogation and
reimbursement against the Borrower by the operation of law or otherwise. In
addition, Guarantor waives all rights and defenses that Guarantor may have
because the Borrower's indebtedness is secured by real property. This means,
among other things, that Agent and the Lenders may collect from Guarantor
without first foreclosing on any real or personal property collateral pledged by
the Borrower.
7. Revival and Reinstatement. If Agent or any Lender is
required to pay, return or restore to Borrower or any other person any amounts
previously paid on the Indebtedness because of any Insolvency Proceeding of
Borrower, any stop notice or any other reason, the obligations of Guarantor
shall be reinstated and revived and the rights of Agent and such Lender shall
continue with regard to such amounts, all as though they had never been paid.
8. Information Regarding Owner. Before signing this Guaranty,
Guarantor investigated the financial condition and business operations of
Borrower and such other matters as Guarantor deemed appropriate to assure itself
of Borrower's ability to discharge its obligations under the Loan Documents.
Guarantor assumes full responsibility for that due diligence, as well as for
keeping informed of all matters that may affect Borrower's ability to pay and
perform its obligations to the Agent and the Lenders. Neither Agent nor any
Lender has any duty to disclose to Guarantor any information which such party
may have or receive about Borrower's financial condition, business operations,
or any other circumstances bearing on its ability to perform.
9. Subordination. Any rights of Guarantor, whether now
existing or later arising, to receive payment on account of any indebtedness
(including interest) owed to it by Borrower or any Subsidiary thereof or to
receive any payment from Borrower or any such Subsidiary other than those
payments or distributions permitted under Sections 7.9(b) and 7.10 of the Credit
Agreement shall at all times be subordinate as to lien and time of payment and
in all other respects to the full and prior repayment of the Indebtedness.
Guarantor shall not be entitled to enforce or receive payment of any sums hereby
subordinated until the Indebtedness has been paid and performed in full and any
such sums received in violation of this Guaranty shall be received by Guarantor
in trust for the Agent and the Lenders.
10. Financial Information. Guarantor shall keep true and
correct financial books and records, using generally accepted accounting
principles consistently applied, or such other accounting principles as the
Requisite Lenders in their reasonable judgment may find
5
<PAGE> 6
acceptable from time to time. Guarantor represents, warrants and covenants to
Agent and the Lenders that all financial information with respect to the
Guarantor delivered or to be delivered to Agent and the Lenders by the Borrower
with respect to Guarantor under Section 6.1 of the Credit Agreement is or shall
be true and correct and fairly presents or will fairly present the financial
position of the Guarantor for the applicable period. Guarantor shall promptly
provide Agent and the Lenders with any additional audited financial information
that Guarantor may obtain, and such other information concerning its affairs and
properties as Agent or any Lender may reasonably request, including, without
limitation, signed copies of any tax returns if requested by Agent or the
Lenders.
11. Guarantor's Representations and Warranties. Guarantor
represents and warrants that:
(a) All financial statements delivered to Agent
or the Lenders were or will be prepared in accordance with generally accepted
accounting principles, or such other accounting principles as may be acceptable
to the Requisite Lenders at the time of their preparation, consistently applied;
(b) There has been no material adverse change in
Guarantor's financial condition since the dates of the statements most recently
furnished to Agent and the Lenders; and
(c) All representations and warranties given on
behalf of or with respect to Guarantor contained in Article V of the Credit
Agreement and in any other Loan Document or certification made in connection
with the Credit Agreement are true and correct.
12. Covenants of Guarantor. Guarantor covenants and agrees
that it shall comply with and perform all covenants given on behalf of or with
respect to Guarantor (whether expressly or as a Subsidiary) contained in
Articles VI and VII of the Credit Agreement and in all other Loan Documents.
13. Intentionally Omitted.
14. Reference and Arbitration.
(a) Mandatory Arbitration. Any controversy or
claim between or among the parties, including those arising out of or relating
to this Guaranty or the Loan Documents and any claim based on or arising from an
alleged tort, shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in Los Angeles, California, in accordance
with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Guaranty, and under the Commercial Rules of the
American Arbitration Association (the "AAA"). The arbitrator(s) shall give
effect to statutes of limitation in determining any claim. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrator(s). Judgment upon the arbitration award may be
6
<PAGE> 7
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(b) Provisional Remedies, Self-Help and
Foreclosure. No provision of this Section 14 shall limit the right of any party
to exercise self-help remedies such as setoff, foreclosure against or sale of
any real or personal property collateral or security, or to obtain provisional
or ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration.
15. Authorization; No Violation. Guarantor is authorized to
execute, deliver and perform under this Guaranty, which is a valid, binding, and
enforceable obligation of Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditor's rights generally. The
execution, delivery and performance of this Guaranty are not in violation of any
applicable law, regulation or ordinance, or any order or ruling of any court or
governmental agency applicable to the Guarantor. The Guaranty does not conflict
with, or constitute a breach or default under, any agreement to which Guarantor
is a party.
16. Additional and Independent Obligations. Guarantor's
obligations under this Guaranty are in addition to its obligations under any
future guaranties, each of which shall remain in full force and effect until it
is expressly modified or released in a writing signed by Agent and consented to
by the Lenders. Guarantor's obligations under this Guaranty are independent of
those of Borrower on the Indebtedness. Agent or the Lenders may bring a separate
action, or commence a separate arbitration proceeding against Guarantor without
first proceeding against Borrower, any other person or any security that Agent
or any Lender may hold, and without pursuing any other remedy. None of Agent's
or any Lender's rights under this Guaranty shall be exhausted by any action by
Agent or any Lender until the Indebtedness has been paid and performed in full
in cash.
17. No Waiver; Consents; Cumulative Remedies. Each waiver by
Agent or the Lenders must be in writing, and no waiver shall be construed as a
continuing waiver. No waiver shall be implied from Agent's or any Lender's delay
in exercising or failure to exercise any right or remedy against Borrower,
Guarantor or any security. Consent by Agent or the Lenders to any act or
omission by Borrower or Guarantor shall not be construed as a consent to any
other or subsequent act or omission, or as a waiver of the requirement for
Agent's or the Lenders' consent to be obtained in any future or other instance.
All remedies of Agent and each Lender against Borrower and Guarantor are
cumulative.
18. No Release. Except as otherwise provided in Section 1,
Guarantor shall not be released, in whole or in part, from its obligations under
this Guaranty except by a writing signed by Agent and all the Lenders.
19. Heirs, Successors and Assigns; Participations. The terms
of this Guaranty
7
<PAGE> 8
shall bind and benefit the heirs, legal representatives, successors and assigns
of Agent, the Lenders and Guarantor; provided, however, that Guarantor may not
assign this Guaranty, or assign or delegate any of its rights or obligations
under this Guaranty, without the prior written consent of Agent in each
instance. Without notice to or the consent of Guarantor, Agent and any Lender
may disclose any and all information in its possession concerning Guarantor,
this Guaranty and any security for this Guaranty to any actual or prospective
purchaser of any securities issued or to be issued by Agent or such Lender, and
to any actual or prospective purchaser or assignee of any participation or other
interest in the Indebtedness and this Guaranty.
20. Notices.
(a) Delivery. All notices, requests and other communications
provided for hereunder shall be in writing (including, unless the context
expressly otherwise provides, telegraphic, telex, facsimile transmission or
cable communication) and mailed, telegraphed, telexed or delivered to its
address specified on the signature pages hereof, or to such other address as
shall be designated by such party in a written notice to the other party.
(b) Receipt. All such notices and communications shall, when
transmitted by overnight delivery, telegraphed, telecopied by facsimile, telexed
or cabled, be effective when delivered for overnight delivery or to the
telegraph company, transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, or if delivered, upon delivery.
(c) Reliance. Agent and each Lender shall be entitled to rely
on the authority of any person purporting to be a person authorized by Guarantor
to give such notice, and neither Agent nor any Lender shall have any liability
to Guarantor or any other person on account of any action taken or not taken by
Agent or such Lender in reliance upon such telephonic or facsimile notice. The
obligation of Guarantor hereunder shall not be affected in any way or to any
extent by any failure by Lender to receive written confirmation of any
telephonic or facsimile notice or the receipt by Agent or a Lender of a
confirmation which is at variance with the terms understood by Agent or such
Lender to be contained in the telephonic or facsimile notice.
21. Rules of Construction. In this Guaranty, the word
"Borrower" includes both the named Borrower and any other person who at any time
assumes or otherwise becomes primarily liable for all or any part of the
obligations of the named Borrower on the Indebtedness. The word "person"
includes any individual, company, trust or other legal entity of any kind. If
this Guaranty is executed by more than one person, the word "Guarantor" includes
all such persons. The word "include(s)" means "include(s), without limitation,"
and the word "including" means "including, but not limited to." When the context
and construction so require, all words used in the singular shall be deemed to
have been used in the plural and vice versa. No listing of specific instances,
items or matters in any way limits the scope or generality of any language of
this Guaranty. All headings appearing in this Guaranty are for convenience only
and shall be disregarded in construing this Guaranty.
22. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to its choice of law rules.
8
<PAGE> 9
23. Costs and Expenses. If any lawsuit or arbitration is
commenced which arises out of, or which relates to this Guaranty, the Loan
Documents or the Indebtedness, the prevailing party shall be entitled to recover
from each other party such sums as the court or arbitrator may adjudge to be
reasonable attorneys' fees (including allocated costs for services of in-house
counsel) in the action or proceeding, in addition to costs and expenses
otherwise allowed by law. In all other situations, including any Insolvency
Proceeding, Guarantor agrees to pay all of the Agent's and each Lender's costs
and expenses, including attorneys' fees (including allocated costs for services
of the Agent's and each Lender's in-house counsel) which may be incurred in any
effort to collect or enforce the Indebtedness or any part of it or any term of
this Guaranty. Without limiting any rights of the Agent or Lenders under the
Credit Agreement, all amounts of any kind due and payable under this Guaranty
(whether for principal, interest, and other costs under the Indebtedness, or for
costs, fees, and expenses for which the Guarantors are directly responsible
hereunder, or otherwise) shall accrue interest from the time the Agent or the
Lenders make demand therefor hereunder until paid in full in cash to such Agent
or the Lenders at the Base Rate, as defined in the Credit Agreement, plus three
(3%) percentage points, except to the extent that any such amounts are then
accruing interest under the Indebtedness, in which case such Base Rate plus 3%
interest rate shall not be applied if the effect would be to compound the
interest to which such obligations are subject to under the Indebtedness.
24. Covenant. Each Guarantor hereby agrees that it will make
dividend payments on its outstanding preferred stock with its excess cash to the
extent such cash is not required by the Guarantor for its business, consistent
with prudent business practices and its cash requirements.
25. Integration; Modifications. This Guaranty (a) integrates
all the terms and conditions mentioned in or incidental to this Guaranty, (b)
supersedes all oral negotiations and prior writings with respect to its subject
matter, and (c) is intended by Guarantor, Agent and the Lenders as the final
expression of the agreement with respect to the terms and conditions set forth
in this Guaranty and as the complete and exclusive statement of the terms agreed
to by Guarantor, Agent and the Lenders. No representation, understanding,
promise or condition shall be enforceable against any party hereto unless it is
contained in this Guaranty. This Guaranty may not be modified except in a
writing signed by both Agent (with the consent of the Requisite Lenders) and
Guarantor. No course of prior dealing, usage of trade, parol or extrinsic
evidence of any nature shall be used to supplement, modify or vary any of the
terms hereof. As between Agent and the Lenders only, nothing contained in this
Guaranty shall alter the rights and obligations among Agent and the Lenders set
forth in the Credit Agreement.
26. Miscellaneous. The illegality or unenforceability of one
or more provisions of this Guaranty shall not affect any other provision. Time
is of the essence in the performance of this Guaranty by Guarantor.
[Rest of Page Intentionally Left Blank]
9
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Guaranty as of the date on the first page.
<PAGE> 11
GUARANTOR
- - ---------
CPF XIV/St. Charleston, Inc.
- - -------------------------------------
- - -------------------------------------
By: /s/ PETER K. KOMPANIEZ
----------------------------------
Printed Name: Peter K. Kompaniez
Title: PRESIDENT
-------------------------------
<PAGE> 12
GUARANTOR
- - ---------
CPF XIV/Torrey Pines, Inc.
- - -------------------------------------
- - -------------------------------------
By: /s/ PETER K. KOMPANIEZ
----------------------------------
Printed Name: Peter K. Kompaniez
Title: PRESIDENT
-------------------------------
<PAGE> 13
GUARANTOR
- - ---------
CPF XIV/Sun River, Inc.
- - ---------------------------------
- - ---------------------------------
By: /s/ PETER K. KOMPANIEZ
------------------------------
Printed Name: Peter K. Kompaniez
Title: PRESIDENT
---------------------------
<PAGE> 14
GUARANTOR
- - ---------
CPF XIV/Lakeside Place, Inc.
- - ---------------------------------
- - ---------------------------------
By: /s/ PETER K. KOMPANIEZ
------------------------------
Printed Name: Peter K. Kompaniez
Title: PRESIDENT
---------------------------
<PAGE> 15
GUARANTOR
- - ---------
ConCap CCP/IV Stratford Place Properties, Inc.
- - ----------------------------------------------
- - ----------------------------------------------
By:/s/ PETER K. KOMPANIEZ
-------------------------------------------
Printed Name: Peter K. Kompaniez
Title: President
----------------------------------------
<PAGE> 16
GUARANTOR
- - ---------
ConCap CCP/IV River's Edge Properties, Inc.
- - -------------------------------------------
- - -------------------------------------------
By:/s/ PETER K. KOMPANIEZ
----------------------------------------
Printed Name: Peter K. Kompaniez
Title: President
-------------------------------------
<PAGE> 17
GUARANTOR
- - ---------
PRA, Inc.
- - --------------------------------
- - --------------------------------
By:/s/ PETER K. KOMPANIEZ
-----------------------------
Printed Name: Peter K. Kompaniez
Title: President
--------------------------
<PAGE> 18
GUARANTOR
- - ---------
National Property Investors, Inc.
- - ---------------------------------
- - ---------------------------------
By: /s/ PETER K. KOMPANIEZ
------------------------------
Printed Name: Peter K. Kompaniez
Title: PRESIDENT
---------------------------
<PAGE> 19
Address Where Notices are to be Sent:
To Guarantor: 1873 South Bellaire Street
17th Floor
Denver, Colorado 90071
To Agent: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Attention: Manager - Unit #1357
To Lenders: Per the Credit Agreement
<PAGE> 1
EXHIBIT 10.8
- - --------------------------------------------------------------------------------
THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
AIMCO PROPERTIES, L.P.
a Delaware limited partnership
----------------------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP
AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM
AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT
THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND
UNDER APPLICABLE STATE SECURITIES OR "BLUE
SKY" LAWS.
dated as of July 29, 1994
- - --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 DEFINED TERMS............................................................ 1
ARTICLE 2 ORGANIZATIONAL MATTERS................................................... 17
Section 2.1 Organization................................................ 17
Section 2.2 Name........................................................ 17
Section 2.3 Registered Office and Agent; Principal Office............... 17
Section 2.4 Power of Attorney........................................... 17
Section 2.5 Term........................................................ 18
ARTICLE 3 PURPOSE.................................................................. 18
Section 3.1 Purpose and Business........................................ 19
Section 3.2 Powers...................................................... 19
Section 3.3 Partnership Only for Purposes Specified..................... 19
Section 3.4 Representations and Warranties by the Parties............... 19
ARTICLE 4 CAPITAL CONTRIBUTIONS.................................................... 21
Section 4.1 Capital Contributions of the Partners....................... 21
Section 4.2 Issuances of Additional Partnership Interests............... 21
Section 4.3 Additional Funds............................................ 22
Section 4.4 Stock Option Plans.......................................... 23
Section 4.5 No Interest; No Return...................................... 25
Section 4.6 Conversion of Junior Shares................................. 25
ARTICLE 5 DISTRIBUTIONS............................................................ 25
Section 5.1 Requirement and Characterization of Distributions........... 25
Section 5.2 Distributions in Kind....................................... 25
Section 5.3 Amounts Withheld............................................ 25
Section 5.4 Distributions Upon Liquidation.............................. 25
Section 5.5 Restricted Distributions.................................... 26
ARTICLE 6 ALLOCATIONS.............................................................. 26
Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss. 26
Section 6.2 General Allocations......................................... 26
Section 6.3 Additional Allocation Provisions............................ 26
Section 6.4 Tax Allocations............................................. 28
</TABLE>
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<TABLE>
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ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS..................................... 29
Section 7.1 Management.................................................. 29
Section 7.2 Certificate of Limited Partnership.......................... 32
Section 7.3 Restrictions on General Partner's Authority................. 32
Section 7.4 Reimbursement of the General Partner........................ 34
Section 7.5 Outside Activities of the Previous General Partner and the
General Partner............................................. 35
Section 7.6 Contracts with Affiliates................................... 35
Section 7.7 Indemnification............................................. 36
Section 7.8 Liability of the General Partner............................ 38
Section 7.9 Other Matters Concerning the General Partner................ 39
Section 7.10 Title to Partnership Assets................................. 39
Section 7.11 Reliance by Third Parties................................... 39
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................................ 40
Section 8.1 Limitation of Liability..................................... 40
Section 8.2 Management of Business...................................... 40
Section 8.3 Outside Activities of Limited Partners...................... 40
Section 8.4 Return of Capital........................................... 40
Section 8.5 Rights of Limited Partners Relating to the Partnership...... 41
Section 8.6 Redemption Rights of Qualifying Parties..................... 41
Section 8.7 Partnership Right to Call Limited Partner Interests......... 45
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS.................................... 46
Section 9.1 Records and Accounting...................................... 46
Section 9.2 Fiscal Year................................................. 46
Section 9.3 Reports..................................................... 46
ARTICLE 10 TAX MATTERS............................................................... 46
Section 10.1 Preparation of Tax Returns.................................. 46
Section 10.2 Tax Elections............................................... 47
Section 10.3 Tax Matters Partner......................................... 47
Section 10.4 Withholding................................................. 48
ARTICLE 11 TRANSFERS AND WITHDRAWALS................................................. 49
Section 11.1 Transfer.................................................... 49
Section 11.2 Transfer of General Partner's Partnership Interest.......... 49
Section 11.3 Limited Partners' Rights to Transfer........................ 50
Section 11.4 Substituted Limited Partners................................ 52
</TABLE>
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<TABLE>
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Section 11.5 Assignees................................................... 52
Section 11.6 General Provisions.......................................... 53
ARTICLE 12 ADMISSION OF PARTNERS...................................................... 54
Section 12.1 Admission of Successor General Partner...................... 54
Section 12.2 Admission of Additional Limited Partners.................... 54
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership ................................................ 55
Section 12.4 Admission of Initial Limited Partners....................... 55
Section 12.5 Limit on Number of Partners................................. 55
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION................................... 55
Section 13.1 Dissolution................................................. 55
Section 13.2 Winding Up.................................................. 56
Section 13.3 Deemed Distribution and Recontribution...................... 57
Section 13.4 Rights of Limited Partners.................................. 57
Section 13.5 Notice of Dissolution....................................... 57
Section 13.6 Cancellation of Certificate of Limited Partnership.......... 57
Section 13.7 Reasonable Time for Winding-Up.............................. 58
ARTICLE 14 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS; AMEND
MENTS; MEETINGS............................................................ 58
Section 14.1 Procedures for Actions and Consents of Partners............. 58
Section 14.2 Amendments.................................................. 58
Section 14.3 Meetings of the Partners.................................... 58
ARTICLE 15 GENERAL PROVISIONS......................................................... 59
Section 15.1 Addresses and Notice........................................ 59
Section 15.2 Titles and Captions......................................... 59
Section 15.3 Pronouns and Plurals........................................ 59
Section 15.4 Further Action.............................................. 59
Section 15.5 Binding Effect.............................................. 59
Section 15.6 Waiver...................................................... 59
Section 15.7 Counterparts................................................ 60
Section 15.8 Applicable Law.............................................. 60
Section 15.9 Entire Agreement............................................ 60
Section 15.10 Invalidity of Provisions.................................... 60
Section 15.11 Limitation to Preserve REIT Status.......................... 60
Section 15.12 No Partition................................................ 61
Section 15.13 No Third-Party Rights Created Hereby........................ 61
</TABLE>
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<TABLE>
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Page
<S> <C>
EXHIBIT A PARTNERS AND PARTNERSHIP UNITS..............................................A-1
EXHIBIT B EXAMPLES REGARDING ADJUSTMENT FACTOR........................................B-1
EXHIBIT C LIST OF DESIGNATED PARTIES..................................................C-1
EXHIBIT D INTENTIONALLY OMITTED.......................................................D-1
EXHIBIT E NOTICE OF REDEMPTION........................................................E-1
EXHIBIT F FORM OF UNIT CERTIFICATE....................................................F-1
EXHIBIT G PARTNERSHIP UNIT DESIGNATION OF THE CLASS B PARTNERSHIP
PREFERRED UNITS.............................................................G-1
EXHIBIT H PARTNERSHIP UNIT DESIGNATION OF THE CLASS C PARTNERSHIP
PREFERRED UNITS.............................................................H-1
EXHIBIT I PARTNERSHIP UNIT DESIGNATION OF THE CLASS D PARTNERSHIP
PREFERRED UNITS.............................................................I-1
EXHIBIT J PARTNERSHIP UNIT DESIGNATION OF THE CLASS E PARTNERSHIP
PREFERRED UNITS.............................................................J-1
EXHIBIT K PARTNERSHIP UNIT DESIGNATION OF THE CLASS I HIGH
PERFORMANCE PARTNERSHIP UNITS...............................................K-1
EXHIBIT L PARTNERSHIP UNIT DESIGNATION OF THE CLASS G PARTNERSHIP
PREFERRED UNITS.............................................................L-1
EXHIBIT M PARTNERSHIP UNIT DESIGNATION OF THE CLASS H PARTNERSHIP
PREFERRED UNITS.............................................................M-1
</TABLE>
iv
<PAGE> 6
THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF AIMCO PROPERTIES, L.P.
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF AIMCO PROPERTIES, L.P., dated as of July 29, 1994, and amended and restated
as of October 1, 1998, is entered into by and among Apartment Investment and
Management Company, a Maryland corporation (the "Previous General Partner"),
AIMCO-GP, Inc., a Delaware corporation (the "General Partner"), AIMCO-LP, Inc.,
a Delaware corporation (the "Special Limited Partner"), and the other Limited
Partners (as defined below).
WHEREAS, the General Partner has submitted, and the Limited
Partners have approved, an amendment and restatement of the Agreement of
Limited Partnership of AIMCO Properties, L.P. on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act,
as it may be amended from time to time, and any successor to such statute.
"Actions" has the meaning set forth in Section 7.7 hereof.
"Additional Funds" has the meaning set forth in Section 4.3.A
hereof.
"Additional Limited Partner" means a Person who is admitted to
the Partnership as a Limited Partner pursuant to Section 4.2 and Section 12.2
hereof and who is shown as such on the books and records of the Partnership.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) decrease such deficit by any amounts that
such Partner is obligated to restore pursuant to this Agreement or by
operation of law upon liquidation of such Partner's Partnership Interest
or is deemed to be obligated to restore pursuant to the penultimate
sentence of each of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) increase such deficit by the items
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
<PAGE> 7
The foregoing definition of "Adjusted Capital Account Deficit" is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjustment Factor" means 1.0; provided, however, that in the
event that:
(i) the Previous General Partner (a) declares or pays a
dividend on its outstanding REIT Shares in REIT Shares or makes a
distribution to all holders of its outstanding REIT Shares in
REIT Shares, (b) splits or subdivides its outstanding REIT Shares
or (c) effects a reverse stock split or otherwise combines its
outstanding REIT Shares into a smaller number of REIT Shares, the
Adjustment Factor shall be adjusted by multiplying the Adjustment
Factor previously in effect by a fraction, (i) the numerator of
which shall be the number of REIT Shares issued and outstanding
on the record date for such dividend, distribution, split,
subdivision, reverse split or combination (assuming for such
purposes that such dividend, distribution, split, subdivision,
reverse split or combination has occurred as of such time) and
(ii) the denominator of which shall be the actual number of REIT
Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution,
split, subdivision, reverse split or combination;
(ii) the Previous General Partner distributes any rights,
options or warrants to all holders of its REIT Shares to
subscribe for or to purchase or to otherwise acquire REIT Shares
(or other securities or rights convertible into, exchangeable for
or exercisable for REIT Shares) at a price per share less than
the Value of a REIT Share on the record date for such
distribution (each a "Distributed Right"), then the Adjustment
Factor shall be adjusted by multiplying the Adjustment Factor
previously in effect by a fraction (a) the numerator of which
shall be the number of REIT Shares issued and outstanding on the
record date plus the maximum number of REIT Shares purchasable
under such Distributed Rights and (b) the denominator of which
shall be the number of REIT Shares issued and outstanding on the
record date plus a fraction (1) the numerator of which is the
maximum number of REIT Shares purchasable under such Distributed
Rights times the minimum purchase price per REIT Share under such
Distributed Rights and (2) the denominator of which is the Value
of a REIT Share as of the record date; provided, however, that,
if any such Distributed Rights expire or become no longer
exercisable, then the Adjustment Factor shall be adjusted,
effective retroactive to the date of distribution of the
Distributed Rights, to reflect a reduced maximum number of REIT
Shares or any change in the minimum purchase price for the
purposes of the above fraction; and
(iii) the Previous General Partner shall, by dividend or
otherwise, distribute to all holders of its REIT Shares evidences
of its indebtedness or assets (including securities, but
excluding any dividend or distribution referred to in subsection
(i) above), which evidences of indebtedness or assets relate to
assets not received by the Previous General Partner, the General
Partner and/or the Special Limited Partner pursuant to a pro rata
distribution by the Partnership, then the Adjustment Factor shall
be adjusted to equal the amount determined by multiplying the
Adjustment Factor in effect immediately prior to the close of
business on the date fixed for determination of shareholders
entitled to receive such distribution by a fraction (i) the
numerator shall be such Value of a REIT Share on the date fixed
for such determination and (ii) the denominator shall be the
Value of a REIT Share on the dates fixed for such determination
less the then fair market value (as determined by the General
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<PAGE> 8
Partner, whose determination shall be conclusive) of the portion
of the evidences of indebtedness or assets so distributed
applicable to one REIT Share.
Any adjustments to the Adjustment Factor shall become effective immediately
after the effective date of such event, retroactive to the record date, if any,
for such event, provided, however, that any Limited Partner may waive, by
written notice to the General Partner, the effect of any adjustment to the
Adjustment Factor applicable to the Partnership Common Units held by such
Limited Partner, and, thereafter, such adjustment will not be effective as to
such Partnership Common Units. For illustrative purposes, examples of
adjustments to the Adjustment Factor are set forth on Exhibit B attached
hereto.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling or controlled by or under common control
with such Person. For the purposes of this definition, "control" when used
with respect to any Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., as it may be amended, supple-
mented or restated from time to time.
"Applicable Percentage" has the meaning set forth in Section
8.6.B hereof.
"Appraisal" means, with respect to any assets, the written
opinion of an independent third party experienced in the valuation of similar
assets, selected by the General Partner in good faith. Such opinion may be in
the form of an opinion by such independent third party that the value for such
property or asset as set by the General Partner is fair, from a financial point
of view, to the Partnership.
"Assignee" means a Person to whom one or more Partnership Common
Units have been Transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5 hereof.
"Available Cash" means, with respect to any period for which such
calculation is being made,
(i) the sum, without duplication, of:
(1) the Partnership's Net Income or Net Loss (as
the case may be) for such period,
(2) Depreciation and all other noncash charges
to the extent deducted in determining Net Income or Net Loss for
such period,
(3) the amount of any reduction in reserves of
the Partnership referred to in clause (ii)(6) below (including,
without limitation, reductions resulting because the General
Partner determines such amounts are no longer necessary),
(4) the excess, if any, of the net cash proceeds
from the sale, exchange, disposition, financing or refinancing of
Partnership property for such period over the gain (or loss, as
the case may be) recognized from such sale, exchange,
disposition,
3
<PAGE> 9
financing or refinancing during such period (excluding
Terminating Capital Transactions), and
(5) all other cash received (including amounts
previously accrued as Net Income and amounts of deferred income)
or any net amounts borrowed by the Partnership for such period
that was not included in determining Net Income or Net Loss for
such period;
(ii) less the sum, without duplication, of:
(1) all principal debt payments made during such
period by the Partnership,
(2) capital expenditures made by the Partnership
during such period,
(3) investments in any entity (including loans
made thereto) to the extent that such investments are not
otherwise described in clause (ii)(1) or clause (ii)(2) above,
(4) all other expenditures and payments not
deducted in determining Net Income or Net Loss for such period
(including amounts paid in respect of expenses previously
accrued),
(5) any amount included in determining Net
Income or Net Loss for such period that was not received by the
Partnership during such period,
(6) the amount of any increase in reserves
(including, without limitation, working capital reserves)
established during such period that the General Partner
determines are necessary or appropriate in its sole and absolute
discretion, and
(7) any amount distributed or paid in redemption
of any Limited Partner Interest or Partnership Units including,
without limitation, any Cash Amount paid.
Notwithstanding the foregoing, Available Cash shall not include (a) any cash
received or reductions in reserves, or take into account any disbursements
made, or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Partnership or (b) any Capital Contributions,
whenever received.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Denver, Colorado, Los Angeles, California or
New York, New York are authorized or required by law to close.
"Capital Account" means, with respect to any Partner, the Capital
Account maintained by the General Partner for such Partner on the Partnership's
books and records in accordance with the following provisions:
(a) To each Partner's Capital Account, there shall be
added such Partner's Capital Contributions, such Partner's distributive share
of Net Income and any items in the nature of income or gain that are specially
allocated pursuant to Section 6.3 hereof, and the principal amount of any
Partnership liabilities assumed by such Partner or that are secured by any
property distributed to such Partner.
4
<PAGE> 10
(b) From each Partner's Capital Account, there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Net Losses and any items in the nature of
expenses or losses that are specially allocated pursuant to Section 6.3 hereof,
and the principal amount of any liabilities of such Partner assumed by the
Partnership or that are secured by any property contributed by such Partner to
the Partnership.
(c) In the event any interest in the Partnership is
Transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent that it
relates to the Transferred interest.
(d) In determining the principal amount of any
liability for purposes of subsections (a) and (b) hereof, there shall be taken
into account Code Section 752(c) and any other applicable provisions of the
Code and Regulations.
(e) The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations
Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a
manner consistent with such Regulations. If the General Partner shall
determine that it is prudent to modify the manner in which the Capital Accounts
are maintained in order to comply with such Regulations, the General Partner
may make such modification provided that such modification will not have a
material effect on the amounts distributable to any Partner without such
Partner's Consent. The General Partner also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any Contributed Property
that such Partner contributes to the Partnership pursuant to Section 4.1, 4.2
or 4.3 hereof or is deemed to contribute pursuant to Section 4.4 hereof.
"Cash Amount" means the lesser of (a) an amount of cash equal to
the product of (i) the Value of a REIT Share and (ii) the REIT Shares Amount
determined as of the applicable Valuation Date or (b) in the case of a
Declination followed by a Public Offering Funding, the Public Offering Funding
Amount.
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Secretary of State of the State of
Delaware, as amended from time to time in accordance with the terms hereof and
the Act.
"Charter" means the Articles of Amendment and Restatement of the
Previous General Partner filed with the Maryland State Department of Assess-
ments and Taxation on July 19, 1994, as amended, supplemented or restated from
time to time.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time or any successor statute thereto, as interpreted by
the applicable Regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
5
<PAGE> 11
"Company Employee" has the meaning ascribed thereto in the
Previous General Partner's 1994 Stock Option Plan.
"Consent" means the consent to, approval of, or vote in favor of
a proposed action by a Partner given in accordance with Article 14 hereof.
"Consent of the Limited Partners" means the Consent of a Majority
in Interest of the Limited Partners, which Consent shall be obtained prior to
the taking of any action for which it is required by this Agreement and, except
as otherwise provided in this Agreement, may be given or withheld by a Majority
in Interest of the Limited Partners, in their reasonable discretion.
"Contributed Property" means each Property or other asset, in
such form as may be permitted by the Act, but excluding cash, contributed or
deemed contributed to the Partnership (or deemed contributed to the Partnership
on termination and reconstitution thereof pursuant to Code Section 708).
"Controlled Entity" means, as to any Limited Partner, (a) any
corporation more than fifty percent (50%) of the outstanding voting stock of
which is owned by such Limited Partner or such Limited Partner's Family
Members, (b) any trust, whether or not revocable, of which such Limited Partner
or such Limited Partner's Family Members are the sole beneficiaries, (c) any
partnership of which such Limited Partner is the managing partner and in which
such Limited Partner or such Limited Partner's Family Members hold partnership
interests representing at least twenty-five percent (25%) of such partnership's
capital and profits and (d) any limited liability company of which such Limited
Partner is the manager and in which such Limited Partner or such Limited
Partner's Family Members hold membership interests representing at least
twenty-five percent (25%) of such limited liability company's capital and
profits.
"Controlling Person" means any Person, whatever his or her title,
who performs executive or senior management functions for the General Partner
or its Affiliates similar to those of directors, executive management and
senior management, or any Person who either holds a two percent (2%) or more
equity interest in the General Partner or its Affiliates, or has the power to
direct or cause the direction of the General Partner or its Affiliates, whether
through the ownership of voting securities, by contract or otherwise, or, in
the absence of a specific role or title, any Person having the power to direct
or cause the direction of the management-level employees and policies of the
General Partner or its Affiliates. It is not intended that every Person who
carries a title such as vice president, senior vice president, secretary or
treasurer be included in the definition of "Controlling Person."
"Cut-Off Date" means the fifth (5th) Business Day after the
General Partner's receipt of a Notice of Redemption.
"Debt" means, as to any Person, as of any date of determination,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services; (ii) all amounts owed by such Person to
banks or other Persons in respect of reimbursement obligations under letters of
credit, surety bonds and other similar instruments guaranteeing payment or
other performance of obligations by such Person; (iii) all indebtedness for
borrowed money or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person that, in accordance with generally accepted
accounting principles, should be capitalized.
"Declination" has the meaning set forth in Section 8.6.D hereof.
6
<PAGE> 12
"Depreciation" means, for each Fiscal Year or other applicable
period, an amount equal to the federal income tax depreciation, amortization or
other cost recovery deduction allowable with respect to an asset for such year
or other period, except that if the Gross Asset Value of an asset differs from
its adjusted basis for federal income tax purposes at the beginning of such
year or period, Depreciation shall be in an amount that bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, however, that if the
federal income tax depreciation, amortization or other cost recovery deduction
for such year or period is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the General Partner.
"Designated Parties" means the Persons designated on Exhibit C
attached hereto. The General Partner may, in its sole and absolute discretion,
amend Exhibit C to add Persons to be designated as Designated Parties.
"Distributed Right" has the meaning set forth in the definition
of "Adjustment Factor."
"Effective Date" means July 29, 1994.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Family Members" means, as to a Person that is an individual,
such Person's spouse, ancestors, descendants (whether by blood or by adoption),
brothers, sisters and inter vivos or testamentary trusts of which only such
Person and his spouse, ancestors, descendants (whether by blood or by adop-
tion), brothers and sisters are beneficiaries.
"Fiscal Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Funding Debt" means any Debt incurred by or on behalf of the
Previous General Partner, the General Partner or the Special Limited Partner
for the purpose of providing funds to the Partnership.
"General Partner" means AIMCO-GP, Inc., a Delaware corporation,
and its successors and assigns, as the general partner of the Partnership in
their capacities as general partner of the Partnership.
"General Partner Interest" means the Partnership Interest held by
the General Partner, which Partnership Interest is an interest as a general
partner under the Act. A General Partner Interest may be expressed as a number
of Partnership Common Units, Partnership Preferred Units or any other
Partnership Units.
"General Partner Loan" has the meaning set forth in Section 4.3.D
hereof.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair market
values of such assets as determined by the General Partner and agreed to by the
contributing Partner. In any case in which the General Partner and the
contributing Partner are unable to agree as to
7
<PAGE> 13
the gross fair market value of any contributed asset or assets, such gross fair
market value shall be determined by Appraisal.
(b) The Gross Asset Values of all Partnership assets
immediately prior to the occurrence of any event described in clause (i),
clause (ii), clause (iii), clause (iv) or clause (v) hereof shall be adjusted
to equal their respective gross fair market values, as determined by the
General Partner using such reasonable method of valuation as it may adopt, as
of the following times:
(i) the acquisition of an additional
interest in the Partnership (other than in connection with the execution
of this Agreement but including, without limitation, acquisitions
pursuant to Section 4.2 hereof or contributions or deemed contributions
by the General Partner pursuant to Section 4.2 hereof) by a new or
existing Partner in exchange for more than a de minimis Capital
Contribution, if the General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(ii) the distribution by the Partnership to
a Partner of more than a de minimis amount of Partnership property as
consideration for an interest in the Partnership, if the General Partner
reasonably determines that such adjustment is necessary or appropriate
to reflect the relative economic interests of the Partners in the
Partnership;
(iii) the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
(iv) upon the admission of a successor
General Partner pursuant to Section 12.1 hereof; and
(v) at such other times as the General
Partner shall reasonably determine necessary or advisable in order to
comply with Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset
distributed to a Partner shall be the gross fair market value of such asset on
the date of distribution as determined by the distributee and the General
Partner provided that, if the distributee is the General Partner or if the
distributee and the General Partner cannot agree on such a determination, such
gross fair market value shall be determined by Appraisal.
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subsection (d) to the extent that the General Partner reasonably determines
that an adjustment pursuant to subsection (b) above is necessary or appropriate
in connection with a transaction that would otherwise result in an adjustment
pursuant to this subsection (d).
(e) If the Gross Asset Value of a Partnership asset has
been determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset for purposes of
computing Net Income and Net Losses.
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<PAGE> 14
"Holder" means either (a) a Partner or (b) an Assignee, owning a
Partnership Unit, that is treated as a member of the Partnership for federal
income tax purposes.
"Incapacity" or "Incapacitated" means, (i) as to any Partner who
is an individual, death, total physical disability or entry by a court of
competent jurisdiction adjudicating such Partner incompetent to manage his or
her person or his or her estate; (ii) as to any Partner that is a corporation
or limited liability company, the filing of a certificate of dissolution, or
its equivalent, for the corporation or the revocation of its charter; (iii) as
to any Partner that is a partnership, the dissolution and commencement of
winding up of the partnership; (iv) as to any Partner that is an estate, the
distribution by the fiduciary of the estate's entire interest in the Partner-
ship; (v) as to any trustee of a trust that is a Partner, the termination of
the trust (but not the substitution of a new trustee); or (vi) as to any
Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Partner under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt
or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within one hundred twenty (120) days after the commencement
thereof, (g) the appointment without the Partner's consent or acquiescence of a
trustee, receiver or liquidator has not been vacated or stayed within ninety
(90) days of such appointment, or (h) an appointment referred to in clause (g)
above is not vacated within ninety (90) days after the expiration of any such
stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of its status as (A) the Previous General Partner or the General Partner
or (B) a director of the Previous General Partner or the General Partner or an
officer or employee of the Partnership or the Previous General Partner or the
General Partner and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"Independent Director" has the meaning ascribed thereto in the
Previous General Partner's 1994 Stock Option Plan.
"Interest" means interest, original issue discount and other
similar payments or amounts paid by the Partnership for the use or forbearance
of money.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Junior Share" means a share of the Previous General Partner's
Class B Common Stock, par value $.01 per share.
"Limited Partner" means the Special Limited Partner and any
Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit
A may be amended from time to time, or any Substituted Limited Partner or
Additional Limited Partner, in such Person's capacity as a Limited Partner in
the Partnership.
9
<PAGE> 15
"Limited Partner Interest" means a Partnership Interest of a
Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partner Interest may be
expressed as a number of Partnership Common Units, Partnership Preferred Units
or other Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1
hereof.
"Liquidator" has the meaning set forth in Section 13.2.A hereof.
"Majority in Interest of the Limited Partners" means Limited
Partners (other than (i) the Special Limited Partner and (ii) any Limited
Partner fifty percent (50%) or more of whose equity is owned, directly or
indirectly, by the (a) General Partner or (b) any REIT as to which the General
Partner is a "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2))) holding more than fifty percent (50%) of the outstanding Partner-
ship Common Units and Class I High Performance Partnership Units held by all
Limited Partners (other than (i) the Special Limited Partner and (ii) any
Limited Partner fifty percent (50%) or more of whose equity is owned, directly
or indirectly, by (a) the General Partner or (b) any REIT as to which the
General Partner is a "qualified REIT subsidiary" (within the meaning of Code
Section 856(i)(2))).
"Net Income" or "Net Loss" means, for each Fiscal Year of the
Partnership, an amount equal to the Partnership's taxable income or loss for
such year, determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or
loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing Net Income
(or Net Loss) pursuant to this definition of "Net Income" or "Net Loss" shall
be added to (or subtracted from, as the case may be) such taxable income (or
loss);
(b) Any expenditure of the Partnership described in
Code Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Net Income (or Net Loss) pursuant to this definition
of "Net Income" or "Net Loss," shall be subtracted from (or added to, as the
case may be) such taxable income (or loss);
(c) In the event the Gross Asset Value of any Partner-
ship asset is adjusted pursuant to subsection (b) or subsection (c) of the
definition of "Gross Asset Value," the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and
other cost recovery deductions that would otherwise be taken into account in
computing such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year;
(f) To the extent that an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Regulations Section 1.704-
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1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a Partner's interest in
the Partnership, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the asset
and shall be taken into account for purposes of computing Net Income or Net
Loss; and
(g) Notwithstanding any other provision of this
definition of "Net Income" or "Net Loss," any item that is specially allocated
pursuant to Section 6.3 hereof shall not be taken into account in computing Net
Income or Net Loss. The amounts of the items of Partnership income, gain, loss
or deduction available to be specially allocated pursuant to Section 6.3 hereof
shall be determined by applying rules analogous to those set forth in this
definition of "Net Income" or "Net Loss."
"New Securities" means (i) any rights, options, warrants or
convertible or exchangeable securities having the right to subscribe for or
purchase REIT Shares or Preferred Shares, excluding Junior Shares, Preferred
Shares and grants under the Previous General Partner's Stock Option Plans, or
(ii) any Debt issued by the Previous General Partner that provides any of the
rights described in clause (i).
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption
substantially in the form of Exhibit E attached to this Agreement.
"Optionee" means a Company Employee, Partnership Employee or
Independent Director to whom a stock option is granted under the Previous
General Partner's Stock Option Plans.
"Original Limited Partners" means the Persons listed as the
Limited Partners on Exhibit A originally attached to this Agreement, without
regard to any amendment thereto, and does not include any Assignee or other
transferee, including, without limitation, any Substituted Limited Partner
succeeding to all or any part of the Partnership Interest of any such Person.
"Ownership Limit" means the applicable restriction on ownership
of shares of the Previous General Partner imposed under the Charter.
"Partner" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liabili-
ty, determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regula-
tions Section 1.704-2(b)(4).
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"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year shall
be determined in accordance with the rules of Regulations Section 1.704-
2(i)(2).
"Partnership" means the limited partnership formed under the Act
and pursuant to this Agreement, and any successor thereto.
"Partnership Common Unit" means a fractional share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2
hereof, but does not include any Partnership Preferred Unit or any other
Partnership Unit specified in a Partnership Unit Designation as being other
than a Partnership Common Unit; provided, however, that the General Partner
Interest and the Limited Partner Interests shall have the differences in rights
and privileges as specified in this Agreement. The ownership of Partnership
Common Units may (but need not, in the sole and absolute discretion of the
General Partner) be evidenced by the form of certificate for Partnership Common
Units attached hereto as Exhibit F.
"Partnership Employee" has the meaning ascribed thereto in the
Previous General Partner's 1994 Stock Option Plan.
"Partnership Interest" means an ownership interest in the
Partnership held by either a Limited Partner or the General Partner and
includes any and all benefits to which the holder of such a Partnership
Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement. A Partnership Interest may be expressed as a number of Partnership
Common Units, Partnership Preferred Units or other Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regula-
tions Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as
well as any net increase or decrease in Partnership Minimum Gain, for a Fiscal
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Preferred Unit" means a fractional share of the
Partnership Interests that the General Partner has authorized pursuant to
Section 4.2 hereof that has distribution rights, or rights upon liquidation,
winding up and dissolution, that are superior or prior to the Partnership
Common Units.
"Partnership Record Date" means the record date established by
the General Partner for the distribution of Available Cash pursuant to Section
5.1 hereof, which record date shall generally be the same as the record date
established by the Previous General Partner for a distribution to its share-
holders of some or all of its portion of such distribution.
"Partnership Subsidiary" has the meaning ascribed thereto in the
Apartment Investment and Management Company 1997 Stock Award and Incentive
Plan.
"Partnership Unit" shall mean a Partnership Common Unit, a
Partnership Preferred Unit or any other fractional share of the Partnership
Interests that the General Partner has authorized pursuant to Section 4.2
hereof.
"Partnership Unit Designation" shall have the meaning set forth
in Section 4.2 hereof.
"Percentage Interest" means, as to each Partner, its interest in
the Partnership Units as determined by dividing the Partnership Units owned by
such Partner by the total number of Partnership Units then outstanding.
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"Permitted Transfer" has the meaning set forth in Section 11.3.A
hereof.
"Person" means an individual or a corporation, partnership,
trust, unincorporated organization, association, limited liability company or
other entity.
"Pledge" has the meaning set forth in Section 11.3.A hereof.
"Preferred Share" means a share of capital stock of the Previous
General Partner now or hereafter authorized or reclassified that has dividend
rights, or rights upon liquidation, winding up and dissolution, that are
superior or prior to the REIT Shares.
"Previous General Partner" means Apartment Investment and Manage-
ment Company, a Maryland corporation.
"Previous General Partner's 1994 Stock Option Plan" means the
1994 Stock Option Plan of Apartment Investment and Management Company and
Affiliates.
"Previous General Partner's Stock Option Plans" means the
Previous General Partner's 1994 Stock Option Plan, the Apartment Investment and
Management Company 1996 Stock Award and Incentive Plan, the Amended and
Restated Apartment Investment and Management Company Non-Qualified Employee
Stock Option Plan, the Apartment Investment and Management Company 1997 Stock
Award and Incentive Plan and any other stock option plan adopted by the
Previous General Partner.
"Primary Offering Notice" has the meaning set forth in Section
8.6.F(4) hereof.
"Properties" means any assets and property of the Partnership
such as, but not limited to, interests in real property and personal property,
including, without limitation, fee interests, interests in ground leases,
interests in limited liability companies, joint ventures or partnerships,
interests in mortgages, and Debt instruments as the Partnership may hold from
time to time.
"Public Offering Funding" has the meaning set forth in Section
8.6.D(2) hereof.
"Public Offering Funding Amount" means the dollar amount equal to
(i) the product of (x) the number of Registrable Shares sold in a Public
Offering Funding and (y) the public offering price per share of such Registra-
ble Shares in such Public Offering Funding, less (ii) the aggregate underwrit-
ing discounts and commissions in such Public Offering Funding.
"Qualified Transferee" means an "accredited investor" as defined
in Rule 501 promulgated under the Securities Act.
"Qualifying Party" means (a) an Original Limited Partner, (b) an
Additional Limited Partner, (c) a Designated Party that is either a Substituted
Limited Partner or an Assignee, (d) a Family Member, or a lending institution
as the pledgee of a Pledge, who is the transferee in a Permitted Transfer or
(e) with respect to any Notice of Redemption delivered to the General Partner
within the time period set forth in Section 11.3.A(4) hereof, a Substituted
Limited Partner succeeding to all or part of the Limited Partner Interest of
(i) an Original Limited Partner, (ii) an Additional Limited Partner, (iii) a
Designated Party that is either a Substituted Limited Partner or an Assignee
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<PAGE> 19
or (iv) a Family Member, or a lending institution who is the pledgee of a
Pledge, who is the transferee in a Permitted Transfer.
"Redeemable Units" means those Partnership Common Units issued to
the Original Limited Partners as of the Effective Date together with such
additional Partnership Common Units that, after the Effective Date, may be
issued to Additional Limited Partners pursuant to Section 4.2 hereof.
"Redemption" has the meaning set forth in Section 8.6.A hereof.
"Registrable Shares" has the meaning set forth in Section
8.6.D(2) hereof.
"Regulations" means the applicable income tax regulations under
the Code, whether such regulations are in proposed, temporary or final form, as
such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section
6.3.B(viii) hereof.
"REIT" means a real estate investment trust qualifying under Code
Section 856.
"REIT Partner" means (a) a Partner that is, or has made an
election to qualify as, a REIT, (b) any "qualified REIT subsidiary" (within the
meaning of Code Section 856(i)(2)) of any Partner that is, or has made an
election to qualify as, a REIT and (c) any Partner, including, without
limitation, the General Partner and the Special Limited Partner, that is a
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)) of a
REIT.
"REIT Payment" has the meaning set forth in Section 15.11 hereof.
"REIT Requirements" has the meaning set forth in Section 5.1.A
hereof.
"REIT Share" means a share of the Previous General Partner's
Class A Common Stock, par value $.01 per share. Where relevant in this
Agreement, "REIT Shares" includes shares of the Previous General Partner's
Class A Common Stock, par value $.01 per share, issued upon conversion of
Preferred Shares or Junior Shares.
"REIT Shares Amount" means a number of REIT Shares equal to the
product of (a) the number of Tendered Units and (b) the Adjustment Factor;
provided, however, that, in the event that the Previous General Partner issues
to all holders of REIT Shares as of a certain record date rights, options,
warrants or convertible or exchangeable securities entitling the Previous
General Partner's shareholders to subscribe for or purchase REIT Shares, or any
other securities or property (collectively, the "Rights"), with the record date
for such Rights issuance falling within the period starting on the date of the
Notice of Redemption and ending on the day immediately preceding the Specified
Redemption Date, which Rights will not be distributed before the relevant
Specified Redemption Date, then the REIT Shares Amount shall also include such
Rights that a holder of that number of REIT Shares would be entitled to
receive, expressed, where relevant hereunder, in a number of REIT Shares
determined by the Previous General Partner in good faith.
"Related Party" means, with respect to any Person, any other
Person whose ownership of shares of the Previous General Partner's capital
stock would be attributed to the first such Person under Code Section 544 (as
modified by Code Section 856(h)(1)(B)).
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<PAGE> 20
"Rights" has the meaning set forth in the definition of "REIT
Shares Amount."
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Single Funding Notice" has the meaning set forth in Section
8.6.D(3) hereof.
"Special Limited Partner" means AIMCO-LP, Inc., a Delaware
corporation.
"Specified Redemption Date" means the later of (a) the tenth
(10th) Business Day after the receipt by the General Partner of a Notice of
Redemption or (b) in the case of a Declination followed by a Public Offering
Funding, the Business Day next following the date of the closing of the Public
Offering Funding; provided, however, that no Specified Redemption Date shall
occur during the first Twelve-Month Period; provided, further, that the
Specified Redemption Date, as well as the closing of a Redemption, or an
acquisition of Tendered Units by the Previous General Partner pursuant to
Section 8.6.B hereof, on any Specified Redemption Date, may be deferred, in the
General Partner's sole and absolute discretion, for such time (but in any event
not more than one hundred fifty (150) days in the aggregate) as may reasonably
be required to effect, as applicable, (i) a Public Offering Funding or other
necessary funding arrangements, (ii) compliance with the Securities Act or
other law (including, but not limited to, (a) state "blue sky" or other
securities laws and (b) the expiration or termination of the applicable waiting
period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended) and (iii) satisfaction or waiver of other commercially reasonable
and customary closing conditions and requirements for a transaction of such
nature.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which a majority of (i) the voting power of the voting
equity securities or (ii) the outstanding equity interests is owned, directly
or indirectly, by such Person; provided, however, that, with respect to the
Partnership, "Subsidiary" means solely a partnership or limited liability
company (taxed, for federal income tax purposes, as a partnership and not as an
association or publicly traded partnership taxable as a corporation) of which
the Partnership is a member unless the General Partner has received an
unqualified opinion from independent counsel of recognized standing, or a
ruling from the IRS, that the ownership of shares of stock of a corporation or
other entity will not jeopardize the Previous General Partner's status as a
REIT or the General Partner's or the Special Limited Partner's status as a
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)), in
which event the term "Subsidiary" shall include the corporation or other entity
which is the subject of such opinion or ruling.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
"Tax Items" has the meaning set forth in Section 6.4.A hereof.
"Tendered Units" has the meaning set forth in Section 8.6.A
hereof.
"Tendering Party" has the meaning set forth in Section 8.6.A
hereof.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or
other disposition of all or substantially all of the assets of the Partnership.
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<PAGE> 21
"Transfer," when used with respect to a Partnership Unit, or all
or any portion of a Partnership Interest, means any sale, assignment, bequest,
conveyance, devise, gift (outright or in trust), Pledge, encumbrance, hypothe-
cation, mortgage, exchange, transfer or other disposition or act of alienation,
whether voluntary or involuntary or by operation of law; provided, however,
that when the term is used in Article 11 hereof, "Transfer" does not include
(a) any Redemption of Partnership Common Units by the Partnership, or
acquisition of Tendered Units by the Previous General Partner, pursuant to
Section 8.6 hereof or (b) any redemption of Partnership Units pursuant to any
Partnership Unit Designation. The terms "Transferred" and "Transferring" have
correlative meanings.
"Twelve-Month Period" means (a) as to an Original Limited Partner
or any successor-in-interest that is a Qualifying Party, a twelve-month period
ending on the day before the first (1st) anniversary of the Effective Date or
on the day before a subsequent anniversary thereof and (b) as to any other
Qualifying Party, a twelve-month period ending on the day before the first
(1st) anniversary of such Qualifying Party's becoming a Holder of Partnership
Common Units or on the day before a subsequent anniversary thereof; provided,
however, that the General Partner may, in its sole and absolute discretion, by
written agreement with a Qualifying Party, shorten the first Twelve-Month
Period to a period of less than twelve (12) months with respect to a Qualifying
Party other than an Original Limited Partner or successor-in-interest.
"Unitholder" means the General Partner or any Holder of Partner-
ship Units.
"Valuation Date" means the date of receipt by the General Partner
of a Notice of Redemption or, if such date is not a Business Day, the immedi-
ately preceding Business Day.
"Value" means, on any Valuation Date with respect to a REIT
Share, the average of the daily market prices for ten (10) consecutive trading
days immediately preceding the Valuation Date (except that, as provided in
Section 4.4.C. hereof, the market price for the trading day immediately
preceding the date of exercise of a stock option under the Previous General
Partner's Stock Option Plans shall be substituted for such average of daily
market prices for purposes of Section 4.4 hereof). The market price for any
such trading day shall be:
(i) if the REIT Shares are listed or admitted to trading on any
securities exchange or The Nasdaq Stock Market's National Market System,
the closing price, regular way, on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on
such day, in either case as reported in the principal consolidated
transaction reporting system,
(ii) if the REIT Shares are not listed or admitted to trading on
any securities exchange or The Nasdaq Stock Market's National Market
System, the last reported sale price on such day or, if no sale takes
place on such day, the average of the closing bid and asked prices on
such day, as reported by a reliable quotation source designated by the
General Partner, or
(iii) if the REIT Shares are not listed or admitted to trading
on any securities exchange or The Nasdaq Stock Market's National Market
System and no such last reported sale price or closing bid and asked
prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable quotation source designat-
ed by the General Partner, or if there shall be no bid and asked prices
on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than ten (10) days prior to
the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during
the ten (10) days prior to the date in question, the Value of the REIT Shares
shall be determined by the General Partner acting in good faith on the basis
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<PAGE> 22
of such quotations and other information as it considers, in its reasonable
judgment, appropriate. In the event that the REIT Shares Amount includes
Rights (as defined in the definition of "REIT Shares Amount") that a holder of
REIT Shares would be entitled to receive, then the Value of such Rights shall
be determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization. The Partnership is a limited
partnership organized pursuant to the provisions of the Act and upon the terms
and subject to the conditions set forth in this Agreement. Except as expressly
provided herein to the contrary, the rights and obligations of the Partners and
the administration and termination of the Partnership shall be governed by the
Act. The Partnership Interest of each Partner shall be personal property for
all purposes.
Section 2.2 Name. The name of the Partnership is "AIMCO
Properties, L.P." The Partnership's business may be conducted under any other
name or names deemed advisable by the General Partner, including the name of
the General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Partners of such change in the next regular
communication to the Partners.
Section 2.3 Registered Office and Agent; Principal Office.
The address of the registered office of the Partnership in the State of
Delaware is located at 32 Lockerman Square, Suite L-100, Dover, Delaware 19901,
and the registered agent for service of process on the Partnership in the State
of Delaware at such registered office is The Prentice-Hall Corporation System,
Inc. The principal office of the Partnership is located at 1873 South Bellaire
Street, Denver, Colorado 80222, or such other place as the General Partner may
from time to time designate by notice to the Limited Partners. The Partnership
may maintain offices at such other place or places within or outside the State
of Delaware as the General Partner deems advisable.
Section 2.4 Power of Attorney.
A. Each Limited Partner and each Assignee hereby irrevocably
constitutes and appoints the General Partner, any Liquidator, and authorized
officers and attorneys-in-fact of each, and each of those acting singly, in
each case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead
to:
(1) execute, swear to, seal, acknowledge, deliver, file and
record in the appropriate public offices (a) all certificates, documents
and other instruments (including, without limitation, this Agreement and
the Certificate and all amendments, supplements or restatements thereof)
that the General Partner or the Liquidator deems appropriate or neces-
sary to form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability to the extent provided by
applicable law) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (b) all
instruments that the General Partner deems appropriate or necessary to
reflect any amendment, change, modification or restatement of this
Agreement
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<PAGE> 23
in accordance with its terms; (c) all conveyances and other instruments
or documents that the General Partner or the Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation of
the Partnership pursuant to the terms of this Agreement, including,
without limitation, a certificate of cancellation; (d) all conveyances
and other instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the distribution or
exchange of assets of the Partnership pursuant to the terms of this
Agreement; (e) all instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to, or other events
described in, Article 11, Article 12 or Article 13 hereof or the Capital
Contribution of any Partner; and (f) all certificates, documents and
other instruments relating to the determination of the rights, prefer-
ences and privileges relating to Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
General Partner, to make, evidence, give, confirm or ratify any vote,
consent, approval, agreement or other action that is made or given by
the Partners hereunder or is consistent with the terms of this Agreement
or appropriate or necessary, in the sole and absolute discretion of the
General Partner, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 hereof or as may
be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Limited Partners and Assignees will be relying upon the
power of the General Partner or the Liquidator to act as contemplated by this
Agreement in any filing or other action by it on behalf of the Partnership, and
it shall survive and not be affected by the subsequent Incapacity of any
Limited Partner or Assignee and the Transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Units or Partnership Interest and
shall extend to such Limited Partner's or Assignee's heirs, successors, assigns
and personal representatives. Each such Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General Partner or the
Liquidator, acting in good faith pursuant to such power of attorney; and each
such Limited Partner or Assignee hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of the General Partner or
the Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within fifteen (15) days after receipt of the General Partner's or
the Liquidator's request therefor, such further designation, powers of attorney
and other instruments as the General Partner or the Liquidator, as the case may
be, deems necessary to effectuate this Agreement and the purposes of the
Partnership.
Section 2.5 Term. The term of the Partnership commenced on
May 16, 1994, the date that the original Certificate was filed in the office of
the Secretary of State of Delaware in accordance with the Act, and shall
continue until December 31, 2093 unless the Partnership is dissolved sooner
pursuant to the provisions of Article 13 hereof or as otherwise provided by
law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of
the Partnership is to conduct any business, enterprise or activity permitted by
or under the Act, including, but not limited to, (i) to conduct the business of
ownership, construction, development and operation of multifamily rental
apartment communities, (ii) to enter into
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<PAGE> 24
any partnership, joint venture, business trust arrangement, limited liability
company or other similar arrangement to engage in any business permitted by or
under the Act, or to own interests in any entity engaged in any business
permitted by or under the Act, (iii) to conduct the business of providing
property and asset management and brokerage services, whether directly or
through one or more partnerships, joint ventures, subsidiaries, business
trusts, limited liability companies or other similar arrangements, and (iv) to
do anything necessary or incidental to the foregoing; provided, however, such
business and arrangements and interests may be limited to and conducted in such
a manner as to permit the Previous General Partner, in the sole and absolute
discretion of the General Partner, at all times to be classified as a REIT.
Section 3.2 Powers.
A. The Partnership shall be empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership.
B. Notwithstanding any other provision in this Agreement, the
General Partner may cause the Partnership not to take, or to refrain from
taking, any action that, in the judgment of the General Partner, in its sole
and absolute discretion, (i) could adversely affect the ability of the Previous
General Partner to continue to qualify as a REIT, (ii) could subject the
Previous General Partner to any additional taxes under Code Section 857 or Code
Section 4981 or (iii) could violate any law or regulation of any governmental
body or agency having jurisdiction over the Previous General Partner, the
General Partner, their securities or the Partnership, unless such action (or
inaction) under clause (i), clause (ii) or clause (iii) above shall have been
specifically consented to by the Previous General Partner and the General
Partner in writing.
Section 3.3 Partnership Only for Purposes Specified. The
Partnership shall be a limited partnership only for the purposes specified in
Section 3.1 hereof, and this Agreement shall not be deemed to create a company,
venture or partnership between or among the Partners with respect to any
activities whatsoever other than the activities within the purposes of the
Partnership as specified in Section 3.1 hereof. Except as otherwise provided
in this Agreement, no Partner shall have any authority to act for, bind, commit
or assume any obligation or responsibility on behalf of the Partnership, its
properties or any other Partner. No Partner, in its capacity as a Partner
under this Agreement, shall be responsible or liable for any indebtedness or
obligation of another Partner, nor shall the Partnership be responsible or
liable for any indebtedness or obligation of any Partner, incurred either
before or after the execution and delivery of this Agreement by such Partner,
except as to those responsibilities, liabilities, indebtedness or obligations
incurred pursuant to and as limited by the terms of this Agreement and the Act.
Section 3.4 Representations and Warranties by the Parties.
A. Each Partner that is an individual (including, without
limitation, each Additional Limited Partner or Substituted Limited Partner as a
condition to becoming an Additional Limited Partner or a Substituted Limited
Partner) represents and warrants to each other Partner(s) that (i) the
consummation of the transactions contemplated by this Agreement to be performed
by such Partner will not result in a breach or violation of, or a default
under, any material agreement by which such Partner or any of such Partner's
property is bound, or any statute, regulation, order or other law to which such
Partner is subject, (ii) such Partner is neither a "foreign person" within the
meaning of Code Section 1445(f) nor a "foreign partner" within the meaning of
Code Section 1446(e), (iii) such Partner does not own, directly or indirectly,
(a) five percent (5%) or more of the total combined voting power of all classes
of stock entitled to vote, or five percent (5%) or more of the total number of
shares of all classes of stock, of any corporation that is a tenant of either
(I) the Previous General Partner, the General Partner, the Special Limited
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Partner or any "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2)) with respect to the Previous General Partner, (II) the Partnership
or (III) any partnership, venture or limited liability company of which the
Previous General Partner, the General Partner, the Special Limited Partner, any
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)) with
respect to the Previous General Partner or the Partnership is a member or (b)
an interest of five percent (5%) or more in the assets or net profits of any
tenant of either (I) the Previous General Partner, the General Partner, the
Special Limited Partner or any "qualified REIT subsidiary" (within the meaning
of Code Section 856(i)(2)) with respect to the Previous General Partner, (II)
the Partnership or (III) any partnership, venture, or limited liability company
of which the Previous General Partner, the General Partner, the Special Limited
Partner, any "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2)) with respect to the Previous General Partner or the Partnership is a
member and (iv) this Agreement is binding upon, and enforceable against, such
Partner in accordance with its terms.
B. Each Partner that is not an individual (including, without
limitation, each Additional Limited Partner or Substituted Limited Partner as a
condition to becoming an Additional Limited Partner or a Substituted Limited
Partner) represents and warrants to each other Partner(s) that (i) all
transactions contemplated by this Agreement to be performed by it have been
duly authorized by all necessary action, including, without limitation, that of
its general partner(s), committee(s), trustee(s), beneficiaries, directors
and/or shareholder(s), as the case may be, as required, (ii) the consummation
of such transactions shall not result in a breach or violation of, or a default
under, its partnership or operating agreement, trust agreement, charter or
bylaws, as the case may be, any material agreement by which such Partner or any
of such Partner's properties or any of its partners, members, beneficiaries,
trustees or shareholders, as the case may be, is or are bound, or any statute,
regulation, order or other law to which such Partner or any of its partners,
members, trustees, beneficiaries or shareholders, as the case may be, is or are
subject, (iii) such Partner is neither a "foreign person" within the meaning of
Code Section 1445(f) nor a "foreign partner" within the meaning of Code Section
1446(e), (iv) such Partner does not own, directly or indirectly, (a) five
percent (5%) or more of the total combined voting power of all classes of stock
entitled to vote, or five percent (5%) or more of the total number of shares of
all classes of stock, of any corporation that is a tenant of either (I) the
Previous General Partner, the General Partner, the Special Limited Partner or
any "qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2))
with respect to the Previous General Partner, (II) the Partnership or (III) any
partnership, venture or limited liability company of which the Previous General
Partner, the General Partner, the Special Limited Partner, any "qualified REIT
subsidiary" (within the meaning of Code Section 856(i)(2)) with respect to the
Previous General Partner or the Partnership is a member or (b) an interest of
five percent (5%) or more in the assets or net profits of any tenant of either
(I) the Previous General Partner, the General Partner the Special Limited
Partner or any "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2)) with respect to the Previous General Partner, (II) the Partnership
or (III) any partnership, venture or limited liability company for which the
Previous General Partner, the General Partner, the Special Limited Partner, any
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)) with
respect to the Previous General Partner or the Partnership is a member and (v)
this Agreement is binding upon, and enforceable against, such Partner in
accordance with its terms.
C. Each Partner (including, without limitation, each
Substituted Limited Partner as a condition to becoming a Substituted Limited
Partner) represents, warrants and agrees that it has acquired and continues to
hold its interest in the Partnership for its own account for investment only
and not for the purpose of, or with a view toward, the resale or distribution
of all or any part thereof, nor with a view toward selling or otherwise
distributing such interest or any part thereof at any particular time or under
any predetermined circumstances. Each Partner further represents and warrants
that it is a sophisticated investor, able and accustomed to handling
sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds that it has invested in the Partnership in what
it understands to be a highly speculative and illiquid investment.
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D. The representations and warranties contained in Sections
3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and delivery of this
Agreement by each Partner (and, in the case of an Additional Limited Partner or
a Substituted Limited Partner, the admission of such Additional Limited Partner
or Substituted Limited Partner as a Limited Partner in the Partnership) and the
dissolution, liquidation and termination of the Partnership.
E. Each Partner (including, without limitation, each
Substituted Limited Partner as a condition to becoming a Substituted Limited
Partner) hereby acknowledges that no representations as to potential profit,
cash flows, funds from operations or yield, if any, in respect of the
Partnership or the General Partner have been made by any Partner or any
employee or representative or Affiliate of any Partner, and that projections
and any other information, including, without limitation, financial and
descriptive information and documentation, that may have been in any manner
submitted to such Partner shall not constitute any representation or warranty
of any kind or nature, express or implied.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners. The
Partners have heretofore made Capital Contributions to the Partnership. Each
Partner owns Partnership Units in the amount set forth for such Partner on
Exhibit A, as the same may be amended from time to time by the General Partner
to the extent necessary to reflect accurately sales, exchanges or other
Transfers, redemptions, Capital Contributions, the issuance of additional
Partnership Units, or similar events having an effect on a Partner's ownership
of Partnership Units. Except as provided by law or in Section 4.2, 4.3 or 10.4
hereof, the Partners shall have no obligation or right to make any additional
Capital Contributions or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests.
A. General. The General Partner is hereby authorized to cause
the Partnership to issue additional Partnership Interests, in the form of
Partnership Units, for any Partnership purpose, at any time or from time to
time, to the Partners (including the General Partner and the Special Limited
Partner) or to other Persons, and to admit such Persons as Additional Limited
Partners, for such consideration and on such terms and conditions as shall be
established by the General Partner in its sole and absolute discretion, all
without the approval of any Limited Partners. Without limiting the foregoing,
the General Partner is expressly authorized to cause the Partnership to issue
Partnership Units (i) upon the conversion, redemption or exchange of any Debt,
Partnership Units or other securities issued by the Partnership, (ii) for less
than fair market value, so long as the General Partner concludes in good faith
that such issuance is in the best interests of the General Partner and the
Partnership, and (iii) in connection with any merger of any other Person into
the Partnership if the applicable merger agreement provides that Persons are to
receive Partnership Units in exchange for their interests in the Person merging
into the Partnership. Subject to Delaware law, any additional Partnership
Interests may be issued in one or more classes, or one or more series of any of
such classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as shall be determined by
the General Partner, in its sole and absolute discretion without the approval
of any Limited Partner, and set forth in a written document thereafter attached
to and made an exhibit to this Agreement (each, a "Partnership Unit
Designation"). Without limiting the generality of the foregoing, the General
Partner shall have authority to specify (a) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests; (b) the right of each such class or series of
Partnership Interests to share in Partnership distributions; (c) the rights of
each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; (d) the voting rights, if any, of each such
class or series of Partnership Interests; and
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(e) the conversion, redemption or exchange rights applicable to each such class
or series of Partnership Interests. Upon the issuance of any additional
Partnership Interest, the General Partner shall amend Exhibit A as appropriate
to reflect such issuance.
B. Issuances to the General Partner or Special Limited Partner.
No additional Partnership Units shall be issued to the General Partner or the
Special Limited Partner unless (i) the additional Partnership Units are issued
to all Partners in proportion to their respective Percentage Interests, (ii)
(a) the additional Partnership Units are (x) Partnership Common Units issued in
connection with an issuance of REIT Shares, or (y) Partnership Units (other
than Partnership Common Units) issued in connection with an issuance of
Preferred Shares, New Securities or other interests in the Previous General
Partner (other than REIT Shares), which Preferred Shares, New Securities or
other interests have designations, preferences and other rights, terms and
provisions that are substantially the same as the designations, preferences and
other rights, terms and provisions of the additional Partnership Units issued
to the General Partner or the Special Limited Partner, and (b) the General
Partner or the Special Limited Partner, as the case may be, contributes to the
Partnership the cash proceeds or other consideration received in connection
with the issuance of such REIT Shares, Preferred Shares, New Securities or
other interests in the Previous General Partner, (iii) the additional
Partnership Units are issued upon the conversion, redemption or exchange of
Debt, Partnership Units or other securities issued by the Partnership, or (iv)
the additional Partnership Units are issued pursuant to Section 4.6.
C. No Preemptive Rights. No Person, including, without limita-
tion, any Partner or Assignee, shall have any preemptive, preferential,
participation or similar right or rights to subscribe for or acquire any
Partnership Interest.
Section 4.3 Additional Funds.
A. General. The General Partner may, at any time and from
time to time, determine that the Partnership requires additional funds
("Additional Funds") for the acquisition or development of additional
Properties, for the redemption of Partnership Units or for such other purposes
as the General Partner may determine. Additional Funds may be obtained by the
Partnership, at the election of the General Partner, in any manner provided in,
and in accordance with, the terms of this Section 4.3 without the approval of
any Limited Partners.
B. Additional Capital Contributions. The General Partner, on
behalf of the Partnership, may obtain any Additional Funds by accepting Capital
Contributions from any Partners or other Persons and issuing additional
Partnership Units in consideration therefor.
C. Loans by Third Parties. The General Partner, on behalf of
the Partnership, may obtain any Additional Funds by causing the Partnership to
incur Debt to any Person (other than the Previous General Partner, the General
Partner or the Special Limited Partner) upon such terms as the General Partner
determines appropriate, including making such Debt convertible, redeemable or
exchangeable for Partnership Units; provided, however, that the Partnership
shall not incur any such Debt if (i) a breach, violation or default of such
Debt would be deemed to occur by virtue of the Transfer of any Partnership
Interest, or (ii) such Debt is recourse to any Partner (unless the Partner
otherwise agrees).
D. General Partner Loans. The General Partner, on behalf of
the Partnership, may obtain any Additional Funds by causing the Partnership to
incur Debt with the Previous General Partner, the General Partner or the
Special Limited Partner (each, a "General Partner Loan") if (i) such Debt is,
to the extent permitted by law, on substantially the same terms and conditions
(including interest rate, repayment schedule, and conversion, redemption,
repurchase and exchange rights) as Funding Debt incurred by the Previous
General Partner, the General Partner or the
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Special Limited Partner, the net proceeds of which are loaned to the
Partnership to provide such Additional Funds, or (ii) such Debt is on terms and
conditions no less favorable to the Partnership than would be available to the
Partnership from any third party; provided, however, that the Partnership shall
not incur any such Debt if (a) a breach, violation or default of such Debt
would be deemed to occur by virtue of the Transfer of any Partnership Interest,
or (b) such Debt is recourse to any Partner (unless the Partner otherwise
agrees).
E. Issuance of Securities by the Previous General Partner.
The Previous General Partner shall not issue any additional REIT Shares,
Preferred Shares, Junior Shares or New Securities unless (i) the Previous
General Partner contributes the cash proceeds or other consideration received
from the issuance of such additional REIT Shares, Preferred Shares, Junior
Shares or New Securities, as the case may be, and from the exercise of the
rights contained in any such additional New Securities, to either or both of
the General Partner and the Special Limited Partner, and (ii) it or they, as
the case may be, contribute such cash proceeds or other consideration to the
Partnership in exchange for (x) in the case of an issuance of REIT Shares,
Partnership Common Units, or (y) in the case of an issuance of Preferred
Shares, Junior Shares or New Securities, Partnership Units with designations,
preferences and other rights, terms and provisions that are substantially the
same as the designations, preferences and other rights, terms and provisions of
such Preferred Shares, Junior Shares or New Securities; provided, however, that
notwithstanding the foregoing, the Previous General Partner may issue REIT
Shares, Preferred Shares, Junior Shares or New Securities (a) pursuant to
Section 4.4 or Section 8.6.B hereof, (b) pursuant to a dividend or distribution
(including any stock split) of REIT Shares, Preferred Shares, Junior Shares or
New Securities to all of the holders of REIT Shares, Preferred Shares, Junior
Shares or New Securities, as the case may be, (c) upon a conversion, redemption
or exchange of Preferred Shares, (d) upon a conversion of Junior Shares into
REIT Shares, (e) upon a conversion, redemption, exchange or exercise of New
Securities, or (f) in connection with an acquisition of a property or other
asset to be owned, directly or indirectly, by the Previous General Partner if
the General Partner determines that such acquisition is in the best interests
of the Partnership. In the event of any issuance of additional REIT Shares,
Preferred Shares, Junior Shares or New Securities by the Previous General
Partner, and the contribution to the Partnership, by the General Partner or the
Special Limited Partner, of the cash proceeds or other consideration received
from such issuance, the Partnership shall pay the Previous General Partner's
expenses associated with such issuance, including any underwriting discounts or
commissions.
Section 4.4 Stock Option Plans.
A. Options Granted to Company Employees and Independent
Directors. If at any time or from time to time, in connection with the
Previous General Partner's Stock Option Plans, a stock option granted to a
Company Employee or Independent Director is duly exercised:
(1) The Special Limited Partner shall, as soon as practicable
after such exercise, make a Capital Contribution to the Partnership in
an amount equal to the exercise price paid to the Previous General
Partner by such exercising party in connection with the exercise of such
stock option.
(2) Notwithstanding the amount of the Capital Contribution
actually made pursuant to Section 4.4.A(1) hereof, the Special Limited
Partner shall be deemed to have contributed to the Partnership as a
Capital Contribution, in consideration of an additional Limited Partner
Interest (expressed in and as additional Partnership Common Units), an
amount equal to the Value of a REIT Share as of the date of exercise
multiplied by the number of REIT Shares then being issued in connection
with the exercise of such stock option.
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(3) An equitable Percentage Interest adjustment shall be made in
which the Special Limited Partner shall be treated as having made a cash
contribution equal to the amount described in Section 4.4.A(2) hereof.
B. Options Granted to Partnership Employees. If at any time
or from time to time, in connection with the Previous General Partner's Stock
Option Plans, a stock option granted to a Partnership Employee is duly
exercised:
(1) The General Partner shall cause the Previous General Partner
to sell to the Partnership, and the Partnership shall purchase from the
Previous General Partner, the number of REIT Shares as to which such
stock option is being exercised. The purchase price per REIT Share for
such sale of REIT Shares to the Partnership shall be the Value of a REIT
Share as of the date of exercise of such stock option.
(2) The Partnership shall sell to the Optionee (or if the
Optionee is an employee of a Partnership Subsidiary, the Partnership
shall sell to such Partnership Subsidiary, which in turn shall sell to
the Optionee), for a cash price per share equal to the Value of a REIT
Share at the time of the exercise, the number of REIT Shares equal to
(a) the exercise price paid to the Previous General Partner by the
exercising party in connection with the exercise of such stock option
divided by (b) the Value of a REIT Share at the time of such exercise.
(3) The Partnership shall transfer to the Optionee (or if the
Optionee is an employee of a Partnership Subsidiary, the Partnership
shall transfer to such Partnership Subsidiary, which in turn shall
transfer to the Optionee) at no additional cost, as additional compensa-
tion, the number of REIT Shares equal to the number of REIT Shares
described in Section 4.4.B(1) hereof less the number of REIT Shares
described in Section 4.4.B(2) hereof.
(4) The Special Limited Partner shall, as soon as practicable
after such exercise, make a Capital Contribution to the Partnership of
an amount equal to all proceeds received (from whatever source, but
excluding any payment in respect of payroll taxes or other withholdings)
by the Previous General Partner, the General Partner or the Special
Limited Partner in connection with the exercise of such stock option.
An equitable Percentage Interest adjustment shall be made in which the
Special Limited Partner shall be treated as having made a cash contribu-
tion equal to the amount described in Section 4.4.B(1) hereof.
C. Special Valuation Rule. For purposes of this Section 4.4,
in determining the Value of a REIT Share, only the trading date immediately
preceding the exercise of the relevant stock option under the Previous General
Partner's Stock Option Plans shall be considered.
D. Future Stock Incentive Plans. Nothing in this Agreement
shall be construed or applied to preclude or restrain the Previous General
Partner, the General Partner or the Special Limited Partner from adopting,
modifying or terminating stock incentive plans, in addition to the Previous
General Partner's Stock Option Plans, for the benefit of employees, directors
or other business associates of the Previous General Partner, the General
Partner, the Special Limited Partner, the Partnership or any of their Affili-
ates. The Limited Partners acknowledge and agree that, in the event that any
such plan is adopted, modified or terminated by the Previous General Partner,
the General Partner or the Special Limited Partner amendments to this Section
4.4 may become necessary or advisable and that any approval or consent to any
such amendments requested by the Previous General Partner, the General Partner
or the Special Limited Partner shall not be unreasonably withheld or delayed.
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Section 4.5 No Interest; No Return. No Partner shall be
entitled to interest on its Capital Contribution or on such Partner's Capital
Account. Except as provided herein or by law, no Partner shall have any right
to demand or receive the return of its Capital Contribution from the Partner-
ship.
Section 4.6 Conversion of Junior Shares. If, at any time, any
of the Junior Shares are converted into REIT Shares, in whole or in part, then
a number of Partnership Common Units equal to (i) the number of REIT Shares
issued upon such conversion divided by (ii) the Adjustment Factor then in
effect shall be issued to the General Partner and the Special Limited Partner
(and between the General Partner and the Special Limited Partner in proportion
to their ownership of Partnership Common Units immediately preceding such
conversion), and the Percentage Interests of the General Partner and the
Limited Partners (including the Special Limited Partner) shall be adjusted to
reflect such conversion.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions.
Subject to the terms of any Partnership Unit Designation, the General Partner
shall cause the Partnership to distribute quarterly all, or such portion as the
General Partner may in its sole and absolute discretion determine, of Available
Cash generated by the Partnership during such quarter to the Holders of
Partnership Common Units in accordance with their respective Partnership Common
Units held on such Partnership Record Date. Except as otherwise provided in
the terms of any Partnership Unit Designation, distributions payable with
respect to any Partnership Units (other than Partnership Units held by the
General Partner or the Special Limited Partner) that were not outstanding
during the entire quarterly period in respect of which any distribution is made
shall be prorated based on the portion of the period that such units were
outstanding. The General Partner in its sole and absolute discretion may
distribute to the Unitholders Available Cash on a more frequent basis and
provide for an appropriate record date. The General Partner shall take such
reasonable efforts, as determined by it in its sole and absolute discretion and
consistent with the Previous General Partner's qualification as a REIT, to
cause the Partnership to distribute sufficient amounts to enable (i) the
General Partner and the Special Limited Partner to transfer funds to the
Previous General Partner and (ii) the Previous General Partner to pay
shareholder dividends that will (a) satisfy the requirements for qualifying as
a REIT under the Code and Regulations (the "REIT Requirements") and (b) avoid
any federal income or excise tax liability of the Previous General Partner.
Section 5.2 Distributions in Kind. No right is given to any
Unitholder to demand and receive property other than cash as provided in this
Agreement. The General Partner may determine, in its sole and absolute
discretion, to make a distribution in kind of Partnership assets to the
Unitholders, and such assets shall be distributed in such a fashion as to
ensure that the fair market value is distributed and allocated in accordance
with Articles 5, 6 and 10 hereof.
Section 5.3 Amounts Withheld. All amounts withheld pursuant
to the Code or any provisions of any state or local tax law and Section 10.4
hereof with respect to any allocation, payment or distribution to any Unithol-
der shall be treated as amounts paid or distributed to such Unitholder pursuant
to Section 5.1 hereof for all purposes under this Agreement.
Section 5.4 Distributions Upon Liquidation. Notwithstanding
the other provisions of this Article 5, net proceeds from a Terminating Capital
Transaction, and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership, shall be distributed to the
Unitholders in accordance with Section 13.2 hereof.
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Section 5.5 Restricted Distributions. Notwithstanding any
provision to the contrary contained in this Agreement, neither the Partnership
nor the General Partner, on behalf of the Partnership, shall make a distribu-
tion to any Unitholder on account of its Partnership Interest or interest in
Partnership Units if such distribution would violate Section 17-607 of the Act
or other applicable law.
ARTICLE 6
ALLOCATIONS
Section 6.1 Timing and Amount of Allocations of Net Income and
Net Loss. Net Income and Net Loss of the Partnership shall be determined and
allocated with respect to each Fiscal Year of the Partnership as of the end of
each such year. Except as otherwise provided in this Article 6, and subject to
Section 11.6.C hereof, an allocation to a Unitholder of a share of Net Income
or Net Loss shall be treated as an allocation of the same share of each item of
income, gain, loss or deduction that is taken into account in computing Net
Income or Net Loss.
Section 6.2 General Allocations. Subject to the terms of any
Partnership Unit Designation, except as otherwise provided in this Article 6
and subject to Section 11.6.C hereof, Net Income and Net Loss shall be
allocated to each of the Holders of Partnership Common Units in accordance with
their respective Partnership Common Units at the end of each Fiscal Year.
Section 6.3 Additional Allocation Provisions. Notwithstanding
the foregoing provisions of this Article 6:
A. Intentionally Omitted.
B. Regulatory Allocations.
(i) Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding the
provisions of Section 6.2 hereof, or any other provision of this Article
6, if there is a net decrease in Partnership Minimum Gain during any
Fiscal Year, each Holder of Partnership Common Units shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Holder's share
of the net decrease in Partnership Minimum Gain, as determined under
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required
to be allocated to each Holder pursuant thereto. The items to be
allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.B(i) is intended to
qualify as a "minimum gain chargeback" within the meaning of Regulations
Section 1.704-2(f) and shall be interpreted consistently therewith.
(ii) Partner Minimum Gain Chargeback. Except as
otherwise provided in Regulations Section 1.704-2(i)(4) or in Section
6.3.B(i) hereof, if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Fiscal Year, each
Holder of Partnership Common Units who has a share of the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(5), shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Holder's share
of the net decrease in Partner Minimum
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Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.7042(i)(4). Allocations pursuant
to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each General Partner, Limited
Partner and other Holder pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Sections 1.704-
2(i)(4) and 1.704-2(j)(2). This Section 6.3.B(ii) is intended to
qualify as a "chargeback of partner nonrecourse debt minimum gain"
within the meaning of Regulations Section 1.704-2(i) and shall be
interpreted consistently therewith.
(iii) Nonrecourse Deductions and Partner Nonrecourse
Deductions. Any Nonrecourse Deductions for any Fiscal Year shall be
specially allocated to the Holders of Partnership Common Units in
accordance with their Partnership Common Units. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the
Holder(s) who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable, in accordance with Regulations Section 1.704-2(i).
(iv) Qualified Income Offset. If any Holder of
Partnership Common Units unexpectedly receives an adjustment,
allocation or distribution described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain
shall be allocated, in accordance with Regulations Section 1.704-
1(b)(2)(ii)(d), to such Holder in an amount and manner sufficient to
eliminate, to the extent required by such Regulations, the Adjusted
Capital Account Deficit of such Holder as quickly as possible, provided
that an allocation pursuant to this Section 6.3.B(iv) shall be made if
and only to the extent that such Holder would have an Adjusted Capital
Account Deficit after all other allocations provided in this Article 6
have been tentatively made as if this Section 6.3.B(iv) were not in the
Agreement. It is intended that this Section 6.3.B(iv) qualify and be
construed as a "qualified income offset" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
(v) Gross Income Allocation. In the event that any
Holder of Partnership Common Units has a deficit Capital Account at the
end of any Fiscal Year that is in excess of the sum of (1) the amount
(if any) that such Holder is obligated to restore to the Partnership
upon complete liquidation of such Holder's Partnership Interest
(including, the Holder's interest in outstanding Partnership Preferred
Units and other Partnership Units) and (2) the amount that such Holder
is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each
such Holder shall be specially allocated items of Partnership income and
gain in the amount of such excess to eliminate such deficit as quickly
as possible, provided that an allocation pursuant to this Section
6.3.B(v) shall be made if and only to the extent that such Holder would
have a deficit Capital Account in excess of such sum after all other
allocations provided in this Article 6 have been tentatively made as if
this Section 6.3.B(v) and Section 6.3.B(iv) hereof were not in the
Agreement.
(vi) Limitation on Allocation of Net Loss. To the
extent that any allocation of Net Loss would cause or increase an
Adjusted Capital Account Deficit as to any Holder of Partnership Common
Units, such allocation of Net Loss shall be reallocated among the other
Holders of Partnership Common Units in accordance with their respective
Partnership Common Units, subject to the limitations of this Section
6.3.B(vi).
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(vii) Section 754 Adjustment. To the extent that an
adjustment to the adjusted tax basis of any Partnership asset pursuant
to Code Section 734(b) or Code Section 743(b) is required, pursuant to
Regulations Section 1.704-1(b)(2) (iv)(m)(2) or Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Holder of Partnership
Common Units in complete liquidation of its interest in the Partnership,
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 to the Holders in accordance with their
Partnership Common Units in the event that Regulations Section 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Holders to whom such distribution
was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4)
applies.
(viii) Curative Allocations. The allocations set forth in
Sections 6.3.B(i), (ii), (iii), (iv), (v), (vi) and (vii) hereof (the
"Regulatory Allocations") are intended to comply with certain regulatory
requirements, including the requirements of Regulations Sections 1.704-
1(b) and 1.704-2. Notwithstanding the provisions of Section 6.1 hereof,
the Regulatory Allocations shall be taken into account in allocating
other items of income, gain, loss and deduction among the Holders of
Partnership Common Units so that to the extent possible without violat-
ing the requirements giving rise to the Regulatory Allocations, the net
amount of such allocations of other items and the Regulatory Allocations
to each Holder of a Partnership Common Unit shall be equal to the net
amount that would have been allocated to each such Holder if the
Regulatory Allocations had not occurred.
C. Special Allocations Upon Liquidation. Notwithstanding any
provision in this Article VI to the contrary, in the event that the Partnership
disposes of all or substantially all of its assets in a transaction that will
lead to a liquidation of the Partnership pursuant to Article XIII hereof, then
any Net Income or Net Loss realized in connection with such transaction and
thereafter (and, if necessary, constituent items of income, gain, loss and
deduction) shall be specially allocated among the Partners as required so as to
cause liquidating distributions pursuant to Section 13.2.A(4) hereof to be made
in the same amounts and proportions as would have resulted had such
distributions instead been made pursuant to Section 5.1 hereof.
D. Allocation of Excess Nonrecourse Liabilities. For
purposes of determining a Holder's proportional share of the "excess
nonrecourse liabilities" of the Partnership within the meaning of Regulations
Section 1.752-3(a)(3), each Holder's interest in Partnership profits shall be
such Holder's share of Partnership Common Units.
Section 6.4 Tax Allocations.
A. In General. Except as otherwise provided in this Section
6.4, for income tax purposes under the Code and the Regulations each Partner-
ship item of income, gain, loss and deduction (collectively, "Tax Items") shall
be allocated among the Holders of Partnership Common Units in the same manner
as its correlative item of "book" income, gain, loss or deduction is allocated
pursuant to Sections 6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c) Revaluations.
Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that
is contributed to the Partnership with a Gross Asset Value that varies from its
basis in the hands of the contributing Partner immediately preceding the date
of contribution shall be allocated among the Holders of Partnership Common
Units for income tax purposes pursuant to Regulations promulgated under Code
Section 704(c) so as to take into account such variation. The Partnership
shall account for such variation under any
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method approved under Code Section 704(c) and the applicable Regulations as
chosen by the General Partner, including, without limitation, the "traditional
method" as described in Regulations Section 1.704-3(b). In the event that the
Gross Asset Value of any partnership asset is adjusted pursuant to subsection
(b) of the definition of "Gross Asset Value" (provided in Article 1 hereof),
subsequent allocations of Tax Items with respect to such asset shall take
account of the variation, if any, between the adjusted basis of such asset and
its Gross Asset Value in the same manner as under Code Section 704(c) and the
applicable Regulations.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are and
shall be exclusively vested in the General Partner, and no Limited Partner
shall have any right to participate in or exercise control or management power
over the business and affairs of the Partnership. The General Partner may not
be removed by the Partners with or without cause, except with the Consent of
the General Partner. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or that are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to the other provisions hereof including Section 7.3,
shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Partnership, to exercise all
powers set forth in Section 3.2 hereof and to effectuate the purposes set forth
in Section 3.1 hereof, including, without limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make distribu-
tions to its Partners in such amounts as will permit the Previous
General Partner (so long as the Previous General Partner qualifies as a
REIT) to avoid the payment of any federal income tax (including, for
this purpose, any excise tax pursuant to Code Section 4981) and to make
distributions to its shareholders sufficient to permit the Previous
General Partner to maintain REIT status or otherwise to satisfy the REIT
Requirements), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by deed to secure debt,
mortgage, deed of trust or other lien or encumbrance on the Partnership-
's assets) and the incurring of any obligations that it deems necessary
for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, sale, transfer, exchange or other
disposition of any assets of the Partnership (including, but not limited
to, the exercise or grant of any conversion, option, privilege or
subscription right or any other right available in connection with any
assets at any time held by the Partnership) or the merger, consolida-
tion, reorganization or other combination of the Partnership with or
into another entity;
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(4) the mortgage, pledge, encumbrance or hypothecation
of any assets of the Partnership, the use of the assets of the
Partnership (including, without limitation, cash on hand) for any
purpose consistent with the terms of this Agreement and on any terms
that it sees fit, including, without limitation, the financing of the
operations and activities of the General Partner, the Partnership or any
of the Partnership's Subsidiaries, the lending of funds to other Persons
(including, without limitation, the Partnership's Subsidiaries) and the
repayment of obligations of the Partnership, its Subsidiaries and any
other Person in which it has an equity investment, and the making of
capital contributions to and equity investments in the Partnership's
Subsidiaries;
(5) the management, operation, leasing, landscaping,
repair, alteration, demolition, replacement or improvement of any
Property, including, without limitation, any Contributed Property, or
other asset of the Partnership or any Subsidiary;
(6) the negotiation, execution and performance of any
contracts, leases, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the General Partner's
powers under this Agreement, including contracting with contractors,
developers, consultants, accountants, legal counsel, other professional
advisors and other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement, the holding,
management, investment and reinvestment of cash and other assets of the
Partnership, and the collection and receipt of revenues, rents and
income of the Partnership;
(8) the selection and dismissal of employees of the
Partnership or the General Partner (including, without limitation,
employees having titles or offices such as "president," "vice presi-
dent," "secretary" and "treasurer"), and agents, outside attorneys,
accountants, consultants and contractors of the Partnership or the
General Partner and the determination of their compensation and other
terms of employment or hiring;
(9) the maintenance of such insurance for the benefit
of the Partnership and the Partners as it deems necessary or
appropriate;
(10) the formation of, or acquisition of an interest in,
and the contribution of property to, any further limited or general
partnerships, limited liability companies, joint ventures or other
relationships that it deems desirable (including, without limitation,
the acquisition of interests in, and the contributions of property to,
any Subsidiary and any other Person in which it has an equity investment
from time to time); provided, however, that, as long as the Previous
General Partner has determined to continue to qualify as a REIT, the
General Partner may not engage in any such formation, acquisition or
contribution that would cause the Previous General Partner to fail to
qualify as a REIT or the General Partner to fail to qualify as a
"qualified REIT subsidiary" within the meaning of Code Section
856(i)(2);
(11) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment, of any claim, cause of action, liability, debt or damages,
due
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or owing to or from the Partnership, the commencement or defense of
suits, legal proceedings, administrative proceedings, arbitrations or
other forms of dispute resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative proceed-
ings, arbitrations or other forms of dispute resolution, the incurring
of legal expense, and the indemnification of any Person against liabili-
ties and contingencies to the extent permitted by law;
(12) the undertaking of any action in connection with
the Partnership's direct or indirect investment in any Subsidiary or any
other Person (including, without limitation, the contribution or loan of
funds by the Partnership to such Persons);
(13) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method of
valuation as it may adopt; provided that such methods are otherwise
consistent with the requirements of this Agreement;
(14) the enforcement of any rights against any Partner
pursuant to representations, warranties, covenants and indemnities
relating to such Partner's contribution of property or assets to the
Partnership;
(15) the exercise, directly or indirectly, through any
attorney- in-fact acting under a general or limited power of attorney,
of any right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;
(16) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in connection with
any Subsidiary of the Partnership or any other Person in which the
Partnership has a direct or indirect interest, or jointly with any such
Subsidiary or other Person;
(17) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any Person in which
the Partnership does not have an interest, pursuant to contractual or
other arrangements with such Person;
(18) the making, execution and delivery of any and all
deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust,
security agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or agreements in
writing necessary or appropriate in the judgment of the General Partner
for the accomplishment of any of the powers of the General Partner
enumerated in this Agreement;
(19) the issuance of additional Partnership Units, as
appropriate and in the General Partner's sole and absolute discretion,
in connection with Capital Contributions by Additional Limited Partners
and additional Capital Contributions by Partners pursuant to Article 4
hereof; and
(20) an election to dissolve the Partnership pursuant to
Section 13.1.C hereof.
B. Each of the Limited Partners agrees that, except as
provided in Section 7.3 hereof, the General Partner is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on behalf
of the Partnership without any further act, approval or vote of the Partners,
notwithstanding any other provision of this Agreement (except as provided in
Section 7.3 hereof), the Act or any applicable law, rule or regulation. The
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execution, delivery or performance by the General Partner or the Partnership of
any agreement authorized or permitted under this Agreement shall not constitute
a breach by the General Partner of any duty that the General Partner may owe
the Partnership or the Limited Partners or any other Persons under this
Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to obtain and maintain (i) casualty,
liability and other insurance on the Properties of the Partnership and (ii)
liability insurance for the Indemnitees hereunder.
D. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain working capital and
other reserves in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the
General Partner may, but shall be under no obligation to, take into account the
tax consequences to any Partner (including the General Partner) of any action
taken by it. The General Partner and the Partnership shall not have liability
to a Limited Partner under any circumstances as a result of an income tax
liability incurred by such Limited Partner as a result of an action (or
inaction) by the General Partner pursuant to its authority under this Agreement
so long as the action or inaction is taken in good faith.
Section 7.2 Certificate of Limited Partnership. To the extent
that such action is determined by the General Partner to be reasonable and
necessary or appropriate, the General Partner shall file amendments to and
restatements of the Certificate and do all the things to maintain the Partner-
ship as a limited partnership (or a partnership in which the limited partners
have limited liability) under the laws of the State of Delaware and each other
state, the District of Columbia or any other jurisdiction, in which the
Partnership may elect to do business or own property. Subject to the terms of
Section 8.5.A(4) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner. The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability to the extent provided by
applicable law) in the State of Delaware and any other state, or the District
of Columbia or other jurisdiction, in which the Partnership may elect to do
business or own property.
Section 7.3 Restrictions on General Partner's Authority.
A. The General Partner may not take any action in
contravention of this Agreement, including, without limitation:
(1) take any action that would make it impossible to
carry on the ordinary business of the Partnership, except as otherwise
provided in this Agreement;
(2) possess Partnership property, or assign any rights
in specific Partnership property, for other than a Partnership purpose
except as otherwise provided in this Agreement;
(3) admit a Person as a Partner, except as otherwise
provided in this Agreement;
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(4) perform any act that would subject a Limited
Partner to liability as a general partner in any jurisdiction or any
other liability except as provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other
agreement that prohibits or restricts, or has the effect of prohibiting
or restricting, the ability of (a) the General Partner, the Previous
General Partner or the Partnership from satisfying its obligations under
Section 8.6 hereof in full or (b) a Limited Partner from exercising its
rights under Section 8.6 hereof to effect a Redemption in full, except,
in either case, with the written consent of such Limited Partner
affected by the prohibition or restriction.
B. The General Partner shall not, without the prior Consent
of the Limited Partners, undertake, on behalf of the Partnership, any of the
following actions or enter into any transaction that would have the effect of
such transactions:
(1) except as provided in Section 7.3.C hereof, amend,
modify or terminate this Agreement other than to reflect the admission,
substitution, termination or withdrawal of Partners pursuant to Article
11 or Article 12 hereof;
(2) make a general assignment for the benefit of
creditors or appoint or acquiesce in the appointment of a custodian,
receiver or trustee for all or any part of the assets of the
Partnership;
(3) institute any proceeding for bankruptcy on behalf
of the Partnership; or
(4) subject to the rights of Transfer provided in
Sections 11.1.C and 11.2 hereof, approve or acquiesce to the Transfer of
the Partnership Interest of the General Partner, or admit into the
Partnership any additional or successor General Partners.
C. Notwithstanding Section 7.3.B hereof, the General Partner
shall have the power, without the Consent of the Limited Partners, to amend
this Agreement as may be required to facilitate or implement any of the
following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any
Affiliate of the General Partner for the benefit of the Limited Part-
ners;
(2) to reflect the admission, substitution or
withdrawal of Partners or the termination of the Partnership in
accordance with this Agreement, and to amend Exhibits A and C in
connection with such admission, substitution or withdrawal;
(3) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or supplement any
provision in this Agreement not inconsistent with law or with other
provisions, or make other changes with respect to matters arising under
this Agreement that will not be inconsistent with law or with the
provisions of this Agreement;
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(4) to satisfy any requirements, conditions or
guidelines contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in federal or state
law;
(5) (a) to reflect such changes as are reasonably
necessary (i) for either the General Partner or the Special Limited
Partner, as the case may be, to maintain its status as a "qualified REIT
subsidiary" within the meaning of Code Section 856(i)(2) or (ii) for the
Previous General Partner to maintain its status as a REIT or to satisfy
the REIT Requirement; (b) to reflect the Transfer of all or any part of
a Partnership Interest among the Previous General Partner, the General
Partner, the Special Limited Partner or any other "qualified REIT
subsidiary" (within the meaning of Code Section 856(i)(2)) with respect
to the Previous General Partner;
(6) to modify the manner in which Capital Accounts are
computed (but only to the extent set forth in the definition of "Capital
Account" or contemplated by the Code or the Regulations); and
(7) the issuance of additional Partnership Interests in
accordance with Section 4.2.
The General Partner will provide notice to the Limited Partners when any action
under this Section 7.3.C is taken.
D. Notwithstanding Sections 7.3.B and 7.3.C hereof, this
Agreement shall not be amended, and no action may be taken by the General
Partner, without the Consent of each Partner adversely affected, if such
amendment or action would (i) convert a Limited Partner Interest in the
Partnership into a General Partner Interest (except as a result of the General
Partner acquiring such Partnership Interest), (ii) modify the limited liability
of a Limited Partner, (iii) alter the rights of any Partner to receive the
distributions to which such Partner is entitled, pursuant to Article 5 or
Section 13.2.A(4) hereof, or alter the allocations specified in Article 6
hereof (except, in any case, as permitted pursuant to Sections 4.2 and 7.3.C
hereof), (iv) alter or modify the Redemption rights, Cash Amount or REIT Shares
Amount as set forth in Sections 8.6 and 11.2 hereof, or amend or modify any
related definitions, or (v) amend this Section 7.3.D; provided, however, that
the Consent of each Partner adversely affected shall not be required for any
amendment or action that affects all Partners holding the same class or series
of Partnership Units on a uniform or pro rata basis. Further, no amendment may
alter the restrictions on the General Partner's authority set forth elsewhere
in this Section 7.3 without the Consent specified therein. Any such amendment
or action consented to by any Partner shall be effective as to that Partner,
notwithstanding the absence of such consent by any other Partner.
Section 7.4 Reimbursement of the General Partner.
A. The General Partner shall not be compensated for its
services as general partner of the Partnership except as provided in elsewhere
in this Agreement (including the provisions of Articles 5 and 6 hereof
regarding distributions, payments and allocations to which it may be entitled
in its capacity as the General Partner).
B. Subject to Sections 7.4.C and 15.11 hereof, the
Partnership shall be liable for, and shall reimburse the General Partner on a
monthly basis, or such other basis as the General Partner may determine in its
sole and absolute discretion, for all sums expended in connection with the
Partnership's business, including, without limitation, (i) expenses relating to
the ownership of interests in and management and operation of, or for the
benefit of, the Partnership, (ii) compensation of officers and employees,
including, without limitation, payments under future
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compensation plans of the General Partner that may provide for stock units, or
other phantom stock, pursuant to which employees of the General Partner will
receive payments based upon dividends on or the value of REIT Shares, (iii)
director fees and expenses and (iv) all costs and expenses of the General
Partner being a public company, including costs of filings with the SEC,
reports and other distributions to its shareholders; provided, however, that
the amount of any reimbursement shall be reduced by any interest earned by the
General Partner with respect to bank accounts or other instruments or accounts
held by it on behalf of the Partnership as permitted pursuant to Section 7.5
hereof. Such reimbursements shall be in addition to any reimbursement of the
General Partner as a result of indemnification pursuant to Section 7.7 hereof.
C. To the extent practicable, Partnership expenses shall be
billed directly to and paid by the Partnership and, subject to Section 15.11
hereof, reimbursements to the General Partner or any of its Affiliates by the
Partnership pursuant to this Section 7.4 shall be treated as "guaranteed
payments" within the meaning of Code Section 707(c).
Section 7.5 Outside Activities of the Previous General Partner
and the General Partner. Neither the General Partner nor the Previous General
Partner shall directly or indirectly enter into or conduct any business, other
than in connection with (a) the ownership, acquisition and disposition of
Partnership Interests as General Partner, (b) the management of the business of
the Partnership, (c) the operation of the Previous General Partner as a
reporting company with a class (or classes) of securities registered under the
Exchange Act, (d) the Previous General Partner's operations as a REIT, (e) the
offering, sale, syndication, private placement or public offering of stock,
bonds, securities or other interests, (f) financing or refinancing of any type
related to the Partnership or its assets or activities, (g) the General
Partner's qualification as a "qualified REIT subsidiary" (within the meaning of
Code Section 856(i)(2)) and (h) such activities as are incidental thereto.
Nothing contained herein shall be deemed to prohibit the General Partner or the
Previous General Partner from executing guarantees of Partnership debt for
which it would otherwise be liable in its capacity as General Partner. Subject
to Section 7.3.B hereof, the General Partner, the Previous General Partner, the
Special Limited Partner and all "qualified REIT subsidiaries" (within the
meaning of Code Section 856(i)(2)), taken as a group, shall not own any assets
or take title to assets (other than temporarily in connection with an
acquisition prior to contributing such assets to the Partnership) other than
Partnership Interests as the General Partner or Special Limited Partner and
other than such cash and cash equivalents, bank accounts or similar instruments
or accounts as such group deems reasonably necessary, taking into account
Section 7.1.D hereof and the requirements necessary for the Previous General
Partner to qualify as a REIT and for the Previous General Partner, the General
Partner and the Special Limited Partner to carry out their respective
responsibilities contemplated under this Agreement and the Charter.
Notwithstanding the foregoing, if the Previous General Partner or the General
Partner acquires assets in its own name and owns Property other than through
the Partnership, the Partners agree to negotiate in good faith to amend this
Agreement, including, without limitation, the definition of "Adjustment
Factor," to reflect such activities and the direct ownership of assets by the
Previous General Partner or the General Partner. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
Section 7.6 Contracts with Affiliates.
A. The Partnership may lend or contribute funds or other
assets to its Subsidiaries or other Persons in which it has an equity
investment, and such Persons may borrow funds from the Partnership, on terms
and conditions established in the sole and absolute discretion of the General
Partner. The foregoing authority shall not create any right or benefit in
favor of any Subsidiary or any other Person.
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B. Except as provided in Section 7.5 hereof and subject to
Section 3.1 hereof, the Partnership may transfer assets to joint ventures,
limited liability companies, partnerships, corporations, business trusts or
other business entities in which it is or thereby becomes a participant upon
such terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes to be advisable.
C. Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates shall sell, transfer or convey
any property to the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner in good faith to be
fair and reasonable.
D. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership employee benefit plans funded by the Partnership for
the benefit of employees of the General Partner, the Partnership, Subsidiaries
of the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership or any of
the Partnership's Subsidiaries.
E. The General Partner is expressly authorized to enter into,
in the name and on behalf of the Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various Affiliates of
the Partnership and the General Partner, on such terms as the General Partner,
in its sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification.
A. To the fullest extent permitted by applicable law, the
Partnership shall indemnify each Indemnitee from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including,
without limitation, attorney's fees and other legal fees and expenses),
judgments, fines, settlements and other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, that relate to the operations of the Partnership ("Actions")
as set forth in this Agreement in which such Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise; provided, however, that the
Partnership shall not indemnify an Indemnitee (i) for willful misconduct or a
knowing violation of the law or (ii) for any transaction for which such
Indemnitee received an improper personal benefit in violation or breach of any
provision of this Agreement. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise, for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. It is the intention of
this Section 7.7.A that the Partnership indemnify each Indemnitee to the
fullest extent permitted by law. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the Indemnitee
did not meet the requisite standard of conduct set forth in this Section 7.7.A.
The termination of any proceeding by conviction of an Indemnitee or upon a plea
of nolo contendere or its equivalent by an Indemnitee, or an entry of an order
of probation against an Indemnitee prior to judgment, does not create a
presumption that such Indemnitee acted in a manner contrary to that specified
in this Section 7.7.A with respect to the subject matter of such proceeding.
Any indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership or otherwise provide funds to enable the Partnership to fund its
obligations under this Section 7.7.
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B. To the fullest extent permitted by law, expenses incurred
by an Indemnitee who is a party to a proceeding or otherwise subject to or the
focus of or is involved in any Action shall be paid or reimbursed by the
Partnership as incurred by the Indemnitee in advance of the final disposition
of the Action upon receipt by the Partnership of (i) a written affirmation by
the Indemnitee of the Indemnitee's good faith belief that the standard of
conduct necessary for indemnification by the Partnership as authorized in this
Section 7.7.A has been met, and (ii) a written undertaking by or on behalf of
the Indemnitee to repay the amount if it shall ultimately be determined that
the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee unless otherwise
provided in a written agreement with such Indemnitee or in the writing pursuant
to which such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to,
purchase and maintain insurance, on behalf of any of the Indemnitees and such
other Persons as the General Partner shall determine, against any liability
that may be asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
E. Any liabilities which an Indemnitee incurs as a result of
acting on behalf of the Partnership or the General Partner (whether as a
fiduciary or otherwise) in connection with the operation, administration or
maintenance of an employee benefit plan or any related trust or funding
mechanism (whether such liabilities are in the form of excise taxes assessed by
the IRS, penalties assessed by the Department of Labor, restitutions to such a
plan or trust or other funding mechanism or to a participant or beneficiary of
such plan, trust or other funding mechanism, or otherwise) shall be treated as
liabilities or judgments or fines under this Section 7.7, unless such
liabilities arise as a result of (i) such Indemnitee's intentional misconduct
or knowing violation of the law, or (ii) any transaction in which such
Indemnitee received a personal benefit in violation or breach of any provision
of this Agreement or applicable law.
F. In no event may an Indemnitee subject any of the Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
G. An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on
the Partnership's liability to any Indemnitee under this Section 7.7 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
I. It is the intent of the Partners that any amounts paid by
the Partnership to the General Partner pursuant to this Section 7.7 shall be
treated as "guaranteed payments" within the meaning of Code Section 707(c).
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Section 7.8 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this
Agreement, neither the General Partner nor any of its directors or officers
shall be liable or accountable in damages or otherwise to the Partnership, any
Partners or any Assignees for losses sustained, liabilities incurred or
benefits not derived as a result of errors in judgment or mistakes of fact or
law or of any act or omission if the General Partner or such director or
officer acted in good faith.
B. The Limited Partners expressly acknowledge that the
General Partner is acting for the benefit of the Partnership, the Limited
Partners and the General Partner's shareholders collectively and that the
General Partner is under no obligation to give priority to the separate
interests of the Limited Partners or the General Partner's shareholders
(including, without limitation, the tax consequences to Limited Partners,
Assignees or the General Partner's shareholders) in deciding whether to cause
the Partnership to take (or decline to take) any actions.
C. Subject to its obligations and duties as General Partner
set forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its employees or agents
(subject to the supervision and control of the General Partner). The General
Partner shall not be responsible for any misconduct or negligence on the part
of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's, and its officers' and
directors', liability to the Partnership and the Limited Partners under this
Section 7.8 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.
E. Notwithstanding anything herein to the contrary, except
for fraud, willful misconduct or gross negligence, or pursuant to any express
indemnities given to the Partnership by any Partner pursuant to any other
written instrument, no Partner shall have any personal liability whatsoever, to
the Partnership or to the other Partner(s), for the debts or liabilities of the
Partnership or the Partnership's obligations hereunder, and the full recourse
of the other Partner(s) shall be limited to the interest of that Partner in the
Partnership. To the fullest extent permitted by law, no officer, director or
shareholder of the General Partner shall be liable to the Partnership for money
damages except for (i) active and deliberate dishonesty established by a non-
appealable final judgment or (ii) actual receipt of an improper benefit or
profit in money, property or services. Without limitation of the foregoing,
and except for fraud, willful misconduct or gross negligence, or pursuant to
any such express indemnity, no property or assets of any Partner, other than
its interest in the Partnership, shall be subject to levy, execution or other
enforcement procedures for the satisfaction of any judgment (or other judicial
process) in favor of any other Partner(s) and arising out of, or in connection
with, this Agreement. This Agreement is executed by the officers of the
General Partner solely as officers of the same and not in their own individual
capacities.
F. To the extent that, at law or in equity, the General Partner
has duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or the Limited Partners, the General Partner shall not be liable to
the Partnership or to any other Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of the General Partner otherwise
existing at law or in equity, are agreed by the Partners to replace such other
duties and liabilities of such General Partner.
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Section 7.9 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture
or other paper or document believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters that the General Partner
reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by the General Partner in the power
of attorney, have full power and authority to do and perform all and every act
and duty that is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provision of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission
is necessary or advisable in order (i) to protect the ability of the Previous
General Partner to continue to qualify as a REIT, (ii) for the Previous General
Partner otherwise to satisfy the REIT Requirements, (iii) to avoid the Previous
General Partner incurring any taxes under Code Section 857 or Code Section 4981
or (iv) for the General Partner or the Special Limited Partner to continue to
qualify as a "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2)), is expressly authorized under this Agreement and is deemed approved
by all of the Limited Partners.
Section 7.10 Title to Partnership Assets. Title to
Partnership assets, whether real, personal or mixed and whether tangible or
intangible, shall be deemed to be owned by the Partnership as an entity, and no
Partner, individually or collectively with other Partners or Persons, shall
have any ownership interest in such Partnership assets or any portion thereof.
Title to any or all of the Partnership assets may be held in the name of the
Partnership, the General Partner or one or more nominees, as the General
Partner may determine, including Affiliates of the General Partner. The
General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
Section 7.11 Reliance by Third Parties. Notwithstanding
anything to the contrary in this Agreement, any Person dealing with the
Partnership shall be entitled to assume that the General Partner has full power
and authority, without the consent or approval of any other Partner or Person,
to encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
take any and all actions on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner as if it were the Partnership's sole
party in interest, both legally and beneficially. Each Limited Partner hereby
waives any and all defenses or other remedies that may be available against
such Person to contest, negate or disaffirm any action
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of the General Partner in connection with any such dealing. In no event shall
any Person dealing with the General Partner or its representatives be obligated
to ascertain that the terms of this Agreement have been complied with or to
inquire into the necessity or expediency of any act or action of the General
Partner or its representatives. Each and every certificate, document or other
instrument executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (i) at the time of the execution
and delivery of such certificate, document or instrument, this Agreement was in
full force and effect, (ii) the Person executing and delivering such
certificate, document or instrument was duly authorized and empowered to do so
for and on behalf of the Partnership and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability. The Limited Partners
shall have no liability under this Agreement except as expressly provided in
this Agreement (including, without limitation, Section 10.4 hereof) or under
the Act.
Section 8.2 Management of Business. No Limited Partner or
Assignee (other than the General Partner, any of its Affiliates or any officer,
director, member, employee, partner, agent or trustee of the General Partner,
the Partnership or any of their Affiliates, in their capacity as such) shall
take part in the operations, management or control (within the meaning of the
Act) of the Partnership's business, transact any business in the Partnership's
name or have the power to sign documents for or otherwise bind the Partnership.
The transaction of any such business by the General Partner, any of its
Affiliates or any officer, director, member, employee, partner, agent,
representative, or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such, shall not affect, impair or
eliminate the limitations on the liability of the Limited Partners or Assignees
under this Agreement.
Section 8.3 Outside Activities of Limited Partners. Subject
to any agreements entered into pursuant to Section 7.6.D hereof and any other
agreements entered into by a Limited Partner or its Affiliates with the General
Partner, the Partnership or a Subsidiary (including, without limitation, any
employment agreement), any Limited Partner and any Assignee, officer, director,
employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall
be entitled to and may have business interests and engage in business
activities in addition to those relating to the Partnership, including business
interests and activities that are in direct or indirect competition with the
Partnership or that are enhanced by the activities of the Partnership. Neither
the Partnership nor any Partners shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee. Subject
to such agreements, none of the Limited Partners nor any other Person shall
have any rights by virtue of this Agreement or the partnership relationship
established hereby in any business ventures of any other Person (other than the
General Partner, to the extent expressly provided herein), and such Person
shall have no obligation pursuant to this Agreement, subject to Section 7.6.D
hereof and any other agreements entered into by a Limited Partner or its
Affiliates with the General Partner, the Partnership or a Subsidiary, to offer
any interest in any such business ventures to the Partnership, any Limited
Partner or any such other Person, even if such opportunity is of a character
that, if presented to the Partnership, any Limited Partner or such other
Person, could be taken by such Person.
Section 8.4 Return of Capital. Except pursuant to the rights
of Redemption set forth in Section 8.6 hereof, no Limited Partner shall be
entitled to the withdrawal or return of its Capital Contribution, except to the
extent
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of distributions made pursuant to this Agreement or upon termination of the
Partnership as provided herein. Except to the extent provided in Article 6
hereof or otherwise expressly provided in this Agreement, no Limited Partner or
Assignee shall have priority over any other Limited Partner or Assignee either
as to the return of Capital Contributions or as to profits, losses or
distributions.
Section 8.5 Rights of Limited Partners Relating to the
Partnership.
A. In addition to other rights provided by this Agreement or
by the Act, and except as limited by Section 8.5.C hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written demand
with a statement of the purpose of such demand and at such Limited Partner's
own expense:
(1) to obtain a copy of (i) the most recent annual and
quarterly reports filed with the SEC by the Previous General Partner or
the General Partner pursuant to the Exchange Act and (ii) each report or
other written communication sent to the shareholders of the Previous
General Partner;
(2) to obtain a copy of the Partnership's federal,
state and local income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with executed copies of
all powers of attorney pursuant to which this Agreement, the Certificate
and all amendments thereto have been executed; and
(5) to obtain true and full information regarding the
amount of cash and a description and statement of any other property or
services contributed by each Partner and that each Partner has agreed to
contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify any Limited Partner that is a
Qualifying Party, on request, of the then current Adjustment Factor or any
change made to the Adjustment Factor.
C. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or the General Partner or (ii) the Partner-
ship or the General Partner is required by law or by agreements with unaffili-
ated third parties to keep confidential.
Section 8.6 Redemption Rights of Qualifying Parties.
A. After the first Twelve-Month Period, a Qualifying Party,
but no other Limited Partner or Assignee, shall have the right (subject to the
terms and conditions set forth herein) to require the Partnership to redeem all
or a portion of the Redeemable Units held by such Tendering Party (such
Redeemable Units being hereafter "Tendered Units") in exchange (a "Redemption")
for REIT shares issuable on, or the Cash Amount payable on, the Specified
Redemption Date, as determined by the Partnership in its sole discretion. Any
Redemption shall be exercised
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pursuant to a Notice of Redemption delivered to the General Partner by the
Qualifying Party when exercising the Redemption right (the "Tendering Party").
A Tendering Party shall have no right to receive distributions with respect to
any Tendered Units (other than the Cash Amount) paid after delivery of the
Notice of Redemption, whether or not the Partnership Record Date for such
distribution precedes or coincides with such delivery of the Notice of
Redemption. If the Partnership elects to redeem Tendered Units for cash, the
Cash Amount shall be delivered as a certified check payable to the Tendering
Party or, in the General Partner's sole and absolute discretion, in immediately
available funds.
B. If the Partnership elects to redeem Tendered Units for
REIT Shares rather than cash, then the Partnership shall direct the Previous
General Partner to issue and deliver such REIT Shares to the Tendering Party
pursuant to the terms set forth in this Section 8.6.B, in which case, (i) the
Previous General Partner, acting as a distinct legal entity, shall assume
directly the obligation with respect thereto and shall satisfy the Tendering
Party's exercise of its Redemption right, and (ii) such transaction shall be
treated, for federal income tax purposes, as a transfer by the Tendering Party
of such Tendered Units to the Previous General Partner in exchange for REIT
shares. The percentage of the Tendered Units tendered for Redemption by the
Tendering Party for which the Partnership elects to cause the Previous General
Partner to issue REIT Shares (rather than cash) is referred to as the
"Applicable Percentage." In making such election to cause the Previous General
Partner to acquire Tendered Units, the Partnership shall act in a fair,
equitable and reasonable manner that neither prefers one group or class of
Qualifying Parties over another nor discriminates against a group or class of
Qualifying Parties. If the Partnership elects to redeem any number of Tendered
Units for REIT Shares, rather than cash, on the Specified Redemption Date, the
Tendering Party shall sell such number of the Tendered Units to the Previous
General Partner in exchange for a number of REIT Shares equal to the product of
the REIT Shares Amount and the Applicable Percentage. The Tendering Party
shall submit (i) such information, certification or affidavit as the Previous
General Partner may reasonably require in connection with the application of
the Ownership Limit and other restrictions and limitations of the Charter to
any such acquisition and (ii) such written representations, investment letters,
legal opinions or other instruments necessary, in the Previous General
Partner's view, to effect compliance with the Securities Act. The product of
the Applicable Percentage and the REIT Shares Amount, if applicable, shall be
delivered by the Previous General Partner as duly authorized, validly issued,
fully paid and accessible REIT Shares and, if applicable, Rights, free of any
pledge, lien, encumbrance or restriction, other than the Ownership Limit and
other restrictions provided in the Charter, the Bylaws of the Previous General
Partner, the Securities Act and relevant state securities or "blue sky" laws.
Neither any Tendering Party whose Tendered Units are acquired by the Previous
General Partner pursuant to this Section 8.6.B, any Partner, any Assignee nor
any other interested Person shall have any right to require or cause the
Previous General Partner or the General Partner to register, qualify or list
any REIT Shares owned or held by such Person, whether or not such REIT Shares
are issued pursuant to this Section 8.6.B, with the SEC, with any state
securities commissioner, department or agency, under the Securities Act or the
Exchange Act or with any stock exchange; provided, however, that this
limitation shall not be in derogation of any registration or similar rights
granted pursuant to any other written agreement between the Previous General
Partner and any such Person. Notwithstanding any delay in such delivery, the
Tendering Party shall be deemed the owner of such REIT Shares and Rights for
all purposes, including, without limitation, rights to vote or consent, receive
dividends, and exercise rights, as of the Specified Redemption Date. REIT
Shares issued upon an acquisition of the Tendered Units by the Previous General
Partner pursuant to this Section 8.6.B may contain such legends regarding
restrictions under the Securities Act and applicable state securities laws as
the Previous General Partner in good faith determines to be necessary or
advisable in order to ensure compliance with such laws.
C. Notwithstanding the provisions of Section 8.6.A and 8.6.B
hereof, the Tendering Parties (i) where the Redemption would consist of less
than all the Partnership Common Units held by Partners other than the General
Partner and the Special Limited Partner, shall not be entitled to elect or
effect a Redemption to the extent that the aggregate Percentage Interests of
the Limited Partners (other than the Special Limited Partner) would be reduced,
as a result of the Redemption, to less than one percent (1%) and (ii) shall
have no rights under this Agreement that
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would otherwise be prohibited under the Charter. To the extent that any
attempted Redemption would be in violation of this Section 8.6.C, it shall be
null and void ab initio, and the Tendering Party shall not acquire any rights
or economic interests in REIT Shares otherwise issuable by the Previous General
Partner under Section 8.6.B hereof.
D. In the event that the Partnership declines to cause the
Previous General Partner to acquire all of the Tendered Units from the
Tendering Party in exchange for REIT Shares pursuant to Section 8.6.B hereof
following receipt of a Notice of Redemption (a "Declination"):
(1) The Previous General Partner or the General Partner
shall give notice of such Declination to the Tendering Party on
or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the
payment of the Cash Amount either (a) by requiring that the
General Partner contribute such funds from the proceeds of a
registered public offering (a "Public Offering Funding") by the
Previous General Partner of a number of REIT Shares ("Registrable
Shares") equal to the REIT Shares Amount with respect to the
Tendered Units or (b) from any other sources (including, but not
limited to, the sale of any Property and the incurrence of addi-
tional Debt) available to the Partnership.
(3) Promptly upon the General Partner's receipt of the
Notice of Redemption and the Previous General Partner or the
General Partner giving notice of the Partnership's Declination,
the General Partner shall give notice (a "Single Funding Notice")
to all Qualifying Parties then holding a Partnership Interest (or
an interest therein) and having Redemption rights pursuant to
this Section 8.6 and require that all such Qualifying Parties
elect whether or not to effect a Redemption of their Partnership
Common Units to be funded through such Public Offering Funding.
In the event that any such Qualifying Party elects to effect such
a Redemption, it shall give notice thereof and of the number of
Partnership Common Units to be made subject thereon in writing to
the General Partner within ten (10) Business Days after receipt
of the Single Funding Notice, and such Qualifying Party shall be
treated as a Tendering Party for all purposes of this Section
8.6. In the event that a Qualifying Party does not so elect, it
shall be deemed to have waived its right to effect a Redemption
for the current Twelve-Month Period; provided, however, that the
Previous General Partner shall not be required to acquire
Partnership Common Units pursuant to this Section 8.6.D more than
twice within a Twelve-Month Period.
Any proceeds from a Public Offering Funding that are in excess of the Cash
Amount shall be for the sole benefit of the Previous General Partner and/or the
General Partner. The General Partner and/or the Special Limited Partner shall
make a Capital Contribution of such amounts to the Partnership for an
additional General Partner Interest and/or Limited Partner Interest. Any such
contribution shall entitle the General Partner and the Special Limited Partner,
as the case may be, to an equitable Percentage Interest adjustment.
E. Notwithstanding the provisions of Section 8.6.B hereof,
the Previous General Partner shall not, under any circumstances, elect to
acquire Tendered Units in exchange for the REIT Shares Amount if such exchange
would be prohibited under the Charter.
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F. Notwithstanding anything herein to the contrary (but
subject to Section 8.6.C hereof), with respect to any Redemption pursuant to
this Section 8.6:
(1) All Partnership Common Units acquired by the
Previous General Partner pursuant to Section 8.6.B hereof shall
be contributed by the Previous General Partner to either or both
of the General Partner and the Special Limited Partner in such
proportions as the Previous General Partner, the General Partner
and the Special Limited Partner shall determine. Any Partnership
Common Units so contributed to the General Partner shall
automatically, and without further action required, be converted
into and deemed to be a General Partner Interest comprised of the
same number of Partnership Common Units. Any Partnership Common
Units so contributed to the Special Limited Partner shall remain
outstanding.
(2) Subject to the Ownership Limit, no Tendering Party
may effect a Redemption for less than five hundred (500)
Redeemable Units or, if such Tendering Party holds (as a Limited
Partner or, economically, as an Assignee) less than five hundred
(500) Redeemable Units, all of the Redeemable Units held by such
Tendering Party.
(3) Each Tendering Party (a) may effect a Redemption
only once in each fiscal quarter of a Twelve-Month Period and (b)
may not effect a Redemption during the period after the
Partnership Record Date with respect to a distribution and before
the record date established by the Previous General Partner for a
distribution to its shareholders of some or all of its portion of
such Partnership distribution.
(4) Notwithstanding anything herein to the contrary,
with respect to any Redemption or acquisition of Tendered Units
by the Previous General Partner pursuant to Section 8.6.B hereof,
in the event that the Previous General Partner or the General
Partner gives notice to all Limited Partners (but excluding any
Assignees) then owning Partnership Interests (a "Primary Offering
Notice") that the Previous General Partner desires to effect a
primary offering of its equity securities then, unless the
Previous General Partner and the General Partner otherwise
consent, commencement of the actions denoted in Section 8.6.E
hereof as to a Public Offering Funding with respect to any Notice
of Redemption thereafter received, whether or not the Tendering
Party is a Limited Partner, may be delayed until the earlier of
(a) the completion of the primary offering or (b) ninety (90)
days following the giving of the Primary Offering Notice.
(5) Without the Consent of the Previous General
Partner, no Tendering Party may effect a Redemption within ninety
(90) days following the closing of any prior Public Offering
Funding.
(6) The consummation of such Redemption shall be
subject to the expiration or termination of the applicable
waiting period, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject,
in the case of an Assignee, to the provision of Section 11.5
hereof) all Redeemable Units subject to any Redemption, and be
treated as a Limited Partner or an Assignee, as applicable, with
respect
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to such Redeemable Units for all purposes of this Agreement,
until such Redeemable Units are either paid for by the
Partnership pursuant to Section 8.6.A hereof or transferred to
the Previous General Partner (or directly to the General Partner
or Special Limited Partner) and paid for, by the issuance of the
REIT Shares, pursuant to Section 8.6.B hereof on the Specified
Redemption Date. Until a Specified Redemption Date and an
acquisition of the Tendered Units by the Previous General Partner
pursuant to Section 8.6.B hereof, the Tendering Party shall have
no rights as a shareholder of the Previous General Partner with
respect to the REIT Shares issuable in connection with such
acquisition.
For purposes of determining compliance with the restrictions set forth in this
Section 8.6.F, all Partnership Common Units beneficially owned by a Related
Party of a Tendering Party shall be considered to be owned or held by such
Tendering Party.
G. In connection with an exercise of Redemption rights
pursuant to this Section 8.6, the Tendering Party shall submit the following to
the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the
Notice of Redemption, (a) disclosing the actual and constructive
ownership, as determined for purposes of Code Sections 856(a)(6)
and 856(h), of REIT Shares by (i) such Tendering Party and (ii)
any Related Party and (b) representing that, after giving effect
to the Redemption, neither the Tendering Party nor any Related
Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering
Party nor any Related Party has any intention to acquire any
additional REIT Shares prior to the closing of the Redemption on
the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to
the closing of the Redemption on the Specified Redemption Date,
that either (a) the actual and constructive ownership of REIT
Shares by the Tendering Party and any Related Party remain un-
changed from that disclosed in the affidavit required by Section
8.6.G(1) or (b) after giving effect to the Redemption, neither
the Tendering Party nor any Related Party shall own REIT Shares
in violation of the Ownership Limit.
Section 8.7 Partnership Right to Call Limited Partner Inter-
ests. Notwithstanding any other provision of this Agreement, on and after the
date on which the aggregate Percentage Interests of the Limited Partners (other
than the Special Limited Partner) are less than one percent (1%), the
Partnership shall have the right, but not the obligation, from time to time and
at any time to redeem any and all outstanding Limited Partner Interests (other
than the Special Limited Partner's Limited Partner Interest) by treating any
Limited Partner as a Tendering Party who has delivered a Notice of Redemption
pursuant to Section 8.6 hereof for the amount of Partnership Common Units to be
specified by the General Partner, in its sole and absolute discretion, by
notice to such Limited Partner that the Partnership has elected to exercise its
rights under this Section 8.7. Such notice given by the General Partner to a
Limited Partner pursuant to this Section 8.7 shall be treated as if it were a
Notice of Redemption delivered to the General Partner by such Limited Partner.
For purposes of this Section 8.7, (a) any Limited Partner (whether or not
otherwise a Qualifying Party) may, in the General Partner's sole and absolute
discretion, be treated as a Qualifying Party that is a Tendering Party and (b)
the provisions of Sections 8.6.C(1), 8.6.F(2), 8.6.F(3) and 8.6.F(5) hereof
shall not apply, but the remainder of Section 8.6 hereof shall apply, mutatis
mutandis.
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ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting.
A. The General Partner shall keep or cause to be kept at the
principal office of the Partnership those records and documents required to be
maintained by the Act and other books and records deemed by the General Partner
to be appropriate with respect to the Partnership's business, including,
without limitation, all books and records necessary to provide to the Limited
Partners any information, lists and copies of documents required to be provided
pursuant to Section 8.5.A or Section 9.3 hereof. Any records maintained by or
on behalf of the Partnership in the regular course of its business may be kept
on, or be in the form for, punch cards, magnetic tape, photographs,
micrographics or any other information storage device, provided that the
records so maintained are convertible into clearly legible written form within
a reasonable period of time.
B. The books of the Partnership shall be maintained, for
financial and tax reporting purposes, on an accrual basis in accordance with
generally accepted accounting principles, or on such other basis as the General
Partner determines to be necessary or appropriate. To the extent permitted by
sound accounting practices and principles, the Partnership, the General Partner
and the Previous General Partner may operate with integrated or consolidated
accounting records, operations and principles.
Section 9.2 Fiscal Year. The Fiscal Year of the Partnership
shall be the calendar year.
Section 9.3 Reports.
A. As soon as practicable, but in no event later than one
hundred five (105) days after the close of each Fiscal Year, the General
Partner shall cause to be mailed to each Limited Partner, of record as of the
close of the Fiscal Year, an annual report containing financial statements of
the Partnership, or of the Previous General Partner if such statements are
prepared solely on a consolidated basis with the Previous General Partner, for
such Fiscal Year, presented in accordance with generally accepted accounting
principles, such statements to be audited by a nationally recognized firm of
independent public accountants selected by the General Partner.
B. As soon as practicable, but in no event later than one
hundred five (105) days after the close of each calendar quarter (except the
last calendar quarter of each year), the General Partner shall cause to be
mailed to each Limited Partner, of record as of the last day of the calendar
quarter, a report containing unaudited financial statements of the Partnership,
or of the Previous General Partner if such statements are prepared solely on a
consolidated basis with the Previous General Partner, and such other
information as may be required by applicable law or regulation or as the
General Partner determines to be appropriate. At the request of any Limited
Partner, the General Partner shall provide access to the books, records and
workpapers upon which the reports required by this Section 9.3 are based, to
the extent required by the Act.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns. The General Partner
shall arrange for the preparation and timely filing of all returns with respect
to Partnership income, gains, deductions, losses and other items required of
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the Partnership for federal and state income tax purposes and shall use all
reasonable effort to furnish, within ninety (90) days of the close of each
taxable year, the tax information reasonably required by Limited Partners for
federal and state income tax reporting purposes. The Limited Partners shall
promptly provide the General Partner with such information relating to the
Contributed Properties, including tax basis and other relevant information, as
may be reasonably requested by the General Partner from time to time.
Section 10.2 Tax Elections. Except as otherwise provided
herein, the General Partner shall, in its sole and absolute discretion,
determine whether to make any available election pursuant to the Code,
including, but not limited to, the election under Code Section 754 and the
election to use the "recurring item" method of accounting provided under Code
Section 461(h) with respect to property taxes imposed on the Partnership's
Properties; provided, however, that, if the "recurring item" method of
accounting is elected with respect to such property taxes, the Partnership
shall pay the applicable property taxes prior to the date provided in Code
Section 461(h) for purposes of determining economic performance. The General
Partner shall have the right to seek to revoke any such election (including,
without limitation, any election under Code Sections 461(h) and 754) upon the
General Partner's determination in its sole and absolute discretion that such
revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner.
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes. The tax matters partner shall
receive no compensation for its services. All third-party costs and expenses
incurred by the tax matters partner in performing its duties as such (including
legal and accounting fees and expenses) shall be borne by the Partnership in
addition to any reimbursement pursuant to Section 7.4 hereof. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
to assist the tax matters partner in discharging its duties hereunder, so long
as the compensation paid by the Partnership for such services is reasonable.
At the request of any Limited Partner, the General Partner agrees to consult
with such Limited Partner with respect to the preparation and filing of any
returns and with respect to any subsequent audit or litigation relating to such
returns; provided, however, that the filing of such returns shall be in the
sole and absolute discretion of the General Partner.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial proceedings for the adjustment
of Partnership items required to be taken into account by a Partner for
income tax purposes (such administrative proceedings being referred to
as a "tax audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any Partner (i) who
(within the time prescribed pursuant to the Code and Regulations) files
a statement with the IRS providing that the tax matters partner shall
not have the authority to enter into a settlement agreement on behalf of
such Partner or (ii) who is a "notice partner" (as defined in Code
Section 6231) or a member of a "notice group" (as defined in Code
Section 6223(b)(2));
(2) in the event that a notice of a final
administrative adjustment at the Partnership level of any item required
to be taken into account by a Partner for tax purposes (a "final
adjustment") is mailed to the tax matters partner, to seek judicial
review of such final adjustment, including the filing of a petition for
readjustment with the United States Tax Court or the United States
Claims Court, or the filing of a complaint for refund with the District
Court of the United States for the district in which the Partnership's
principal place of business is located;
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(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment
with the IRS at any time and, if any part of such request is not allowed
by the IRS, to file an appropriate pleading (petition or complaint) for
judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend
the period for assessing any tax that is attributable to any item
required to be taken into account by a Partner for tax purposes, or an
item affected by such item; and
(6) to take any other action on behalf of the Partners
in connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax matters
partner in connection with any such proceeding, except to the extent required
by law, is a matter in the sole and absolute discretion of the tax matters
partner and the provisions relating to indemnification of the General Partner
set forth in Section 7.7 hereof shall be fully applicable to the tax matters
partner in its capacity as such.
Section 10.4 Withholding. Each Limited Partner hereby autho-
rizes the Partnership to withhold from or pay on behalf of or with respect to
such Limited Partner any amount of federal, state, local or foreign taxes that
the General Partner determines that the Partnership is required to withhold or
pay with respect to any amount distributable or allocable to such Limited
Partner pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Partnership pursuant to Code Section
1441, Code Section 1442, Code Section 1445 or Code Section 1446. Any amount
paid on behalf of or with respect to a Limited Partner shall constitute a loan
by the Partnership to such Limited Partner, which loan shall be repaid by such
Limited Partner within fifteen (15) days after notice from the General Partner
that such payment must be made unless (i) the Partnership withholds such
payment from a distribution that would otherwise be made to the Limited Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the Available Funds of the
Partnership that would, but for such payment, be distributed to the Limited
Partner. Each Limited Partner hereby unconditionally and irrevocably grants to
the Partnership a security interest in such Limited Partner's Partnership
Interest to secure such Limited Partner's obligation to pay to the Partnership
any amounts required to be paid pursuant to this Section 10.4. In the event
that a Limited Partner fails to pay any amounts owed to the Partnership
pursuant to this Section 10.4 when due, the General Partner may, in its sole
and absolute discretion, elect to make the payment to the Partnership on behalf
of such defaulting Limited Partner, and in such event shall be deemed to have
loaned such amount to such defaulting Limited Partner and shall succeed to all
rights and remedies of the Partnership as against such defaulting Limited
Partner (including, without limitation, the right to receive distributions).
Any amounts payable by a Limited Partner hereunder shall bear interest at the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in the Wall Street Journal, plus four (4)
percentage points (but not higher than the maximum lawful rate) from the date
such amount is due (i.e., fifteen (15) days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the
security interest created hereunder.
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ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer.
A. No part of the interest of a Partner shall be subject to
the claims of any creditor, to any spouse for alimony or support, or to legal
process, and may not be voluntarily or involuntarily alienated or encumbered
except as may be specifically provided for in this Agreement.
B. No Partnership Interest shall be Transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported Transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void ab initio.
C. Notwithstanding the other provisions of this Article 11
(other than Section 11.6.D hereof), the Partnership Interests of the General
Partner and the Special Limited Partner may be Transferred, in whole or in
part, at any time or from time to time, to or among the Previous General
Partner, the General Partner, the Special Limited Partner, and any other Person
that is, at the time of such Transfer, a "qualified REIT subsidiary" (within
the meaning of Code Section 856(i)(2)) with respect to the Previous General
Partner. Any transferee of the entire General Partner Interest pursuant to
this Section 11.1.C shall automatically become, without further action or
Consent of any Limited Partners, the sole general partner of the Partnership,
subject to all the rights, privileges, duties and obligations under this
Agreement and the Act relating to a general partner. Any transferee of a
Limited Partner Interest pursuant to this Section 11.1.C shall automatically
become, without further action or Consent of any Limited Partners, a
Substituted Limited Partner. Upon any Transfer permitted by this Section
11.1.C, the transferor Partner shall be relieved of all its obligations under
this Agreement. The provisions of Section 11.2.B (other than the last sentence
thereof), 11.3, 11.4.A and 11.5 hereof shall not apply to any Transfer
permitted by this Section 11.1.C.
Section 11.2 Transfer of General Partner's Partnership Inter-
est.
A. The General Partner may not Transfer any of its General
Partner Interest or withdraw from the Partnership except as provided in
Sections 11.2.B and 11.2.C hereof.
B. The General Partner shall not withdraw from the
Partnership and shall not Transfer all or any portion of its interest in the
Partnership (whether by sale, disposition, statutory merger or consolidation,
liquidation or otherwise) without the Consent of the Limited Partners, which
Consent may be given or withheld in the sole and absolute discretion of the
Limited Partners. Upon any Transfer of such a Partnership Interest pursuant to
the Consent of the Limited Partners and otherwise in accordance with the provi-
sions of this Section 11.2.B, the transferee shall become a successor General
Partner for all purposes herein, and shall be vested with the powers and rights
of the transferor General Partner, and shall be liable for all obligations and
responsible for all duties of the General Partner, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Partnership Interest so
acquired. It is a condition to any Transfer otherwise permitted hereunder that
the transferee assumes, by operation of law or express agreement, all of the
obligations of the transferor General Partner under this Agreement with respect
to such Transferred Partnership Interest, and such Transfer shall relieve the
transferor General Partner of its obligations under this Agreement without the
Consent of the Limited Partners. In the event that the General Partner
withdraws from the Partnership, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the bankruptcy of the General
Partner, a Majority in Interest of the Limited Partners may elect to continue
the Partnership business by selecting a successor General Partner in accordance
with the Act.
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C. The General Partner may merge with another entity if
immediately after such merger substantially all of the assets of the surviving
entity, other than the General Partner Interest held by the General Partner,
are contributed to the Partnership as a Capital Contribution in exchange for
Partnership Units.
Section 11.3 Limited Partners' Rights to Transfer.
A. General. Prior to the end of the first Twelve-Month
Period, no Limited Partner shall Transfer all or any portion of its Partnership
Interest to any transferee without the Consent of the General Partner, which
Consent may be withheld in its sole and absolute discretion; provided, however,
that any Limited Partner may, at any time, without the consent of the General
Partner, (i) Transfer all or part of its Partnership Interest to any Designated
Party, any Family Member, any Controlled Entity or any Affiliate, provided that
the transferee is, in any such case, a Qualified Transferee, or (ii) pledge (a
"Pledge") all or any portion of its Partnership Interest to a lending
institution, that is not an Affiliate of such Limited Partner, as collateral or
security for a bona fide loan or other extension of credit, and Transfer such
pledged Partnership Interest to such lending institution in connection with the
exercise of remedies under such loan or extension or credit (any Transfer or
Pledge permitted by this proviso is hereinafter referred to as a "Permitted
Transfer"). After such first Twelve-Month Period, each Limited Partner, and
each transferee of Partnership Units or Assignee pursuant to a Permitted
Transfer, shall have the right to Transfer all or any portion of its
Partnership Interest to any Person, subject to the provisions of Section 11.6
hereof and to satisfaction of each of the following conditions:
(1) General Partner Right of First Refusal. The
transferring Partner shall give written notice of the proposed Transfer
to the General Partner, which notice shall state (i) the identity of the
proposed transferee and (ii) the amount and type of consideration
proposed to be received for the Transferred Partnership Units. The
General Partner shall have ten (10) Business Days upon which to give the
Transferring Partner notice of its election to acquire the Partnership
Units on the proposed terms. If it so elects, it shall purchase the
Partnership Units on such terms within ten (10) Business Days after
giving notice of such election; provided, however, that in the event
that the proposed terms involve a purchase for cash, the General Partner
may at its election deliver in lieu of all or any portion of such cash a
note payable to the Transferring Partner at a date as soon as reasonably
practicable, but in no event later than one hundred eighty (180) days
after such purchase, and bearing interest at an annual rate equal to the
total dividends declared with respect to one (1) REIT Share for the four
(4) preceding fiscal quarters of the General Partner, divided by the
Value as of the closing of such purchase; provided, further, that such
closing may be deferred to the extent necessary to effect compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, if
applicable, and any other applicable requirements of law. If it does
not so elect, the Transferring Partner may Transfer such Partnership
Units to a third party, on terms no more favorable to the transferee
than the proposed terms, subject to the other conditions of this Section
11.3.
(2) Qualified Transferee. Any Transfer of a Part-
nership Interest shall be made only to a single Qualified Transferee;
provided, however, that, for such purposes, all Qualified Transferees
that are Affiliates, or that comprise investment accounts or funds
managed by a single Qualified Transferee and its Affiliates, shall be
considered together to be a single Qualified Transferee; provided,
further, that each Transfer meeting the minimum Transfer restriction of
Section 11.3.A(3) hereof may be to a separate Qualified Transferee.
(3) Minimum Transfer Restriction. Any Transferring
Partner must Transfer not less than the lesser of (i) the greater of
five hundred (500) Partnership Units or one-third (1/3) of the number of
Partnership Units owned by such Partner as of the Effective Date or (ii)
all of the remaining Partnership Units
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owned by such Transferring Partner; provided, however, that, for
purposes of determining compliance with the foregoing restriction, all
Partnership Units owned by Affiliates of a Limited Partner shall be
considered to be owned by such Limited Partner.
(4) Transferee Agreement to Effect a Redemption. Any
proposed transferee shall deliver to the General Partner a written
agreement reasonably satisfactory to the General Partner to the effect
that the transferee will, within six (6) months after consummation of a
Partnership Common Units Transfer, tender its Partnership Common Units
for Redemption in accordance with the terms of the Redemption rights
provided in Section 8.6 hereof.
(5) No Further Transfers. The transferee (other than a
Designated Party) shall not be permitted to effect any further Transfer
of the Partnership Units, other than to the General Partner.
(6) Exception for Permitted Transfers. The conditions
of Sections 11.3.A(1) through 11.3.A(5) hereof shall not apply in the
case of a Permitted Transfer.
It is a condition to any Transfer otherwise permitted hereunder (whether or not
such Transfer is effected during or after the first Twelve-Month Period) that
the transferee assumes by operation of law or express agreement all of the
obligations of the transferor Limited Partner under this Agreement with respect
to such Transferred Partnership Interest, and no such Transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor Partner are assumed by a successor corporation by
operation of law) shall relieve the transferor Partner of its obligations under
this Agreement without the approval of the General Partner, in its sole and
absolute discretion. Notwithstanding the foregoing, any transferee of any
Transferred Partnership Interest shall be subject to any and all ownership
limitations (including, without limitation, the Ownership Limit) contained in
the Charter that may limit or restrict such transferee's ability to exercise
its Redemption rights, including, without limitation, the Ownership Limit. Any
transferee, whether or not admitted as a Substituted Limited Partner, shall
take subject to the obligations of the transferor hereunder. Unless admitted
as a Substituted Limited Partner, no transferee, whether by a voluntary
Transfer, by operation of law or otherwise, shall have any rights hereunder,
other than the rights of an Assignee as provided in Section 11.5 hereof.
B. Incapacity. If a Limited Partner is subject to
Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall have all the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners, for the purpose of settling or managing the estate, and such
power as the Incapacitated Limited Partner possessed to Transfer all or any
part of its interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.
C. Opinion of Counsel. In connection with any Transfer of a
Limited Partner Interest, the General Partner shall have the right to receive
an opinion of counsel reasonably satisfactory to it to the effect that the
proposed Transfer may be effected without registration under the Securities Act
and will not otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or the Partnership Interests
Transferred. If, in the opinion of such counsel, such Transfer would require
the filing of a registration statement under the Securities Act or would
otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Units, the General Partner may
prohibit any Transfer otherwise permitted under this Section 11.3 by a Limited
Partner of Partnership Interests.
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D. Adverse Tax Consequences. No Transfer by a Limited
Partner of its Partnership Interests (including any Redemption, any other
acquisition of Partnership Units by the General Partner or any acquisition of
Partnership Units by the Partnership) may be made to any person if (i) in the
opinion of legal counsel for the Partnership, it would result in the
Partnership being treated as an association taxable as a corporation, or (ii)
such Transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning
of Code Section 7704.
Section 11.4 Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a
transferee (including any Designated Party or other transferees pursuant to
Transfers permitted by Section 11.3 hereof) as a Limited Partner in its place.
A transferee (including, but not limited to, any Designated Party) of the
interest of a Limited Partner may be admitted as a Substituted Limited Partner
only with the Consent of the General Partner, which Consent may be given or
withheld by the General Partner in its sole and absolute discretion. The
failure or refusal by the General Partner to permit a transferee of any such
interests to become a Substituted Limited Partner shall not give rise to any
cause of action against the Partnership or the General Partner. Subject to the
foregoing, an Assignee shall not be admitted as a Substituted Limited Partner
until and unless it furnishes to the General Partner (i) evidence of
acceptance, in form and substance satisfactory to the General Partner, of all
the terms, conditions and applicable obligations of this Agreement, (ii) a
counterpart signature page to this Agreement executed by such Assignee and
(iii) such other documents and instruments as may be required or advisable, in
the sole and absolute discretion of the General Partner, to effect such
Assignee's admission as a Substituted Limited Partner.
B. A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the rights
and powers and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
C. Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address and number
of Partnership Units of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address and number of Partnership Units of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees. If the General Partner, in its sole
and absolute discretion, does not consent to the admission of any permitted
transferee under Section 11.3 hereof as a Substituted Limited Partner, as
described in Section 11.4 hereof, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be entitled to all
the rights of an assignee of a limited partnership interest under the Act,
including the right to receive distributions from the Partnership and the share
of Net Income, Net Losses and other items of income, gain, loss, deduction and
credit of the Partnership attributable to the Partnership Units assigned to
such transferee and the rights to Transfer the Partnership Units provided in
this Article 11, but shall not be deemed to be a holder of Partnership Units
for any other purpose under this Agreement (other than as expressly provided in
Section 8.6 hereof with respect to a Qualifying Party that becomes a Tendering
Party), and shall not be entitled to effect a Consent or vote with respect to
such Partnership Units on any matter presented to the Limited Partners for
approval (such right to Consent or vote, to the extent provided in this
Agreement or under the Act, fully remaining with the transferor Limited
Partner). In the event that any such transferee desires to make a further
assignment of any such Partnership Units, such transferee shall be subject to
all the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of Partnership Units.
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Section 11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership other
than as a result of a permitted Transfer of all of such Limited Partner's
Partnership Units in accordance with this Article 11, with respect to which the
transferee becomes a Substituted Limited Partner, or pursuant to a redemption
(or acquisition by the Previous General Partner) of all of its Partnership
Units pursuant to a Redemption under Section 8.6 hereof and/or pursuant to any
Partnership Unit Designation.
B. Any Limited Partner who shall Transfer all of its Partner-
ship Units in a Transfer (i) permitted pursuant to this Article 11 where such
transferee was admitted as a Substituted Limited Partner, (ii) pursuant to the
exercise of its rights to effect a redemption of all of its Partnership Units
pursuant to a Redemption under Section 8.6 hereof and/or pursuant to any
Partnership Unit Designation or (iii) to the Previous General Partner or the
General Partner, whether or not pursuant to Section 8.6.B hereof, shall cease
to be a Limited Partner.
C. If any Partnership Unit is Transferred in compliance with
the provisions of this Article 11, or is redeemed by the Partnership, or
acquired by the Previous General Partner pursuant to Section 8.6 hereof, on any
day other than the first day of a Fiscal Year, then Net Income, Net Losses,
each item thereof and all other items of income, gain, loss, deduction and
credit attributable to such Partnership Unit for such Fiscal Year shall be
allocated to the transferor Partner or the Tendering Party, as the case may be,
and, in the case of a Transfer or assignment other than a Redemption, to the
transferee Partner (including, without limitation, the General Partner and the
Special Limited Partner as transferees of the Previous General Partner in the
case of an acquisition of Partnership Common Units pursuant to Section 8.6
hereof), by taking into account their varying interests during the Fiscal Year
in accordance with Code Section 706(d), using the "interim closing of the
books" method or another permissible method selected by the General Partner.
Solely for purposes of making such allocations, each of such items for the
calendar month in which a Transfer occurs shall be allocated to the transferee
Partner and none of such items for the calendar month in which a Transfer or a
Redemption occurs shall be allocated to the transferor Partner or the Tendering
Party, as the case may be, if such Transfer occurs on or before the fifteenth
(15th) day of the month, otherwise such items shall be allocated to the
transferor. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before
the date of such Transfer, assignment or Redemption shall be made to the
transferor Partner or the Tendering Party, as the case may be, and, in the case
of a Transfer other than a Redemption, all distributions of Available Cash
thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
D. In addition to any other restrictions on Transfer herein
contained, in no event may any Transfer or assignment of a Partnership Interest
by any Partner (including any Redemption, any acquisition of Partnership Units
by the Previous General Partner or any other acquisition of Partnership Units
by the Partnership) be made (i) to any person or entity who lacks the legal
right, power or capacity to own a Partnership Interest; (ii) in violation of
applicable law; (iii) of any component portion of a Partnership Interest, such
as the Capital Account, or rights to distributions, separate and apart from all
other components of a Partnership Interest; (iv) in the event that such
Transfer would cause either (a) the Previous General Partner to cease to comply
with the REIT Requirements or (b) the General Partner or the Special Limited
Partner to cease to qualify as a "qualified REIT subsidiary" (within the
meaning of Code Section 856(i)(2); (v) if such Transfer would, in the opinion
of counsel to the Partnership or the General Partner, cause a termination of
the Partnership for federal or state income tax purposes (except as a result of
the Redemption (or acquisition by the Previous General Partner) of all
Partnership Common Units held by all Limited Partners other than the Special
Limited Partner); (vi) if such Transfer would, in the opinion of legal counsel
to the Partnership, cause the Partnership to cease to be classified as a
partnership for federal income tax purposes (except as a result of the
Redemption (or acquisition by the Previous General Partner) of all Partnership
Common Units held by all Limited Partners other than the Special Limited
Partner); (vii) if such Transfer would cause the Partnership to
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become, with respect to any employee benefit plan subject to Title I of ERISA,
a "party-in-interest" (as defined in ERISA Section 3(14)) or a "disqualified
person" (as defined in Code Section 4975(c)); (viii) if such Transfer would, in
the opinion of legal counsel to the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; (ix) if such
Transfer requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (x) if such Transfer causes the
Partnership to become a "publicly traded partnership," as such term is defined
in Code Section 469(k)(2) or Code 7704(b); or (xi) if such Transfer subjects
the Partnership to regulation under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or ERISA, each as amended.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner. A
successor to all of the General Partner's General Partner Interest pursuant to
Section 11.2 hereof who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the General Partner, effective
immediately prior to such Transfer. Any such successor shall carry on the
business of the Partnership without dissolution. In each case, the admission
shall be subject to the successor General Partner executing and delivering to
the Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to effect
the admission.
Section 12.2 Admission of Additional Limited Partners.
A. After the admission to the Partnership of an Original
Limited Partner on the date hereof, a Person (other than an existing Partner)
who makes a Capital Contribution to the Partnership in accordance with this
Agreement shall be admitted to the Partnership as an Additional Limited Partner
only upon furnishing to the General Partner (i) evidence of acceptance, in form
and substance satisfactory to the General Partner, of all of the terms and
conditions of this Agreement, including, without limitation, the power of
attorney granted in Section 2.4 hereof, (ii) a counterpart signature page to
this Agreement executed by such Person and (iii) such other documents or
instruments as may be required in the sole and absolute discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole and absolute discretion. The admission of any Person as
an Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Fiscal Year, then Net
Income, Net Losses, each item thereof and all other items of income, gain,
loss, deduction and credit allocable among Partners and Assignees for such
Fiscal Year shall be allocated among such Additional Limited Partner and all
other Partners and Assignees by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using the
"interim closing of the books" method or another permissible method selected by
the General Partner. Solely for purposes of making such allocations, each of
such items for the calendar month in which an admission of any Additional
Limited Partner occurs shall be allocated among all the Partners and Assignees
including such Additional Limited Partner, in accordance with the principles
described in Section 11.6.C hereof. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of such
admission shall be made solely to Partners and Assignees other than the
Additional Limited Partner,
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and all distributions of Available Cash thereafter shall be made to all the
Partners and Assignees including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership. For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
Section 12.4 Admission of Initial Limited Partners. The
Persons listed on Exhibit A as limited partners of the Partnership shall be
admitted to the Partnership as Limited Partners upon their execution and
delivery of this Agreement.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution. The Partnership shall not be
dissolved by the admission of Substituted Limited Partners or Additional
Limited Partners or by the admission of a successor General Partner in
accordance with the terms of this Agreement. Upon the withdrawal of the
General Partner, any successor General Partner shall continue the business of
the Partnership without dissolution. However, the Partnership shall dissolve,
and its affairs shall be wound up, upon the first to occur of any of the
following (each a "Liquidating Event"):
A. the expiration of its term as provided in Section 2.5
hereof;
B. an event of withdrawal, as defined in the Act (including,
without limitation, bankruptcy), of the sole General Partner unless, within
ninety (90) days after the withdrawal, a "majority in interest" (as such phrase
is used in Section 17-801(3) of the Act) of the remaining Partners agree in
writing, in their sole and absolute discretion, to continue the business of the
Partnership and to the appointment, effective as of the date of withdrawal, of
a successor General Partner:
C. an election to dissolve the Partnership made by the
General Partner in its sole and absolute discretion, with or without the
Consent of the Limited Partners;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
E. the occurrence of a Terminating Capital Transaction;
F. the Redemption (or acquisition by the Previous General
Partner, the General Partner and/or the Special Limited Partner) of all
Partnership Common Units other than Partnership Common Units held by the
General Partner or the Special Limited Partner; or
G. the Redemption (or acquisition by the General Partner) of
all Partnership Common Units other than Partnership Common Units held by the
General Partner.
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<PAGE> 61
Section 13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets and satisfying the claims of its
creditors and Partners. After the occurrence of a Liquidating Event, no
Partner shall take any action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Partnership's business and affairs. The
General Partner (or, in the event that there is no remaining General Partner or
the General Partner has dissolved, become bankrupt within the meaning of the
Act or ceased to operate, any Person elected by a Majority in Interest of the
Limited Partners (the General Partner or such other Person being referred to
herein as the "Liquidator")) shall be responsible for overseeing the winding up
and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property, and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partner, include shares of stock in the Previous General Partner) shall be
applied and distributed in the following order:
(1) First, to the satisfaction of all of the
Partnership's debts and liabilities to creditors other than the Partners
and their Assignees (whether by payment or the making of reasonable
provision for payment thereof);
(2) Second, to the satisfaction of all of the
Partnership's debts and liabilities to the General Partner (whether by
payment or the making of reasonable provision for payment thereof),
including, but not limited to, amounts due as reimbursements under
Section 7.4 hereof;
(3) Third, to the satisfaction of all of the
Partnership's debts and liabilities to the other Partners and any
Assignees (whether by payment or the making of reasonable provision for
payment thereof); and
(4) Subject to the terms of any Partnership Unit
Designation, the balance, if any, to the General Partner, the Limited
Partners and any Assignees in accordance with and in proportion to their
positive Capital Account balances, after giving effect to all
contributions, distributions and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof
that require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors)
and/or distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith
judgment of the Liquidator, such distributions in kind are in the best interest
of the Partners, and shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator deems
reasonable and equitable and to any agreements governing the operation of such
properties at such time. The Liquidator shall determine the fair market value
of any property distributed in kind using such reasonable method of valuation
as it may adopt.
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<PAGE> 62
C. In the event that the Partnership is "liquidated" within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be
made pursuant to this Article 13 to the Partners and Assignees that have
positive Capital Accounts in compliance with Regulations Section 1.704-
1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, positive Capital
Account balances. If any Partner has a deficit balance in its Capital Account
(after giving effect to all contributions, distributions and allocations for
all taxable years, including the year during which such liquidation occurs),
such Partner shall have no obligation to make any contribution to the capital
of the Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any
purpose whatsoever. In the sole and absolute discretion of the General Partner
or the Liquidator, a pro rata portion of the distributions that would otherwise
be made to the Partners pursuant to this Article 13 may be withheld or escrowed
to provide a reasonable reserve for Partnership liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment obligations
owed to the Partnership, provided that such withheld or escrowed amounts shall
be distributed to the General Partner and Limited Partners in the manner and
order of priority set forth in Section 13.2.A hereof as soon as practicable.
Section 13.3 Deemed Distribution and Recontribution. Notwith-
standing any other provision of this Article 13, in the event that the
Partnership is liquidated within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
Property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes the Partnership shall be deemed to
have distributed the Property in kind to the Partners and the Assignees, who
shall be deemed to have assumed and taken such Property subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the Partners and the Assignees shall be
deemed to have recontributed the Partnership Property in kind to the Partner-
ship, which shall be deemed to have assumed and taken such Property subject to
all such liabilities; provided, however, that nothing in this Section 13.3
shall be deemed to have constituted any Assignee as a Substituted Limited
Partner without compliance with the provisions of Section 11.4 hereof.
Section 13.4 Rights of Limited Partners. Except as otherwise
provided in this Agreement, (a) each Limited Partner shall look solely to the
assets of the Partnership for the return of its Capital Contribution, (b) no
Limited Partner shall have the right or power to demand or receive property
other than cash from the Partnership and (c) no Limited Partner shall have
priority over any other Limited Partner as to the return of its Capital
Contributions, distributions or allocations.
Section 13.5 Notice of Dissolution. In the event that a
Liquidating Event occurs or an event occurs that would, but for an election or
objection by one or more Partners pursuant to Section 13.1 hereof, result in a
dissolution of the Partnership, the General Partner shall, within thirty (30)
days thereafter, provide written notice thereof to each of the Partners and, in
the General Partner's sole and absolute discretion or as required by the Act,
to all other parties with whom the Partnership regularly conducts business (as
determined in the sole and absolute discretion of the General Partner), and the
General Partner may, or, if required by the Act, shall, publish notice thereof
in a newspaper of general circulation in each place in which the Partnership
regularly conducts business (as determined in the sole and absolute discretion
of the General Partner).
Section 13.6 Cancellation of Certificate of Limited Partner-
ship. Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 hereof, the Partnership shall be termi-
nated, a certificate of cancellation shall be filed with the State of Delaware,
all qualifications of the Partnership as a foreign limited partnership or
association in jurisdictions other than the State of Delaware shall be
cancelled, and such other actions as may be necessary to terminate the
Partnership shall be taken.
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<PAGE> 63
Section 13.7 Reasonable Time for Winding-Up. A reasonable
time shall be allowed for the orderly winding-up of the business and affairs of
the Partnership and the liquidation of its assets pursuant to Section 13.2
hereof, in order to minimize any losses otherwise attendant upon such winding-
up, and the provisions of this Agreement shall remain in effect between the
Partners during the period of liquidation.
ARTICLE 14
PROCEDURES FOR ACTIONS AND CONSENTS
OF PARTNERS; AMENDMENTS; MEETINGS
Section 14.1 Procedures for Actions and Consents of Partners.
The actions requiring consent or approval of Limited Partners pursuant to this
Agreement, including Section 7.3 hereof, or otherwise pursuant to applicable
law, are subject to the procedures set forth in this Article 14.
Section 14.2 Amendments. Amendments to this Agreement may be
proposed by the General Partner or by a Majority in Interest of the Limited
Partners. Following such proposal, the General Partner shall submit any
proposed amendment to the Limited Partners. The General Partner shall seek the
written consent of the Limited Partners on the proposed amendment or shall call
a meeting to vote thereon and to transact any other business that the General
Partner may deem appropriate. For purposes of obtaining a written consent, the
General Partner may require a response within a reasonable specified time, but
not less than fifteen (15) days, and failure to respond in such time period
shall constitute a consent that is consistent with the General Partner's
recommendation with respect to the proposal; provided, however, that an action
shall become effective at such time as requisite consents are received even if
prior to such specified time.
Section 14.3 Meetings of the Partners.
A. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a
written request by a Majority in Interest of the Limited Partners. The call
shall state the nature of the business to be transacted. Notice of any such
meeting shall be given to all Partners not less than seven (7) days nor more
than thirty (30) days prior to the date of such meeting. Partners may vote in
person or by proxy at such meeting. Whenever the vote or Consent of Partners
is permitted or required under this Agreement, such vote or Consent may be
given at a meeting of Partners or may be given in accordance with the procedure
prescribed in Section 14.3.B hereof.
B. Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by a majority of the Percentage Interests
of the Partners (or such other percentage as is expressly required by this
Agreement for the action in question). Such consent may be in one instrument
or in several instruments, and shall have the same force and effect as a vote
of a majority of the Percentage Interests of the Partners (or such other
percentage as is expressly required by this Agreement). Such consent shall be
filed with the General Partner. An action so taken shall be deemed to have
been taken at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons
to act for it by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participat-
ing at a meeting. Every proxy must be signed by the Limited Partner or its
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy (or there
is receipt of a proxy authorizing a later date). Every proxy shall be
revocable at the pleasure of the Limited
58
<PAGE> 64
Partner executing it, such revocation to be effective upon the Partnership's
receipt of written notice of such revocation from the Limited Partner executing
such proxy.
D. Each meeting of Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to
such rules for the conduct of the meeting as the General Partner or such other
Person deems appropriate in its sole and absolute discretion. Without
limitation, meetings of Partners may be conducted in the same manner as
meetings of the General Partner's shareholders and may be held at the same time
as, and as part of, the meetings of the General Partner's shareholders.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice. Any notice, demand,
request or report required or permitted to be given or made to a Partner or
Assignee under this Agreement shall be in writing and shall be deemed given or
made when delivered in person or when sent by first class United States mail or
by other means of written communication (including by telecopy, facsimile, or
commercial courier service) to the Partner or Assignee at the address set forth
in Exhibit A or such other address of which the Partner shall notify the
General Partner in writing.
Section 15.2 Titles and Captions. All article or section
titles or captions in this Agreement are for convenience only. They shall not
be deemed part of this Agreement and in no way define, limit, extend or
describe the scope or intent of any provisions hereof. Except as specifically
provided otherwise, references to "Articles" or "Sections" are to Articles and
Sections of this Agreement.
Section 15.3 Pronouns and Plurals. Whenever the context may
require, any pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa.
Section 15.4 Further Action. The parties shall execute and
deliver all documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
Section 15.5 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
Section 15.6 Waiver.
A. No failure by any party to insist upon the strict perfor-
mance of any covenant, duty, agreement or condition of this Agreement or to
exercise any right or remedy consequent upon a breach thereof shall constitute
waiver of any such breach or any other covenant, duty, agreement or condition.
B. The restrictions, conditions and other limitations on the
rights and benefits of the Limited Partners contained in this Agreement, and
the duties, covenants and other requirements of performance or notice by the
Limited Partners, are for the benefit of the Partnership and, except for an
obligation to pay money to the Partnership, may be waived or relinquished by
the General Partner, in its sole and absolute discretion, on behalf of the
Partnership in one or more instances from time to time and at any time;
provided, however, that any such waiver or relinquishment may not be made if it
would have the effect of (i) creating liability for any other Limited Partner,
59
<PAGE> 65
(ii) causing the Partnership to cease to qualify as a limited partnership,
(iii) reducing the amount of cash otherwise distributable to the Limited
Partners, (iv) resulting in the classification of the Partnership as an
association or publicly traded partnership taxable as a corporation or (v)
violating the Securities Act, the Exchange Act or any state "blue sky" or other
securities laws; provided, further, that any waiver relating to compliance with
the Ownership Limit or other restrictions in the Charter shall be made and
shall be effective only as provided in the Charter.
Section 15.7 Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not signato-
ries to the original or the same counterpart. Each party shall become bound by
this Agreement immediately upon affixing its signature hereto.
Section 15.8 Applicable Law. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Delaware, without regard to the principles of conflicts of law. In the
event of a conflict between any provision of this Agreement and any non-
mandatory provision of the Act, the provisions of this Agreement shall control
and take precedence.
Section 15.9 Entire Agreement. This Agreement contains all of
the understandings and agreements between and among the Partners with respect
to the subject matter of this Agreement and the rights, interests and obliga-
tions of the Partners with respect to the Partnership.
Section 15.10 Invalidity of Provisions. If any provision of
this Agreement is or becomes invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
Section 15.11 Limitation to Preserve REIT Status. Notwithstand-
ing anything else in this Agreement, to the extent that the amount paid,
credited, distributed or reimbursed by the Partnership to any REIT Partner or
its officers, directors, employees or agents, whether as a reimbursement, fee,
expense or indemnity (a "REIT Payment"), would constitute gross income to the
REIT Partner for purposes of Code Section 856(c)(2) or Code Section 856(c)(3),
then, notwithstanding any other provision of this Agreement, the amount of such
REIT Payments, as selected by the General Partner in its discretion from among
items of potential distribution, reimbursement, fees, expenses and indemnities,
shall be reduced for any Fiscal Year so that the REIT Payments, as so reduced,
for or with respect to such REIT Partner shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of
(a) four and nine-tenths percent (4.9%) of the REIT Partner's total
gross income (but excluding the amount of any REIT Payments) for the
Fiscal Year that is described in subsections (A) through (H) of Code
Section 856(c)(2) over (b) the amount of gross income (within the
meaning of Code Section 856(c)(2)) derived by the REIT Partner from
sources other than those described in subsections (A) through (H) of
Code Section 856(c)(2) (but not including the amount of any REIT
Payments); or
(ii) an amount equal to the excess, if any, of
(a) twenty-four percent (24%) of the REIT Partner's total gross income
(but excluding the amount of any REIT Payments) for the Fiscal Year that
is described in subsections (A) through (I) of Code Section 856(c)(3)
over (b) the amount of gross income (within the meaning of Code Section
856(c)(3)) derived by the REIT Partner from sources other than those
described in subsections (A) through (I) of Code Section 856(c)(3) (but
not including the amount of any REIT Payments);
60
<PAGE> 66
provided, however, that REIT Payments in excess of the amounts set forth in
clauses (i) and (ii) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 15.11, such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. The purpose of the limitations contained in this Section 15.11 is
to prevent any REIT Partner from failing to qualify as a REIT under the Code by
reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indi-
rectly from the Partnership, and this Section 15.11 shall be interpreted and
applied to effectuate such purpose.
Section 15.12 No Partition. No Partner nor any successor-in-
interest to a Partner shall have the right while this Agreement remains in
effect to have any property of the Partnership partitioned, or to file a
complaint or institute any proceeding at law or in equity to have such property
of the Partnership partitioned, and each Partner, on behalf of itself and its
successors and assigns hereby waives any such right. It is the intention of
the Partners that the rights of the parties hereto and their successors-in-
interest to Partnership property, as among themselves, shall be governed by the
terms of this Agreement, and that the rights of the Partners and their
successors-in-interest shall be subject to the limitations and restrictions as
set forth in this Agreement.
Section 15.13 No Third-Party Rights Created Hereby. The provi-
sions of this Agreement are solely for the purpose of defining the interests of
the Partners, inter se; and no other person, firm or entity (i.e., a party who
is not a signatory hereto or a permitted successor to such signatory hereto)
shall have any right, power, title or interest by way of subrogation or
otherwise, in and to the rights, powers, title and provisions of this
Agreement. No creditor or other third party having dealings with the Partner-
ship shall have the right to enforce the right or obligation of any Partner to
make Capital Contributions or loans to the Partnership or to pursue any other
right or remedy hereunder or at law or in equity. None of the rights or
obligations of the Partners herein set forth to make Capital Contributions or
loans to the Partnership shall be deemed an asset of the Partnership for any
purpose by any creditor or other third party, nor may any such rights or
obligations be sold, transferred or assigned by the Partnership or pledged or
encumbered by the Partnership to secure any debt or other obligation of the
Partnership or any of the Partners.
[the next page is the signature page]
61
<PAGE> 67
IN WITNESS WHEREOF, this Agreement has been executed as of the
date first written above.
PREVIOUS GENERAL PARTNER:
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
By: /s/ Peter Kompaniez
----------------------------------------
Name: Peter Kompaniez
Title: President
GENERAL PARTNER:
AIMCO-GP, INC.
By: /s/ Peter Kompaniez
----------------------------------------
Name: Peter Kompaniez
Title: President
SPECIAL LIMITED PARTNER:
AIMCO-LP, INC.
By: /s/ Peter Kompaniez
----------------------------------------
Name: Peter Kompaniez
Title: President
LIMITED PARTNERS:
By: AIMCO-GP, INC.,
as attorney-in-fact
By: /s/ Peter Kompaniez
----------------------------------------
Name: Peter Kompaniez
Title: President
62
<PAGE> 68
EXHIBIT A
PARTNERS AND PARTNERSHIP UNITS
Exhibit A, the list of Partners and Partnership Units, is main-
tained by the General Partner and omitted from this copy of the Agreement.
A-1
<PAGE> 69
EXHIBIT B
EXAMPLES REGARDING ADJUSTMENT FACTOR
For purposes of the following examples, it is assumed that (a)
the Adjustment Factor in effect on June 30, 1995 is 1.0 and (b) on July 1, 1995
(the "Partnership Record Date" for purposes of these examples), prior to the
events described in the examples, there are 100 REIT Shares issued and
outstanding.
Example 1
On the Partnership Record Date, the Previous General Partner
declares a dividend on its outstanding REIT Shares in REIT Shares. The amount
of the dividend is one REIT Share paid in respect of each REIT Share owned.
Pursuant to Paragraph (i) of the definition of "Adjustment Factor," the
Adjustment Factor shall be adjusted on the Partnership Record Date, effective
immediately after the stock dividend is declared, as follows:
200
1.0* ----- = 2.0
100
Accordingly, the Adjustment Factor after the stock dividend is
declared is 2.0.
Example 2
On the Partnership Record Date, the Previous General Partner
distributes options to purchase REIT Shares to all holders of its REIT Shares.
The amount of the distribution is one option to acquire one REIT Share in
respect of each REIT Share owned. The strike price is $4.00 a share. The
Value of a REIT Share on the Partnership Record Date is $5.00 per share.
Pursuant to Paragraph (ii) of the definition of "Adjustment Factor," the
Adjustment Factor shall be adjusted on the Partnership Record Date, effective
immediately after the options are distributed, as follows:
(100 + 100)
1.0* -------------- = 1.1111
100* $4.00
(100+ --------------)
$5.00
Accordingly, the Adjustment Factor after the options are
distributed is 1.1111. If the options expire or become no longer exercisable,
then the retroactive adjustment specified in Paragraph (ii) of the definition
of "Adjustment Factor" shall apply.
B-1
<PAGE> 70
Example 3
On the Partnership Record Date, the Previous General Partner
distributes assets to all holders of its REIT Shares. The amount of the
distribution is one asset with a fair market value (as determined by the
General Partner) of $1.00 in respect of each REIT Share owned. It is also
assumed that the assets do not relate to assets received by the Previous
General Partner or the General Partner pursuant to a pro rata distribution by
the Partnership. The Value of a REIT Share on the Partnership Record Date is
$5.00 a share. Pursuant to Paragraph (iii) of the definition of "Adjustment
Factor," the Adjustment Factor shall be adjusted on the Partnership Record
Date, effective immediately after the assets are distributed, as follows:
$5.00
1.0* ------------- = 1.25
$5.00 - $1.00
Accordingly, the Adjustment Factor after the assets are
distributed is 1.25.
B-2
<PAGE> 71
EXHIBIT C
LIST OF DESIGNATED PARTIES
Terry Considine
Peter K. Kompaniez
Robert P. Lacy
Michael & Verona Sollinger
Patrick Stucker
Stonegate Funding Company
Steven F. Goldstone
Donaldson C. Pillsbury
Christopher Crowley
Richard D. Spizzini
Henry L. King
Alfonso G. Canales
Thomas J. Flynn
Carl E. Yasharian
Margot A. Mathoni
David B. Pall
Thomas E. Woodruff
Glen H. & Joyce E. Rosmann
Warren H. Leland
Amerett L. Donahoe
Daniel E. Landon
Conrad F. Fingerson
Dwight E. Lowell, II
Alfred V. & Lois E. Gangnes
Edward S. Stone
Sycamore Realty Trust, V
E. Oran Brigham
Donald Ravitch
Brian Conboy
Alan B. Grebene
Charles A. Cahill, III
Harold F. & Lucille J. Goodman
Timothy J. Tucker
C-1
<PAGE> 72
EXHIBIT D
[INTENTIONALLY OMITTED]
D-1
<PAGE> 73
EXHIBIT E
NOTICE OF REDEMPTION
To: AIMCO-GP, Inc.
c/o Apartment Investment and
Management Company
1873 South Bellaire Street
Suite 1700
Denver, Colorado 80222
The undersigned Limited Partner or Assignee hereby irrevocably
tenders for Redemption _______ Partnership Common Units in AIMCO Properties,
L.P. in accordance with the terms of the Agreement of Limited Partnership of
AIMCO Properties, L.P., dated as of July 29, 1994, as amended (the "Agree-
ment"), and the Redemption rights referred to therein. All capitalized terms
used herein and not otherwise defined shall have the same meaning ascribed to
them respectively in the Agreement. The undersigned Limited Partner or
Assignee:
(a) if the Partnership elects to redeem such Partnership Common
Units for REIT Shares rather than cash, hereby irrevocably transfers,
assigns, contributes and sets over to the Previous General Partner all
of the undersigned Limited Partner's or Assignee's right, title and
interest in and to such Partnership Common Units;
(b) undertakes (i) to surrender such Partnership Common Units
and any certificate therefor at the closing of the Redemption and (ii)
to furnish to the Previous General Partner, prior to the Specified
Redemption Date, the documentation, instruments and information required
under Section 8.6.G of the Agreement;
(c) directs that the certificate representing the REIT Shares,
or the certified check representing the Cash Amount, in either case,
deliverable upon the closing of such Redemption be delivered to the
address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee is a
Qualifying Party;
(ii) the undersigned Limited Partner or Assignee has,
and at the closing of the Redemption will have, good, marketable
and unencumbered title to such Partnership Common Units, free and
clear of the rights or interests of any other person or entity;
(iii) the undersigned Limited Partner or Assignee has,
and at the closing of the Redemption will have, the full right,
power and authority to tender and surrender such Partnership
Common Units as provided herein; and
(iv) the undersigned Limited Partner or Assignee has
obtained the consent or approval of all persons and entities, if
any, having the right to consent to or approve such tender and
surrender; and
E-1
<PAGE> 74
(e) acknowledges that he will continue to own such Partnership
Common Units until and unless such Redemption transaction closes.
Dated:
---------------------
Name of Limited Partner or Assignee:
---------------------------------------------
---------------------------------------------
(Signature of Limited Partner or Assignee)
---------------------------------------------
(Street Address)
---------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
---------------------------------------------
Issue Check Payable to:
---------------------------------------------
Please insert social security
or identifying number:
---------------------------------------------
E-2
<PAGE> 75
EXHIBIT F
FORM OF UNIT CERTIFICATE
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF
COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO
THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER
DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. IN ADDITION, THE LIMITED
PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN
THE AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF
JULY 29, 1994, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL
PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number
-------
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that
---------------------------------------------------------
is the owner of
-------------------------------------------------------------
FULLY PAID PARTNERSHIP COMMON UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized
attorney on the surrender of this Certificate properly endorsed. This
Certificate and the Partnership Common Units represented hereby are issued and
shall be held subject to all of the provisions of the Agreement of Limited
Partnership, as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated:
By
--------------------------------
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For Value Received, ________________________________ hereby
sells, assigns and transfers unto
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Partnership Common Unit(s) represented by the within Certificate, and does
hereby irrevocably constitute and appoint the General Partner of AIMCO
Properties, L.P. as its Attorney to transfer said Partnership Common Unit(s) on
the books of AIMCO Properties, L.P. with full power of substitution in the
premises.
Dated:
--------------------
By:
---------------------------
Name:
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<PAGE> 77
EXHIBIT G
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS B PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class B
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Seven Hundred Fifty Thousand (750,000).
2. DEFINITIONS.
For purposes of the Class B Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned thereto
in the Agreement.
"Agreement" shall mean the Agreement of Limited Partnership of the
Partnership, as amended, supplemented or restated from time to time.
"Call Date" shall have the meaning set forth in paragraph (a) of Section
5 of this Exhibit G.
"Class B Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this
Exhibit G. It is the intention of the General Partner that each Class B
Partnership Preferred Unit shall be substantially the economic equiva-
lent of one share of Class B Preferred Stock.
"Class B Preferred Stock" means the Class B Cumulative Convertible
Preferred Stock, par value $0.01 per share, of the Previous General
Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Previous General Partner or such shares of the Previous
General Partner's capital stock into which outstanding shares of Common
Stock shall be reclassified.
"Distribution Payment Date" shall mean any date on which cash dividends
are paid on the Class B Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in paragraph
(c) of Section 8 of this Exhibit G.
"Parity Partnership Units" shall have the meaning set forth in paragraph
(b) of Section 8 of this Exhibit G.
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"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in paragraph
(a) of Section 8 of this Exhibit G.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class B
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class B Partnership Preferred Unit equal to the per
share dividend payable on the Class B Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class B Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class B Preferred Stock on such Distribution
Payment Date. Holders of Class B Partnership Preferred Units shall not be
entitled to any distributions on the Class B Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(1) In the event of any liquidation, dissolution or
winding up of the Partnership, whether voluntary or involuntary, before any
payment or distribution of the Partnership (whether capital or surplus) shall
be made to or set apart for the holders of Junior Partnership Units, the
holders of Class B Partnership Preferred Units shall be entitled to receive One
Hundred Dollars ($100) per Class B Partnership Preferred Unit (the "Liquidation
Preference"), plus an amount equal to all dividends (whether or not earned)
accumulated, accrued and unpaid on each share of Class B Preferred Stock to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. Until the holders of the Class B Partnership
Preferred Units have been paid the Liquidation Preference in full, plus an
amount equal to all dividends (whether or not earned) accumulated, accrued and
unpaid on the Class B Preferred Stock to the date of final distribution to such
holders, no payment will be made to any holder of Junior Partnership Units upon
the liquidation, dissolution or winding up of the Partnership. If, upon any
liquidation, dissolution or winding up of the Partnership, the assets of the
Partnership, or proceeds thereof, distributable among the holders of Class B
Partnership Preferred Units shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any Parity
Partnership Units, then such assets, or the proceeds thereof, shall be
distributed among the holders of Class B Partnership Preferred Units and any
such Parity Partnership Units ratably in the same proportion as the respective
amounts that would be payable on such Class B Partnership Preferred Units and
any such other Parity Partnership Units if all amounts payable thereon were
paid in full. For the purposes of this Section 4, (i) a consolidation or
merger of the Partnership with one or more partnerships, or (ii) a sale or
transfer of all or substantially all of the Partnership's assets shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Partnership.
(2) Upon any liquidation, dissolution or winding up of
the Partnership, after payment shall have been made in full to the holders of
Class B Partnership Preferred Units and any Parity Partnership Units, as
provided in this Section 4, any other series or class or classes of Junior
Partnership Units shall, subject to the respective terms thereof, be entitled
to receive any and all assets remaining to be paid or distributed, and the
holders of the Class B Partnership Preferred Units and any Parity Partnership
Units shall not be entitled to share therein.
5. REDEMPTION.
Class B Partnership Preferred Units shall be redeemable by the Partner-
ship as follows:
(1) At any time that the Previous General Partner
exercises its right to redeem all or any of the shares of Class B Preferred
Stock, the General Partner shall cause the Partnership to redeem an equal
number of
G-2
<PAGE> 79
Class B Partnership Preferred Units, at a redemption price payable in cash
equal to 100% of the Liquidation Preference thereof, plus an amount equal to
all accrued and unpaid dividends on each share of Class B Preferred Stock to
the date fixed for redemption (the "Call Date"), in the manner set forth
herein.
(2) If the Partnership shall redeem Class B Partnership
Preferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class B Partnership Preferred Units so called for redemption (except that,
in the case of a Call Date after a distribution record date and prior to the
related Distribution Payment Date, holders of Class B Partnership Preferred
Units on the distribution record date will be entitled on such Distribution
Payment Date to receive the distribution payable thereon), (ii) said units
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class B Partnership Preferred Units of the
Partnership shall cease (except the rights to receive the cash payable upon
such redemption, without interest thereon, and to receive any distributions
payable thereon). No interest shall accrue for the benefit of the holders of
Class B Partnership Preferred Units to be redeemed on any cash set aside by the
Partnership.
If fewer than all the outstanding Class B Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class B Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class B Partnership Preferred Units which shall have been issued and
reacquired in any manner by the Partnership (including Class B Partnership
Preferred Units which have been surrendered for conversion into Partnership
Common Units) shall be deemed cancelled.
7. CONVERSION.
Class B Partnership Preferred Units shall be convertible by the holders
thereof as follows:
(1) Upon any conversion of shares of Class B Preferred Stock
into shares of Common Stock, the General Partner shall cause a number of Class
B Partnership Preferred Units equal to the number of such converted shares of
Class B Preferred Stock to be converted by the holders thereof into Partnership
Common Units. The conversion ratio in effect from time to time for the
conversion of Class B Partnership Preferred Units into Partnership Common Units
pursuant to this Section 7 shall at all times be equal to, and shall be
automatically adjusted as necessary to reflect, the conversion ratio in effect
from time to time for the conversion of Class B Preferred Stock into Common
Stock.
(2) Holders of Class B Partnership Preferred Units at the
close of business on a distribution payment record date shall be entitled to
receive the distribution payable on such units on the corresponding
Distribution Payment Date notwithstanding the conversion thereof following such
distribution payment record date and prior to such Distribution Payment Date.
Except as provided above, the Partnership shall make no payment or allowance
for unpaid distributions on converted units or for distributions on the
Partnership Common Units issued upon such conversion. Each conversion of Class
B Partnership Preferred Units into Partnership Common Units shall be deemed to
have been effected at the same time and date that the corresponding conversion
of Class B Preferred Stock into Common Stock is deemed to have been effected.
G-3
<PAGE> 80
(3) No fractional Partnership Common Units shall be issued
upon conversion of Class B Partnership Preferred Units. Instead of any
fractional Partnership Common Units that would otherwise be deliverable upon
the conversion of Class B Partnership Preferred Units, the Partnership shall
pay to the holder of such converted units an amount in cash equal to the cash
payable to a holder of an equivalent number of converted shares of Class B
Preferred Stock in lieu of fractional shares of Common Stock.
(4) The Partnership will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of (i) the issue or delivery
of Partnership Common Units or other securities or property on conversion or
redemption of Class B Partnership Preferred Units pursuant hereto, and (ii) the
issue or delivery of Common Stock or other securities or property on conversion
or redemption of Class B Preferred Stock pursuant to the terms hereof.
8. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(1) prior or senior to the Class B Partnership Preferred Units,
as to the payment of distributions and as to distributions of assets upon
liquidation, dissolution or winding up, if the holders of such class or series
shall be entitled to the receipt of distributions or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in preference
or priority to the holders of Class B Partnership Preferred Units ("Senior
Partnership Units");
(2) on a parity with the Class B Partnership Preferred
Units, as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class B Partnership
Preferred Units, if the holders of such class or series of Partnership Units
and the Class B Partnership Preferred Units shall be entitled to the receipt of
distributions and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
distributions per unit or other denomination or liquidation preferences,
without preference or priority one over the other ("Parity Partnership Units");
and
(3) junior to the Class B Partnership Preferred Units, as to
the payment of distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of Partnership
Units shall be Partnership Common Units or if the holders of Class B Preferred
Partnership Units shall be entitled to receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of such class or series of Partnership
Units ("Junior Partnership Units").
9. SPECIAL ALLOCATIONS.
(1) Gross income and, if necessary, gain shall be allocated to
the holders of Class B Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class B
Partnership Preferred Units receive a distribution on any Class B Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(2) If any Class B Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in
such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the holders of Class B Partnership Preferred
Units to the extent that the redemption amounts paid or payable with respect to
the Class B Partnership Preferred Units so redeemed exceeds the aggregate
Capital Contributions (net of liabilities
G-4
<PAGE> 81
assumed or taken subject to by the Partnership) per Class B Partnership
Preferred Unit allocable to the Class B Partnership Preferred Units so redeemed
and (b) deductions and losses (in such relative proportions as the General
Partner in its discretion shall determine) shall be allocated to the holders of
Class B Partnership Preferred Units to the extent that the aggregate Capital
Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class B Partnership Preferred Unit allocable to the Class B
Partnership Preferred Units so redeemed exceeds the redemption amount paid or
payable with respect to the Class B Partnership Preferred Units so redeemed.
10. RESTRICTIONS ON OWNERSHIP.
The Class B Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
11. GENERAL.
(1) The ownership of Class B Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class B Partnership Pre- ferred
Units.
(2) The rights of the General Partner and the Special
Limited Partner, in their capacity as holders of the Class B Partnership
Preferred Units, are in addition to and not in limitation of any other rights
or authority of the General Partner or the Special Limited Partner,
respectively, in any other capacity under the Agreement or applicable law. In
addition, nothing contained herein shall be deemed to limit or otherwise
restrict the authority of the General Partner or the Special Limited Partner
under the Agreement, other than in their capacity as holders of the Class B
Partnership Preferred Units.
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<PAGE> 82
EXHIBIT H
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS C PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class C
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Two Million Seven Hundred Sixty Thousand
(2,760,000).
2. DEFINITIONS.
For purposes of the Class C Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned thereto
in the Agreement.
"Agreement" shall mean the Agreement of Limited Partnership of the
Partnership, as amended, supplemented or restated from time to time.
"Call Date" shall have the meaning set forth in paragraph (a) of Section
5 of this Exhibit H.
"Class C Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this
Exhibit H. It is the intention of the General Partner that each Class C
Partnership Preferred Unit shall be substantially the economic equiva-
lent of one share of Class C Preferred Stock.
"Class C Preferred Stock" means the Class C Cumulative Preferred Stock,
par value $0.01 per share, of the Previous General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Previous General Partner or such shares of the Previous
General Partner's capital stock into which outstanding shares of Common
Stock shall be reclassified.
"Distribution Payment Date" shall mean any date on which cash dividends
are paid on the Class C Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in paragraph
(c) of Section 7 of this Exhibit H.
"Parity Partnership Units" shall have the meaning set forth in paragraph
(b) of Section 7 of this Exhibit H.
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<PAGE> 83
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in paragraph
(a) of Section 7 of this Exhibit H.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class C
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class C Partnership Preferred Unit equal to the per
share dividend payable on the Class C Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class C Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class C Preferred Stock on such Distribution
Payment Date. Holders of Class C Partnership Preferred Units shall not be
entitled to any distributions on the Class C Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(1) In the event of any liquidation, dissolution or winding up
of the Partnership, whether voluntary or involuntary, before any payment or
distribution of the Partnership (whether capital or surplus) shall be made to
or set apart for the holders of Junior Partnership Units, the holders of Class
C Partnership Preferred Units shall be entitled to receive Twenty Five Dollars
($25) per Class C Partnership Preferred Unit (the "Liquidation Preference"),
plus an amount equal to all dividends (whether or not earned) accumulated,
accrued and unpaid on each share of Class C Preferred Stock to the date of
final distribution to such holders; but such holders shall not be entitled to
any further payment. Until the holders of the Class C Partnership Preferred
Units have been paid the Liquidation Preference in full, plus an amount equal
to all dividends (whether or not earned) accumulated, accrued and unpaid on the
Class C Preferred Stock to the date of final distribution to such holders, no
payment will be made to any holder of Junior Partnership Units upon the
liquidation, dissolution or winding up of the Partnership. If, upon any
liquidation, dissolution or winding up of the Partnership, the assets of the
Partnership, or proceeds thereof, distributable among the holders of Class C
Partnership Preferred Units shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any Parity
Partnership Units, then such assets, or the proceeds thereof, shall be
distributed among the holders of Class C Partnership Preferred Units and any
such Parity Partnership Units ratably in the same proportion as the respective
amounts that would be payable on such Class C Partnership Preferred Units and
any such other Parity Partnership Units if all amounts payable thereon were
paid in full. For the purposes of this Section 4, (i) a consolidation or
merger of the Partnership with one or more partnerships, or (ii) a sale or
transfer of all or substantially all of the Partnership's assets shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Partnership.
(2) Upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of Class
C Partnership Preferred Units and any Parity Partnership Units, as provided in
this Section 4, any other series or class or classes of Junior Partnership
Units shall, subject to the respective terms thereof, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of the
Class C Partnership Preferred Units and any Parity Partnership Units shall not
be entitled to share therein.
5. REDEMPTION.
Class C Partnership Preferred Units shall be redeemable by the Partner-
ship as follows:
(1) At any time that the Previous General Partner exercises
its right to redeem all or any of the shares of Class C Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of
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<PAGE> 84
Class C Partnership Preferred Units, at a redemption price payable in cash
equal to 100% of the Liquidation Preference thereof, plus an amount equal to
all accrued and unpaid dividends on each share of Class C Preferred Stock to
the date fixed for redemption (the "Call Date"), in the manner set forth
herein.
(2) If the Partnership shall redeem Class C Partnership
Preferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class C Partnership Preferred Units so called for redemption (except that,
in the case of a Call Date after a distribution record date and prior to the
related Distribution Payment Date, holders of Class C Partnership Preferred
Units on the distribution record date will be entitled on such Distribution
Payment Date to receive the distribution payable thereon), (ii) said units
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class C Partnership Preferred Units of the
Partnership shall cease (except the rights to receive the cash payable upon
such redemption, without interest thereon, and to receive any distributions
payable thereon). No interest shall accrue for the benefit of the holders of
Class C Partnership Preferred Units to be redeemed on any cash set aside by the
Partnership.
If fewer than all the outstanding Class C Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class C Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class C Partnership Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(1) prior or senior to the Class C Partnership Preferred Units,
as to the payment of distributions and as to distributions of assets upon
liquidation, dissolution or winding up, if the holders of such class or series
shall be entitled to the receipt of distributions or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in preference
or priority to the holders of Class C Partnership Preferred Units ("Senior
Partnership Units");
(2) on a parity with the Class C Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class C Partnership
Preferred Units if such Class or series of Partnership Units shall be Class B
Preferred Partnership Units or if the holders of such class or series of
Partnership Units and the Class C Partnership Preferred Units shall be entitled
to the receipt of distributions and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid distributions per unit or other denomination or liquidation
preferences, without preference or priority one over the other ("Parity
Partnership Units"); and
(3) junior to the Class C Partnership Preferred Units, as to
the payment of distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of Partnership
Units shall be Partnership Common Units or if the holders of Class C Preferred
Partnership Units shall be entitled to receipt
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<PAGE> 85
of distributions or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
such class or series of Partnership Units ("Junior Partnership Units").
8. SPECIAL ALLOCATIONS.
(1) Gross income and, if necessary, gain shall be allocated to
the holders of Class C Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class C
Partnership Preferred Units receive a distribution on any Class C Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(2) If any Class C Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in
such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the holders of Class C Partnership Preferred
Units to the extent that the redemption amounts paid or payable with respect to
the Class C Partnership Preferred Units so redeemed exceeds the aggregate
Capital Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class C Partnership Preferred Unit allocable to the Class C
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class C Partnership Preferred Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class C Partnership Preferred Unit
allocable to the Class C Partnership Preferred Units so redeemed exceeds the
redemption amount paid or payable with respect to the Class C Partnership
Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class C Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
10. GENERAL.
(1) The ownership of Class C Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class C Partnership Preferred
Units.
(2) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class C Partnership Preferred
Units, are in addition to and not in limitation of any other rights or
authority of the General Partner or the Special Limited Partner, respectively,
in any other capacity under the Agreement or applicable law. In addition,
nothing contained herein shall be deemed to limit or otherwise restrict the
authority of the General Partner or the Special Limited Partner under the
Agreement, other than in their capacity as holders of the Class C Partnership
Preferred Units.
H-4
<PAGE> 86
EXHIBIT I
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS D PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class D
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Four Million Six Hundred Thousand (4,600,000).
2. DEFINITIONS.
For purposes of the Class D Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned thereto
in the Agreement.
"Agreement" shall mean the Agreement of Limited Partnership of the
Partnership, as amended, supplemented or restated from time to time.
"Call Date" shall have the meaning set forth in paragraph (a) of Section
5 of this Exhibit I.
"Class D Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this
Exhibit I. It is the intention of the General Partner that each Class D
Partnership Preferred Unit shall be substantially the economic equiva-
lent of one share of Class D Preferred Stock.
"Class D Preferred Stock" means the Class D Cumulative Preferred Stock,
par value $0.01 per share, of the Previous General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Previous General Partner or such shares of the Previous
General Partner's capital stock into which outstanding shares of Common
Stock shall be reclassified.
"Distribution Payment Date" shall mean any date on which cash dividends
are paid on the Class D Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in paragraph
(c) of Section 7 of this Exhibit I.
"Parity Partnership Units" shall have the meaning set forth in paragraph
(b) of Section 7 of this Exhibit I.
I-1
<PAGE> 87
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in paragraph
(a) of Section 7 of this Exhibit I.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class D
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class D Partnership Preferred Unit equal to the per
share dividend payable on the Class D Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class D Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class D Preferred Stock on such Distribution
Payment Date. Holders of Class D Partnership Preferred Units shall not be
entitled to any distributions on the Class D Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(1) In the event of any liquidation, dissolution or winding
up of the Partnership, whether voluntary or involuntary, before any payment or
distribution of the Partnership (whether capital or surplus) shall be made to
or set apart for the holders of Junior Partnership Units, the holders of Class
D Partnership Preferred Units shall be entitled to receive Twenty Five Dollars
($25) per Class D Partnership Preferred Unit (the "Liquidation Preference"),
plus an amount equal to all dividends (whether or not earned) accumulated,
accrued and unpaid on each share of Class D Preferred Stock to the date of
final distribution to such holders; but such holders shall not be entitled to
any further payment. Until the holders of the Class D Partnership Preferred
Units have been paid the Liquidation Preference in full, plus an amount equal
to all dividends (whether or not earned) accumulated, accrued and unpaid on the
Class D Preferred Stock to the date of final distribution to such holders, no
payment will be made to any holder of Junior Partnership Units upon the
liquidation, dissolution or winding up of the Partnership. If, upon any
liquidation, dissolution or winding up of the Partnership, the assets of the
Partnership, or proceeds thereof, distributable among the holders of Class D
Partnership Preferred Units shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any Parity
Partnership Units, then such assets, or the proceeds thereof, shall be
distributed among the holders of Class D Partnership Preferred Units and any
such Parity Partnership Units ratably in the same proportion as the respective
amounts that would be payable on such Class D Partnership Preferred Units and
any such other Parity Partnership Units if all amounts payable thereon were
paid in full. For the purposes of this Section 4, (i) a consolidation or
merger of the Partnership with one or more partnerships, or (ii) a sale or
transfer of all or substantially all of the Partnership's assets shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Partnership.
(2) Upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of Class
D Partnership Preferred Units and any Parity Partnership Units, as provided in
this Section 4, any other series or class or classes of Junior Partnership
Units shall, subject to the respective terms thereof, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of the
Class D Partnership Preferred Units and any Parity Partnership Units shall not
be entitled to share therein.
5. REDEMPTION.
Class D Partnership Preferred Units shall be redeemable by the Partner-
ship as follows:
(1) At any time that the Previous General Partner exercises
its right to redeem all or any of the shares of Class D Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of Class D
Partnership Preferred Units, at a redemption price payable in cash equal to
100% of the Liquidation Preference thereof, plus an amount equal to all accrued
and unpaid dividends on each share of
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Class D Preferred Stock to the date fixed for redemption (the "Call Date"), in
the manner set forth herein.
(2) If the Partnership shall redeem Class D Partnership
Preferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class D Partnership Preferred Units so called for redemption (except that,
in the case of a Call Date after a distribution record date and prior to the
related Distribution Payment Date, holders of Class D Partnership Preferred
Units on the distribution record date will be entitled on such Distribution
Payment Date to receive the distribution payable thereon), (ii) said units
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class D Partnership Preferred Units of the
Partnership shall cease (except the rights to receive the cash payable upon
such redemption, without interest thereon, and to receive any distributions
payable thereon). No interest shall accrue for the benefit of the holders of
Class D Partnership Preferred Units to be redeemed on any cash set aside by the
Partnership.
If fewer than all the outstanding Class D Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class D Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class D Partnership Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(1) prior or senior to the Class D Partnership Preferred
Units, as to the payment of distributions and as to distributions of assets
upon liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of Class D Partnership Preferred Units
("Senior Partnership Units");
(2) on a parity with the Class D Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class D Partnership
Preferred Units if such Class or series of Partnership Units shall be Class B
Partnership Preferred Units, Class C Partnership Preferred Units or if the
holders of such class or series of Partnership Units and the Class D
Partnership Preferred Units shall be entitled to the receipt of distributions
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid distributions per
unit or other denomination or liquidation preferences, without preference or
priority one over the other ("Parity Partnership Units"); and
(3) junior to the Class D Partnership Preferred Units, as to
the payment of distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of Partnership
Units shall be Partnership Common Units or if the holders of Class D Preferred
Partnership Units shall be entitled to receipt
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of distributions or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
such class or series of Partnership Units ("Junior Partnership Units").
8. SPECIAL ALLOCATIONS.
(1) Gross income and, if necessary, gain shall be allocated to
the holders of Class D Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class D
Partnership Preferred Units receive a distribution on any Class D Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(2) If any Class D Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in
such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the holders of Class D Partnership Preferred
Units to the extent that the redemption amounts paid or payable with respect to
the Class D Partnership Preferred Units so redeemed exceeds the aggregate
Capital Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class D Partnership Preferred Unit allocable to the Class D
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class D Partnership Preferred Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class D Partnership Preferred Unit
allocable to the Class D Partnership Preferred Units so redeemed exceeds the
redemption amount paid or payable with respect to the Class D Partnership
Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class D Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
10. GENERAL.
(1) The ownership of Class D Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class D Partnership Preferred
Units.
(2) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class D Partnership Preferred
Units, are in addition to and not in limitation of any other rights or
authority of the General Partner or the Special Limited Partner, respectively,
in any other capacity under the Agreement or applicable law. In addition,
nothing contained herein shall be deemed to limit or otherwise restrict the
authority of the General Partner or the Special Limited Partner under the
Agreement, other than in their capacity as holders of the Class D Partnership
Preferred Units.
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EXHIBIT J
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS E PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class E
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Ten Million (10,000,000).
2. DEFINITIONS.
For purposes of the Class E Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2, and capitalized
terms used and not otherwise defined herein shall have the meanings assigned
thereto in the Agreement:
"Agreement" shall mean the Agreement of Limited Partnership of the
Partnership, as amended, supplemented or restated from time to time.
"Call Date" shall mean a date fixed for redemption of shares of Class E
Preferred Stock.
"Class E Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this
Exhibit J. It is the intention of the General Partner that each Class E
Partnership Preferred Unit shall be substantially the economic equiva-
lent of one share of Class E Preferred Stock.
"Class E Preferred Stock" means the Class E Cumulative Convertible
Preferred Stock, par value $0.01 per share, of the Previous General
Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Distribution Payment Date" shall mean any date on which dividends are
paid on the Class E Preferred Stock.
"Issue Date" shall have the meaning set forth in the Articles Supplemen-
tary relating to the Class E Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in paragraph
(c) of Section 7 of this Exhibit J.
"Parity Partnership Units" shall have the meaning set forth in paragraph
(b) of Section 7 of this Exhibit J.
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in paragraph
(a) of Section 7 of this Exhibit J.
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"Special Dividend" shall have the meaning set forth in the Articles
Supplementary relating to the Class E Preferred Stock.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class E
Partnership Preferred Units shall be entitled to receive distributions of the
type and in an amount per Class E Partnership Preferred Unit equal to the per
share dividend payable on the Class E Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class E Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class E Preferred Stock on such Distribution
Payment Date. Holders of Class E Partnership Preferred Units shall not be
entitled to any distributions on the Class E Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(1) In the event of any liquidation, dissolution or winding up
of the Partnership, whether voluntary or involuntary, before any payment or
distribution of the Partnership (whether capital, surplus or otherwise) shall
be made to or set apart for the holders of Junior Partnership Units, the
holders of Class E Partnership Preferred Units shall be entitled to receive One
Dollar ($1.00) per Class E Partnership Preferred Unit (the "Liquidation
Preference"), plus an amount equal to the Special Dividend if such dividend is
unpaid on the date of final distribution to such holders. Until the holders of
the Class E Partnership Preferred Units have been paid the Liquidation
Preference in full, plus an amount equal to the Special Dividend if such
dividend is unpaid on the date of final distribution to such holders, no
payment shall be made to any holder of Junior Partnership Units upon the
liquidation, dissolution or winding up of the Partnership. If, upon any
liquidation, dissolution or winding up of the Partnership, the assets of the
Partnership, or proceeds thereof, distributable among the holders of Class E
Partnership Preferred Units shall be insufficient to pay in full the preferen-
tial amount aforesaid and liquidating payments on any Parity Partnership Units,
then such assets, or the proceeds thereof, shall be distributed among the
holders of Class E Partnership Preferred Units and any such Parity Partnership
Units ratably in the same proportion as the respective amounts that would be
payable on such Class E Partnership Preferred Units and any such other Parity
Partnership Units if all amounts payable thereon were paid in full. For the
purposes of this Section 4, (i) a consolidation or merger of the Partnership
with one or more partnerships, or (ii) a sale or transfer of all or
substantially all of the Partnership's assets shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Partnership.
(2) Upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of Class
E Partnership Preferred Units and any Parity Partnership Units, as provided in
this Section 4, any other series or class or classes of Junior Partnership
Units shall, subject to the respective terms thereof, be entitled to receive
any assets remaining to be paid or distributed, and the holders of the Class E
Partnership Preferred Units shall be entitled to share therein on the same
basis as the holders of Partnership Common Units (on a per unit basis).
5. REDEMPTION.
Class E Partnership Preferred Units shall be redeemable by the Partner-
ship as follows:
(1) At any time that the Previous General Partner redeems all
or any of the shares of Class E Preferred Stock, the General Partner shall
cause the Partnership to redeem an equal number of Class E Partnership
Preferred Units, at a redemption price per Class E Partnership Preferred Unit
equal to the redemption price per share paid in respect of such redeemed shares
of Class E Preferred Stock, in the manner set forth herein; provided, however,
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that in the event of a redemption of Class E Partnership Preferred Units, if
the Call Date occurs after a dividend record date for the Class E Preferred
Stock and on or prior to the related Distribution Payment Date, the
distribution payable on such Distribution Payment Date in respect of such Class
E Partnership Preferred Units called for redemption shall be payable on such
Distribution Payment Date to the holders of record of such Class E Partnership
Preferred Units on the applicable dividend record date, and shall not be
payable as part of the redemption price for such Class E Partnership Preferred
Units.
(2) If the Partnership shall redeem Class E Partnership Pre-
ferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class E Partnership Preferred Units so called for redemption, (ii) said
units shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class E Partnership Preferred Units shall cease
except the rights to receive the cash payable upon such redemption, without
interest thereon; provided, however, that if a Call Date occurs after a
dividend record date for the Class E Preferred Stock and on or prior to the
related Distribution Payment Date, the full distribution payable on such
Distribution Payment Date in respect of such Class E Partnership Preferred
Units called for redemption shall be payable on such Distribution Payment Date
to the holders of record of such Class E Partnership Preferred Units on the
applicable dividend record date notwithstanding the prior redemption of such
Class E Partnership Preferred Units. No interest shall accrue for the benefit
of the holders of Class E Partnership Preferred Units to be redeemed on any
cash set aside by the Partnership.
If fewer than all the outstanding Class E Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class E Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class E Partnership Preferred Units which shall have been issued and
reacquired or redeemed in any manner by the Partnership shall be deemed
cancelled.
7. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(1) prior or senior to the Class E Partnership Preferred
Units, as to the payment of distributions and as to distributions of assets
upon liquidation, dissolution or winding up, if (i) such class or series of
Partnership Units shall be Class B Partnership Preferred Units, Class C
Partnership Preferred Units, Class D Partnership Preferred Units, Class F
Partnership Preferred Units, Class G Partnership Preferred Units or Class H
Partnership Preferred Units, or (ii) the holders of such class or series shall
be entitled to the receipt of distributions and of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class E Partnership Preferred Units (the Partnership
Units referred to in clauses (i) and (ii) of this paragraph being hereinafter
referred to, collectively, as "Senior Partnership Units");
(2) on a parity with the Class E Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class E Partnership
Preferred Units if the holders of such class or series of Partnership Units and
the Class E Partnership Preferred Units shall be entitled to the receipt of
distributions and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
distributions per
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unit or other denomination or liquidation preferences, without preference or
priority one over the other ( "Parity Partnership Units"); and
(3) junior to the Class E Partnership Preferred Units, as to
the payment of distributions and as to the distribution of assets upon liquida-
tion, dissolution or winding up, if (i) such class or series of Partnership
Units shall be Partnership Common Units or Class I High Performance Partnership
Units or (ii) the holders of Class E Partnership Preferred Units shall be
entitled to receipt of distributions or of amounts distributable upon liquida-
tion, dissolution or winding up, as the case may be, in preference or priority
to the holders of such class or series of Partnership Units (the Partnership
Units referred to in clauses (i) and (ii) of this paragraph being hereinafter
referred to, collectively, as "Junior Partnership Units").
8. SPECIAL ALLOCATIONS.
(1) Gross income and, if necessary, gain shall be allocated to
the holders of Class E Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class E
Partnership Preferred Units receive a distribution on any Class E Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(2) If any Class E Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in
such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the holders of Class E Partnership Preferred
Units to the extent that the redemption amounts paid or payable with respect to
the Class E Partnership Preferred Units so redeemed exceeds the aggregate
Capital Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class E Partnership Preferred Unit allocable to the Class E
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class E Partnership Preferred Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class E Partnership Preferred Unit
allocable to the Class E Partnership Preferred Units so redeemed exceeds the
redemption amount paid or payable with respect to the Class E Partnership
Preferred Units so redeemed.
9. CONVERSION.
Class E Partnership Preferred Units shall be convertible by the holders
thereof as follows:
(1) Upon any conversion of shares of Class E Preferred Stock
into shares of Common Stock, the General Partner shall cause a number of Class
E Partnership Preferred Units equal to the number of such converted shares of
Class E Preferred Stock to be converted by the holders thereof into Partnership
Common Units. The conversion ratio in effect from time to time for the
conversion of Class E Partnership Preferred Units into Partnership Common Units
pursuant to this Section 9 shall at all times be equal to, and shall be
automatically adjusted as necessary to reflect, the conversion ratio in effect
from time to time for the conversion of Class E Preferred Stock into Common
Stock.
(2) If the Previous General Partner shall after the Issue Date
(i) pay a dividend or make a distribution on the Class E Preferred Stock in
shares of Common Stock, (ii) subdivide its outstanding Class E Preferred Stock
into a greater number of shares, (iii) combine its outstanding Class E
Preferred Stock into a smaller number of shares, or (iv) issue any shares of
capital stock by reclassification of its outstanding Class E Preferred Stock,
then the Partnership shall contemporaneously do the same with respect to the
Class E Partnership Preferred Units. If the Previous General Partner shall
after the Issue Date issue rights, options or warrants to all holders of Class
E Preferred Stock entitling them to subscribe for or purchase Class E Preferred
Stock, then upon the subscription for or purchase of shares
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<PAGE> 94
of Class E Preferred Stock pursuant thereto, the Previous General Partner shall
contribute the proceeds from such subscription or purchase to the Partnership
in exchange for a number of Partnership Preferred Units equal to the number of
shares of Class E Preferred Stock so subscribed for or purchased.
(3) Each conversion of Class E Partnership Preferred Units
into Partnership Common Units shall be deemed to have been effected at the same
time and date that the corresponding conversion of Class E Preferred Stock into
Common Stock is deemed to have been effected.
(4) The Partnership will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
Partnership Common Units upon conversion of Class E Partnership Preferred Units
pursuant hereto.
10. RESTRICTIONS ON OWNERSHIP.
The Class E Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
11. GENERAL.
(1) The ownership of Class E Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class E Partnership Preferred
Units.
(2) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class E Partnership Preferred
Units, are in addition to and not in limitation of any other rights or
authority of the General Partner or the Special Limited Partner, respectively,
in any other capacity under the Agreement or applicable law. In addition,
nothing contained herein shall be deemed to limit or otherwise restrict the
authority of the General Partner or the Special Limited Partner under the
Agreement, other than in their capacity as holders of the Class E Partnership
Preferred Units.
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EXHIBIT K
PARTNERSHIP UNIT DESIGNATION
OF THE
CLASS I HIGH PERFORMANCE PARTNERSHIP UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Units is hereby designated as "Class I High
Performance Partnership Units," and the number of Partnership Units initially
constituting such class shall be fifteen thousand (15,000), subject to
adjustment at the Class I High Performance Valuation Date, as provided in
Section 3 hereof.
2. DEFINITIONS.
For purposes of this Partnership Unit Designation, the following terms
shall have the meanings indicated in this Section 2. Capitalized terms used
and not otherwise defined herein shall have the meanings assigned thereto in
the Agreement.
"AIMCO Equity Capitalization" shall mean the quotient obtained by
dividing (i) the sum of the AIMCO Market Values for each trading day included
in the Measurement Period, by (ii) the number of trading days included in the
Measurement Period.
"AIMCO Market Value" shall mean, for any date, the product of (i) the
number of REIT Shares and Partnership Units (other than Partnership Preferred
Units) outstanding as of the close of business on such date, multiplied by (ii)
the Value of a REIT Share on such date.
"AIMCO Total Return" shall mean the Total Return of the REIT Shares for
the Measurement Period.
"Agreement" shall mean the Agreement of Limited Partnership of the
Partnership, as amended, supplemented or restated from time to time.
"Change of Control" shall mean the occurrence of any of the following
events:
(i) an acquisition (other than directly from the Previous
General Partner) of any voting securities of the Previous General
Partner (the "Voting Securities) by any "person" (as the term
"person" is used for purposes of Section 13(d) or Section 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) immediately after which such person has "beneficial owner-
ship" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) ("Beneficial Ownership") of 20% or more of the
combined voting power of the Previous General Partner's then
outstanding Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting Securities that
are acquired in a Non-Control Acquisition (as hereinafter
defined) shall not constitute an acquisition that would cause a
Change in Control. "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust forming a
part thereof) maintained by (1) the Previous General Partner or
(2) any corporation, partnership or other person of which a
majority of its voting power or its equity securities or equity
interest is owned directly or indirectly by the Previous General
Partner or in which the Previous General Partner serves as a
general partner or manager (a "Subsidiary"), (B) the Previous
General Partner or any Subsidiary, or (C) any person in
connection with a Non-Control Transaction (as hereinafter
defined);
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<PAGE> 96
(ii) the individuals who constitute the Board of Directors of
the Previous General Partner as of January 1, 1998 (the "Incumbent Board")
cease for any reason to constitute at least two-thirds (2/3) of the Board of
Directors; provided, however, that if the election, or nomination for election
by the Previous General Partner's stockholders, of any new director was
approved by a vote of at least two-thirds (2/3) of the Incumbent Board, such
new director shall be considered as a member of the Incumbent Board; provided,
further, that no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of either an actual or
threatened "election contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) (an "Election Contest") or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
(iii) approval by stockholders of the Previous General Partner
of: (A) a merger, consolidation, share exchange or reorganization involving
the Previous General Partner, unless (1) the stockholders of the Previous
General Partner, immediately before such merger, consolidation, share exchange
or reorganization, own, directly or indirectly immediately following such
merger, consolidation, share exchange or reorganization, at least 80% of the
combined voting power of the outstanding voting securities of the corporation
that is the successor in such merger, consolidation, share exchange or
reorganization (the "Surviving Company") in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger,
consolidation, share exchange or reorganization, (2) the individuals who were
members of the Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation, share exchange or
reorganization constitute at least two-thirds (2/3) of the members of the
board of directors of the Surviving Company, and (3) no persons (other than the
Previous General Partner or any Subsidiary, any employee benefit plan (or any
trust forming a part thereof) maintained by the Previous General Partner, the
Surviving Company or any Subsidiary, or any person who, immediately prior to
such merger, consolidation, share exchange or reorganization had Beneficial
Ownership of 15% or more of the then outstanding Voting Securities has
Beneficial Ownership of 15% or more of the combined voting power of the
Surviving Company's then outstanding voting securities (a transaction described
in clauses (1) through (3) is referred to herein as a "Non-Control
Transaction"); (B) a complete liquidation or dissolution of the Previous
General Partner; or (C) an agreement for the sale or other disposition of all
or substantially all of the assets of the Previous General Partner to any
person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change of Control shall not be deemed
to occur solely because any person (a "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securi-
ties as a result of the acquisition of Voting Securities by the Previous
General Partner that, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by such Subject
Person, provided that if a Change of Control would occur (but for the operation
of this sentence) as a result of the acquisition of Voting Securities by the
Previous General Partner, and after such share acquisition by the Previous
General Partner, such Subject Person becomes the Beneficial Owner of any
additional Voting Securities that increases the percentage of the then
outstanding Voting Securities Beneficially Owned by such Subject Person, then a
Change of Control shall occur.
"Class I High Performance Cash Amount" shall mean, as of any date, the
lesser of (i) an amount of cash equal to the product of the amount that a
Holder would receive in respect of each Class I High Performance Partnership
Unit if the Partnership sold all of its properties at their fair market value
(which may be determined by reference to the Value of a REIT Share), paid all
of its debts and distributed the remaining proceeds to the Partners as provided
in Section 13.2 of the Agreement, determined as of the applicable Valuation
Date, or (ii) in the case of a Declination followed by a Public Offering
Funding, the Public Offering Funding Amount.
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"Class I High Performance Partnership Unit" shall mean a Partnership
Unit with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this Exhibit K.
"Class I High Performance Valuation Date" shall mean the earlier to
occur of (i) January 1, 2001, or (ii) the date on which a Change of Control
occurs.
"Determination Date" shall mean (i) when used with respect to any
dividend or other distribution, the date fixed for the determination of the
holders of the securities entitled to receive such dividend or distribution,
or, if a dividend or distribution is paid or made without fixing such a date,
the date of such dividend or distribution, and (ii) when used with respect to
any split, subdivision, reverse stock split, combination or reclassification of
securities, the date upon which such split, subdivision, reverse stock split,
combination or reclassification becomes effective.
"Excess Return" shall mean the amount (measured as a percentage), if
any, by which (i) the AIMCO Total Return exceeds (ii) the Hurdle Rate of
Return.
"Ex-Date" shall mean (i) when used with respect to any dividend or
distribution, the first date on which the securities on which the dividend or
distribution is payable trade regular way on the relevant exchange or in the
relevant market without the right to receive such dividend or distribution, and
(ii) when used with respect to any split, subdivision, reverse stock split,
combination or reclassification of securities, the first date on which the
securities trade regular way on such exchange or in such market to reflect such
split, subdivision, reverse stock split, combination or reclassification
becoming effective.
"Extraordinary Distribution" shall mean the distribution by the Previous
General Partner, by dividend or otherwise, to all holders of its REIT Shares of
evidences of its indebtedness or assets (including securities) other than cash.
"Hurdle Rate of Return" shall mean the greater of (x) 115% of the
Industry Total Return, or (y) 30% (or, if the Class I High Performance
Valuation Date is not January 1, 2001, a percentage equal to the return over
the Measurement Period that, if compounded annually over three years, would
result in a cumulative return of 30%).
"Industry Total Return" shall mean the Total Return of the securities
included in the Industry Peer Group Index for the Measurement Period, with such
average determined in a manner consistent with the manner in which such index
is calculated; provided, however, that if such Total Return would be less than
zero without giving effect to the reinvestment of dividends, then the "Industry
Total Return" shall be equal to zero.
"Industry Peer Group Index" shall mean the Morgan Stanley REIT Index or
any other similar industry index approved by the Board of Directors of the
Previous General Partner.
"Measurement Period" shall mean the period from and including January 1,
1998 to but excluding the Class I High Performance Valuation Date.
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Total Return" shall mean, for any security and for any period, the
cumulative total return for such security over such period, as measured by (i)
the sum of (A) the cumulative amount of dividends paid in respect of such
security for such period (assuming that all dividends other than Extraordinary
Distributions are reinvested in such security as of the payment date for such
dividend based on the security price on the dividend payment date), and (B) an
amount equal to (1) the security price at the end of such period, minus (2) the
security price at the beginning of
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<PAGE> 98
such period, divided by (ii) the security price at the beginning of the
measurement period; provided, however, that if the foregoing calculation
results in a negative number, the "Total Return" shall be equal to zero.
"Value" shall have the meaning set forth in the Agreement, except that
Value shall be determined by reference to the average of the daily market
prices for twenty (20) consecutive trading days rather than ten (10) consecu-
tive trading days.
3. ADJUSTMENT OF UNITS AT CLASS I HIGH PERFORMANCE VALUATION DATE.
(a) If, on the Class I High Performance Valuation Date there
is any Excess Return, then, from and after such date, each Class I High Perfor-
mance Partnership Unit shall, without any action on the part of the Partner-
ship, the General Partner or the Holder thereof, be automatically adjusted to
equal a number of Class I High Performance Partnership Units equal to the
quotient obtained by dividing (x) the product of (A) 15% of the Excess Return,
multiplied by (B) the AIMCO Equity Capitalization, by (y) the product of (A)
15,000 and (B) the Value of a REIT Share on the Class I High Performance
Valuation Date. For illustrative purposes, examples of the calculation of such
adjustment are set forth in Annex I hereto.
(b) If, on the Class I High Performance Valuation Date there
is no Excess Return, then, from and after such date, each Class I High Perfor-
mance Partnership Units shall, without any action on the part of the Partner-
ship, the General Partner or the Holder thereof, be automatically adjusted to
equal 1/100 of a Class I High Performance Partnership Unit.
4. DISTRIBUTIONS.
On and after the Class I High Performance Valuation Date, the Holders of
Class I High Performance Partnership Units shall be entitled to receive
distributions (other than distributions upon liquidation) if, as, when and in
the same amounts and of the same type as may be paid to Holders of Partnership
Common Units as if each Holder of Class I High Performance Partnership Units
held an equal number of Partnership Common Units originally issued on the Class
I High Performance Valuation Date.
5. ALLOCATIONS.
(a) From and after the Class I High Performance Valuation
Date, Net Income and Net Loss shall be allocated to each of the Holders of
Class I High Performance Partnership Units as if each such Holder was the
Holder of an equal number of Partnership Common Units originally issued on the
Class I High Performance Valuation Date.
(b) In the event that the Partnership disposes of all or
substantially all of its assets in a transaction that will lead to a liquida-
tion of the Partnership pursuant to Article XIII of the Agreement, then,
notwithstanding Section 6.3.C of the Agreement, each Holder of Class I High
Performance Partnership Units shall be specifically allocated items of
Partnership income and gain in an amount sufficient to cause the Capital
Account of such Holder to be equal to that of a Holder of an equal number of
Partnership Common Units.
6. REDEMPTION.
Upon the occurrence of a Change of Control, and subject to the applica-
ble requirements of Federal securities laws and any securities exchange or
quotation system rules or regulations, each Holder of Class I High Performance
Partnership Units shall have the redemption rights of Qualifying Parties set
forth in Section 8.6 of the Agreement, except that (i) all references therein
to "Redeemable Units" or "Partnership Common Units" shall be deemed to be
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<PAGE> 99
references to Class I High Performance Partnership Units, (ii) the first
Twelve-Month Period applicable to all Class I High Performance Partnership
Units shall be deemed to have passed, (iii) all references therein to "Cash
Amount" shall be deemed to be references to the Class I High Performance Cash
Amount, and (iv) in the event that the Previous General Partner elects to
acquire Class I High Performance Partnership Units that have been tendered for
Redemption, the Previous General Partner shall acquire each such Class I High
Performance Partnership Unit in exchange for a number of REIT Shares equal to
the quotient obtained by dividing the Class I High Performance Cash Amount by
the Value of a REIT Share, determined as of the applicable Valuation Date.
7. STATUS OF REACQUIRED UNITS.
All Class I High Performance Partnership Units which shall have been
issued and reacquired in any manner by the Partnership shall be deemed
cancelled and no longer outstanding.
8. RESTRICTIONS ON OWNERSHIP AND TRANSFER.
The restrictions on Transfer set forth in Sections 11.1.B and 11.3.A of
the Agreement shall not apply to Transfers of Class I High Performance
Partnership Units. Prior to the Class I High Performance Valuation Date, the
Class I High Performance Partnership Units shall be owned and held solely by
SMP I, L.L.C., a Delaware limited liability company ("SMP"), Richard S.
Ellwood, J. Landis Martin, Thomas L. Rhodes and John D. Smith. On or after the
Class I High Performance Valuation Date, the Class I High Performance
Partnership Units may be Transferred (i) by SMP to (a) any Person who is a
member (a "Member") of SMP immediately prior to such transfer, (b) a Family
Member of a Member, (c) a Controlled Entity of a Member, (c) any Person with
respect to whom the Member constitutes a Controlled Entity, (d) upon the death
of a Member, by will or by the laws of descent and distribution to any
Qualified Transferee, and (ii) by any other Person to (a) a Family Member of a
such Person, (b) a Controlled Entity of such Person, (c) any other Person with
respect to whom such Person constitutes a Controlled Entity, (d) upon the death
of such Person, by will or by the laws of descent and distribution to any
Qualified Transferee,
9. ADJUSTMENTS.
(a) In the event of any Extraordinary Distribution occurring on or
after January 1, 1998, for purposes of determining the Value of a REIT Share or
the AIMCO Total Return, each price of a REIT Share determined as of a date on
or after the Ex-Date for such Extraordinary Distribution shall be adjusted by
multiplying such price by a fraction (i) the numerator of which shall be the
price of a REIT Share on the date immediately prior to such Ex-Date, and (ii)
the denominator of which shall be (A) the price of a REIT Share on the date
immediately prior to such Ex-Date, minus (B) the fair market value on the date
fixed for such determination of the portion of the evidences of indebtedness or
assets so distributed applicable to one REIT Share (as determined by the
General Partner, whose determination shall be conclusive); provided further,
that such amount shall be so adjusted for each such Extraordinary Distribution
occurring on or after January 1, 1998.
(b) In the event that, on or after January 1, 1998, the Previous
General Partner (i) declares or pays a dividend on its outstanding REIT Shares
in REIT Shares or makes a distribution to all holders of its outstanding REIT
Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT Shares,
(iii) effects a reverse stock split or otherwise combines its outstanding REIT
Shares into a smaller number of REIT Shares, or (iv) otherwise reclassifies its
outstanding REIT Shares, then, for purposes of determining the Value of a REIT
Share or the AIMCO Total Return, each price of a REIT Share determined as of a
date on or after the Ex-Date for such transaction shall be adjusted by
multiplying such price by a fraction (x) the numerator of which shall be the
number of REIT Shares issued and outstanding on the Determination Date for such
dividend, distribution, split, subdivision, reverse stock split, combination or
reclassification (assuming for such purposes that such dividend, distribution,
split, subdivision, reverse
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<PAGE> 100
split or combination has occurred as of such time) and (y) the denominator of
which shall be the actual number of REIT Shares (determined without the above
assumption) issued and outstanding on the Determination Date for such dividend,
distribution, split, subdivision, reverse stock split, combination or
reclassification.
(c) The General Partner shall have authority to appropriately adjust
the AIMCO Market Value, the AIMCO Total Return or the Value of a REIT Share if
any other transaction or circumstance occurs or arises that would have an
inequitable result.
10. GENERAL.
The ownership of Class I High Performance Partnership Units may (but
need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class I High Performance
Partnership Units.
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<PAGE> 101
ANNEX I TO
EXHIBIT K
Numerical Examples of the Calculation of the Adjustment to the Number of
Class I High Performance Partnership
Units on the Class I High Performance Valuation Date
The following table illustrates the adjustment that would be made on the
Class I High Performance Valuation Date to the number of Class I High
Performance Units under different circumstances. Except as otherwise
indicated, it is assumed, for purposes of the illustration, that: (i) the Class
I High Performance Valuation Date is January 1, 2001; (ii) the AIMCO Total
Return is 14% per year; (iii) the Industry Total Return is 10% per year; and
(iv) the weighted average market value of outstanding equity (Common Stock and
Partnership Units, other than Partnership Preferred Units) during the
Measurement Period is $3,000,000,000 (assumptions (i) - (iv) are referred to as
the "Base Case").
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6)
--------- ------------ --------- ----------- ----------- ---------
Cumulative Total Return Over Three Years:
<S> <C> <C> <C> <C> <C> <C>
Company Common Stock 48.2% 119.7% 48.2% 48.2% 119.7% 26.0%
Peer Group Index 32.4% 32.4% 71.2% 0% 32.4% 3.0%
115% of Peer Group Index 38.1% 38.1% 83.7% 0% 38.1% 3.5%
Minimum Return 30% 30% 30% 30% 30% 30%
Excess Return 10.1% 81.6% 0% 18.2% 81.6% 0%
Weighted Average Market Value of $ 3,000 $ 4,000 $ 3,000 $ 3,000 $ 10,000 $ 4,000
Outstanding Equity (millions)
Excess Shareholder Return (millions) $ 303 $ 3,264 $ 0 $ 546 $ 8,160 $ 0
Value of High Performance Units (millions) $ 45.4 $ 489.6 $ 0 $ 81.9 $ 1,224.0 $ 0
Value of a REIT Share $ 50 $ 70 $ 50 $ 50 $ 70 $ 40
Adjusted Number of Class I High Performance Units:
Total 908,000 6,994,286 0 1,638,000 17,485,714 0
Per Unit Adjustment 60.5 466.3 0 109.2 1,165.7 0
</TABLE>
- - ---------------
(1) Base Case.
(2) Base Case, except that the Company Common Stock has a 30% annual Total
Return and the weighted average market value of outstanding equity is $4
billion.
(3) Base Case, except that the Peer Group Index has a 20% annual Total
Return.
(4) Base Case, except that the Peer Group Index has a negative annual Total
Return of 10%.
(5) Base Case, except that the Company Common Stock has a 30% annual Total
Return and the weighted average market value of outstanding equity is
$10 billion.
(6) Base Case, except that the Company Common Stock has an 8% annual Total
Return, the Peer Group Index has a 1% annual Total Return and the
weighted average market value of outstanding equity is $4 billion.
K-7
<PAGE> 102
EXHIBIT L
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS G PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class G
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Four Million Fifty Thousand (4,050,000).
2. DEFINITIONS.
For purposes of the Class G Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned thereto
in the Agreement.
"Agreement" shall mean the Agreement of Limited Partnership of the
Partnership, as amended, supplemented or restated from time to time.
"Call Date" shall have the meaning set forth in paragraph (a) of Section
5 of this Exhibit L.
"Class G Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this
Exhibit L. It is the intention of the General Partner that each Class G
Partnership Preferred Unit shall be substantially the economic equiva-
lent of one share of Class G Preferred Stock.
"Class G Preferred Stock" means the Class G Cumulative Preferred Stock,
par value $0.01 per share, of the Previous General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Previous General Partner or such shares of the Previous
General Partner's capital stock into which outstanding shares of Common
Stock shall be reclassified.
"Distribution Payment Date" shall mean any date on which cash dividends
are paid on the Class G Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in paragraph
(c) of Section 7 of this Exhibit L.
"Parity Partnership Units" shall have the meaning set forth in paragraph
(b) of Section 7 of this Exhibit L.
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<PAGE> 103
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in paragraph
(a) of Section 7 of this Exhibit L.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class G
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class G Partnership Preferred Unit equal to the per
share dividend payable on the Class G Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class G Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class G Preferred Stock on such Distribution
Payment Date. Holders of Class G Partnership Preferred Units shall not be
entitled to any distributions on the Class G Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(1) In the event of any liquidation, dissolution or winding up
of the Partnership, whether voluntary or involuntary, before any payment or
distribution of the Partnership (whether capital or surplus) shall be made to
or set apart for the holders of Junior Partnership Units, the holders of Class
G Partnership Preferred Units shall be entitled to receive Twenty Five Dollars
($25) per Class G Partnership Preferred Unit (the "Liquidation Preference"),
plus an amount equal to all dividends (whether or not earned) accumulated,
accrued and unpaid on each share of Class G Preferred Stock to the date of
final distribution to such holders; but such holders shall not be entitled to
any further payment. Until the holders of the Class G Partnership Preferred
Units have been paid the Liquidation Preference in full, plus an amount equal
to all dividends (whether or not earned) accumulated, accrued and unpaid on the
Class G Preferred Stock to the date of final distribution to such holders, no
payment will be made to any holder of Junior Partnership Units upon the
liquidation, dissolution or winding up of the Partnership. If, upon any
liquidation, dissolution or winding up of the Partnership, the assets of the
Partnership, or proceeds thereof, distributable among the holders of Class G
Partnership Preferred Units shall be insufficient to pay in full the preferen-
tial amount aforesaid and liquidating payments on any Parity Partnership Units,
then such assets, or the proceeds thereof, shall be distributed among the
holders of Class G Partnership Preferred Units and any such Parity Partnership
Units ratably in the same proportion as the respective amounts that would be
payable on such Class G Partnership Preferred Units and any such other Parity
Partnership Units if all amounts payable thereon were paid in full. For the
purposes of this Section 4, (i) a consolidation or merger of the Partnership
with one or more partnerships, or (ii) a sale or transfer of all or
substantially all of the Partnership's assets shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Partnership.
(2) Upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of Class
G Partnership Preferred Units and any Parity Partnership Units, as provided in
this Section 4, any other series or class or classes of Junior Partnership
Units shall, subject to the respective terms thereof, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of the
Class G Partnership Preferred Units and any Parity Partnership Units shall not
be entitled to share therein.
5. REDEMPTION.
Class G Partnership Preferred Units shall be redeemable by the Partner-
ship as follows:
(1) At any time that the Previous General Partner exercises
its right to redeem all or any of the shares of Class G Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of
L-2
<PAGE> 104
Class G Partnership Preferred Units, at a redemption price payable in cash
equal to 100% of the Liquidation Preference thereof, plus an amount equal to
all accrued and unpaid dividends on each share of Class G Preferred Stock to
the date fixed for redemption (the "Call Date"), in the manner set forth
herein.
(2) If the Partnership shall redeem Class G Partnership Pre-
ferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class G Partnership Preferred Units so called for redemption (except that,
in the case of a Call Date after a distribution record date and prior to the
related Distribution Payment Date, holders of Class G Partnership Preferred
Units on the distribution record date will be entitled on such Distribution
Payment Date to receive the distribution payable thereon), (ii) said units
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class G Partnership Preferred Units of the
Partnership shall cease (except the rights to receive the cash payable upon
such redemption, without interest thereon, and to receive any distributions
payable thereon). No interest shall accrue for the benefit of the holders of
Class G Partnership Preferred Units to be redeemed on any cash set aside by the
Partnership.
If fewer than all the outstanding Class G Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class G Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class G Partnership Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(1) prior or senior to the Class G Partnership Preferred
Units, as to the payment of distributions and as to distributions of assets
upon liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of Class G Partnership Preferred Units
("Senior Partnership Units");
(2) on a parity with the Class G Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class G Partnership
Preferred Units if such Class or series of Partnership Units shall be Class B
Preferred Partnership Units or if the holders of such class or series of
Partnership Units and the Class G Partnership Preferred Units shall be entitled
to the receipt of distributions and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid distributions per unit or other denomination or liquidation
preferences, without preference or priority one over the other ("Parity
Partnership Units"); and
(3) junior to the Class G Partnership Preferred Units, as to
the payment of distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of Partnership
Units shall be Partnership Common Units or if the holders of Class G Preferred
Partnership Units shall be entitled to receipt
L-3
<PAGE> 105
of distributions or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
such class or series of Partnership Units ("Junior Partnership Units").
8. SPECIAL ALLOCATIONS.
(1) Gross income and, if necessary, gain shall be allocated to
the holders of Class G Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class G
Partnership Preferred Units receive a distribution on any Class G Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(2) If any Class G Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in
such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the holders of Class G Partnership Preferred
Units to the extent that the redemption amounts paid or payable with respect to
the Class G Partnership Preferred Units so redeemed exceeds the aggregate
Capital Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class G Partnership Preferred Unit allocable to the Class G
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class G Partnership Preferred Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class G Partnership Preferred Unit
allocable to the Class G Partnership Preferred Units so redeemed exceeds the
redemption amount paid or payable with respect to the Class G Partnership
Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class G Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
10. GENERAL.
(1) The ownership of Class G Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class G Partnership Preferred
Units.
(2) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class G Partnership Preferred
Units, are in addition to and not in limitation of any other rights or
authority of the General Partner or the Special Limited Partner, respectively,
in any other capacity under the Agreement or applicable law. In addition,
nothing contained herein shall be deemed to limit or otherwise restrict the
authority of the General Partner or the Special Limited Partner under the
Agreement, other than in their capacity as holders of the Class G Partnership
Preferred Units.
L-4
<PAGE> 106
EXHIBIT M
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS H PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class H
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Two Million Three Hundred Thousand
(2,300,000).
2. DEFINITIONS.
For purposes of the Class H Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2, and capitalized
terms used and not otherwise defined herein shall have the meanings assigned
thereto in the Agreement:
"Agreement" shall mean the Agreement of Limited Partnership of the
Partnership, as amended, supplemented or restated from time to time.
"Call Date" shall have the meaning set forth in paragraph (a) of Section
5 of this Exhibit M.
"Class H Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this
Exhibit M. It is the intention of the General Partner that each Class H
Partnership Preferred Unit shall be substantially the economic equiva-
lent of one share of Class H Preferred Stock.
"Class H Preferred Stock" means the Class H Cumulative Preferred Stock,
par value $0.01 per share, of the Previous General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
"Distribution Payment Date" shall mean any date on which cash dividends
are paid on the Class H Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in paragraph
(c) of Section 7 of this Exhibit M.
"Parity Partnership Units" shall have the meaning set forth in paragraph
(b) of Section 7 of this Exhibit M.
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in paragraph
(a) of Section 7 of this Exhibit M.
M-1
<PAGE> 107
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class H
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class H Partnership Preferred Unit equal to the per
share dividend payable on the Class H Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class H Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class H Preferred Stock on such Distribution
Payment Date. Holders of Class H Partnership Preferred Units shall not be
entitled to any distributions on the Class H Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(1) In the event of any liquidation, dissolution or winding up
of the Partnership, whether voluntary or involuntary, before any payment or
distribution of the Partnership (whether capital, surplus or otherwise) shall
be made to or set apart for the holders of Junior Partnership Units, the
holders of Class H Partnership Preferred Units shall be entitled to receive
Twenty Five Dollars ($25) per Class H Partnership Preferred Unit (the "Liqui-
dation Preference"), plus an amount per Class H Partnership Preferred Unit
equal to all dividends (whether or not declared or earned) accumulated, accrued
and unpaid on one share of Class H Preferred Stock to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payment. Until the holders of the Class H Partnership Preferred Units
have been paid the Liquidation Preference in full, plus an amount equal to all
dividends (whether or not declared or earned) accumulated, accrued and unpaid
on the Class H Preferred Stock to the date of final distribution to such
holders, no payment shall be made to any holder of Junior Partnership Units
upon the liquidation, dissolution or winding up of the Partnership. If, upon
any liquidation, dissolution or winding up of the Partnership, the assets of
the Partnership, or proceeds thereof, distributable among the holders of Class
H Partnership Preferred Units shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any Parity Partner-
ship Units, then such assets, or the proceeds thereof, shall be distributed
among the holders of Class H Partnership Preferred Units and any such Parity
Partnership Units ratably in the same proportion as the respective amounts that
would be payable on such Class H Partnership Preferred Units and any such other
Parity Partnership Units if all amounts payable thereon were paid in full. For
the purposes of this Section 4, (i) a consolidation or merger of the
Partnership with one or more partnerships, or (ii) a sale or transfer of all or
substantially all of the Partnership's assets shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Partnership.
(2) Upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of Class
H Partnership Preferred Units and any Parity Partnership Units, as provided in
this Section 4, any other series or class or classes of Junior Partnership
Units shall, subject to the respective terms thereof, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of the
Class H Partnership Preferred Units and any Parity Partnership Units shall not
be entitled to share therein.
5. REDEMPTION.
Class H Partnership Preferred Units shall be redeemable by the Partner-
ship as follows:
(1) At any time that the Previous General Partner exercises
its right to redeem all or any of the shares of Class H Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of Class H
Partnership Preferred Units, at a redemption price per Class H Partnership
Preferred Unit payable in cash equal to 100% of the Liquidation Preference per
share of Class H Preferred Stock, plus an amount equal to all accumulated,
accrued and unpaid dividends on one share of Class H Preferred Stock to the
date fixed for redemption (the "Call Date"), in the manner set forth herein;
provided, however, that in the event of a redemption of Class H
M-2
<PAGE> 108
Partnership Preferred Units, if the Call Date occurs after a dividend record
date for the Class H Preferred Stock and on or prior to the related Distribu-
tion Payment Date, the distribution payable on such Distribution Payment Date
in respect of such Class H Partnership Preferred Units called for redemption
shall be payable on such Distribution Payment Date to the holders of record of
such Class H Partnership Preferred Units on the applicable dividend record
date, and shall not be payable as part of the redemption price for such Class H
Partnership Preferred Units.
(2) If the Partnership shall redeem Class H Partnership Pre-
ferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class H Partnership Preferred Units so called for redemption, (ii) said
units shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class H Partnership Preferred Units of the
Partnership shall cease except the rights to receive the cash payable upon such
redemption, without interest thereon; provided, however, that if a Call Date
occurs after a dividend record date for the Class H Preferred Stock and on or
prior to the related Distribution Payment Date, the full distribution payable
on such Distribution Payment Date in respect of such Class H Partnership
Preferred Units called for redemption shall be payable on such Distribution
Payment Date to the holders of record of such Class H Partnership Preferred
Units on the applicable dividend record date notwithstanding the prior
redemption of such Class H Partnership Preferred Units. No interest shall
accrue for the benefit of the holders of Class H Partnership Preferred Units to
be redeemed on any cash set aside by the Partnership.
If fewer than all the outstanding Class H Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class H Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class H Partnership Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(1) prior or senior to the Class H Partnership Preferred
Units, as to the payment of distributions and as to distributions of assets
upon liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of distributions and of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of Class H Partnership Preferred Units
("Senior Partnership Units");
(2) on a parity with the Class H Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class H Partnership
Preferred Units if (i) such class or series of Partnership Units shall be Class
B Partnership Preferred Units, Class C Partnership Preferred Units, Class D
Partnership Preferred Units or Class G Partnership Preferred Units or (ii) the
holders of such class or series of Partnership Units and the Class H
Partnership Preferred Units shall be entitled to the receipt of distributions
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid distributions per
unit or other denomination or liquidation preferences, without preference or
priority one over the other (the Partnership Units referred to in clauses (i)
and (ii) of this paragraph being hereinafter referred to, collectively, as
"Parity Partnership Units"); and
M-3
<PAGE> 109
(3) junior to the Class H Partnership Preferred Units, as to
the payment of distributions and as to the distribution of assets upon liquida-
tion, dissolution or winding up, if (i) such class or series of Partnership
Units shall be Partnership Common Units or Class I High Performance Partnership
Units or (ii) the holders of Class H Partnership Preferred Units shall be
entitled to receipt of distributions or of amounts distributable upon liquida-
tion, dissolution or winding up, as the case may be, in preference or priority
to the holders of such class or series of Partnership Units (the Partnership
Units referred to in clauses (i) and (ii) of this paragraph being hereinafter
referred to, collectively, as "Junior Partnership Units").
8. SPECIAL ALLOCATIONS.
(1) Gross income and, if necessary, gain shall be allocated to
the holders of Class H Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class H
Partnership Preferred Units receive a distribution on any Class H Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(2) If any Class H Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in
such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the holders of Class H Partnership Preferred
Units to the extent that the redemption amounts paid or payable with respect to
the Class H Partnership Preferred Units so redeemed exceeds the aggregate
Capital Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class H Partnership Preferred Unit allocable to the Class H
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class H Partnership Preferred Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class H Partnership Preferred Unit
allocable to the Class H Partnership Preferred Units so redeemed exceeds the
redemption amount paid or payable with respect to the Class H Partnership
Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class H Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
10. GENERAL.
(1) The ownership of Class H Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class H Partnership Preferred
Units.
(2) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class H Partnership Preferred
Units, are in addition to and not in limitation of any other rights or
authority of the General Partner or the Special Limited Partner, respectively,
in any other capacity under the Agreement or applicable law. In addition,
nothing contained herein shall be deemed to limit or otherwise restrict the
authority of the General Partner or the Special Limited Partner under the
Agreement, other than in their capacity as holders of the Class H Partnership
Preferred Units.
M-4
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT TO THE THIRD
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P.
This FIRST AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., dated as of November 6, 1998
(this "Amendment"), is being executed by AIMCO-GP, Inc., a Delaware corporation
(the "General Partner"), as the general partner of AIMCO
Properties, L.P., a Delaware limited partnership (the "Partnership"), pursuant
to the authority conferred on the General Partner by Section 7.3.C(7) of the
Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties,
L.P., dated as of July 29, 1994 (the "Agreement"). Capitalized terms used, but
not otherwise defined herein, shall have the respective meanings ascribed
thereto in the Agreement.
WHEREAS, on November 6, 1998, the Previous General Partner filed
Articles Supplementary amending its Charter to reclassify 2,000,000 shares of
authorized but unissued shares of its Class A Common Stock, par value $.01 per
share, as shares of its Class J Cumulative Convertible Preferred Stock, par
value $.01 per share (the "Class J Preferred Stock");
WHEREAS, in accordance with Section 4.3.E of the Agreement, upon the
issuance of any such shares of Class J Preferred Stock, the Previous General
Partner will contribute the net cash proceeds from such issuance and 250,000
shares of Class J Preferred Stock to the Special Limited Partner, which will
contribute such net cash proceeds and such shares of Class J Preferred Stock to
the Partnership in exchange for a number of Partnership Preferred Units equal to
the number of shares of Class J Preferred Stock so issued, which Partnership
Preferred Units shall have designations, preferences and other rights, terms and
provisions that are substantially the same as the designations, preferences and
other rights, terms and provisions of the Class J Preferred Stock, except as
otherwise set forth herein; and
WHEREAS, pursuant to Section 4.2.A of the Agreement, the General
Partner is authorized to determine the designations, preferences and relative,
participating, optional or other special rights, powers and duties of such
Partnership Preferred Units.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 2
1. The Agreement is hereby amended by the addition of a new exhibit,
entitled "Exhibit N," in the form attached hereto, which shall be attached to
and made a part of the Agreement.
2. Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Agreement shall remain unmodified and continue
in full force and effect and, except as amended hereby, all of the terms,
covenants, provisions and conditions of the Agreement are hereby ratified and
confirmed in all respects.
2
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
GENERAL PARTNER:
AIMCO-GP, INC.
By: /s/ PETER KOMPANIEZ
-------------------------------------
Name: Peter Kompaniez
Title: President and Vice Chairman
3
<PAGE> 4
EXHIBIT N
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS J PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class J
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be 1,250,000.
2. DEFINITIONS.
For purposes of the Class J Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2, and capitalized terms
used and not otherwise defined herein shall have the meanings assigned thereto
in the Agreement:
"Agreement" shall mean the Third Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of July 29, 1994, as
amended.
"Call Date" shall have the meaning set forth in paragraph (a) of
Section 5 of this Exhibit N.
"Class J Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating,
optional or other special rights, powers and duties as are set forth in
this Exhibit N. It is the intention of the General Partner that each
Class J Partnership Preferred Unit shall be substantially the economic
equivalent of one share of Class J Preferred Stock.
"Class J Preferred Stock" means the Class J Cumulative Convertible
Preferred Stock, par value $0.01 per share, of the Previous General
Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time
to time, as the same may be amended, and any successor thereto, as
interpreted by any applicable regulations or other administrative
pronouncements as in effect from time to time.
1
<PAGE> 5
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Previous General Partner or such shares of the Previous
General Partner's capital stock into which outstanding shares of Common
Stock shall be reclassified.
"Distribution Payment Date" shall mean any date on which cash dividends
are paid on the Class J Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in
paragraph (c) of Section 8 of this Exhibit N.
"Parity Partnership Units" shall have the meaning set forth in
paragraph (b) of Section 8 of this Exhibit N.
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in
paragraph (a) of Section 8 of this Exhibit N.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class J
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class J Partnership Preferred Unit equal to the per
share dividend payable on the Class J Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class J Partnership Preferred Units, as they appear on the records of the
Partnership at the close of business on the record date for the dividend payable
with respect to the Class J Preferred Stock on such Distribution Payment Date.
Holders of Class J Partnership Preferred Units shall not be entitled to any
distributions on the Class J Partnership Preferred Units, whether payable in
cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Partnership, whether voluntary or involuntary, before any payment or
distribution of the Partnership (whether capital, surplus or otherwise) shall be
made to or set apart for the holders of Junior Partnership Units, the holders of
Class J Partnership Preferred Units shall be entitled to receive One Hundred
Dollars ($100) per Class J Partnership Preferred Unit (the "Liquidation
Preference"), plus an amount per Class J Partnership Preferred Unit equal to all
dividends (whether or not declared or earned) accumulated, accrued and unpaid on
one share of Class J Preferred Stock to the date of final distribution to such
holders; but such holders shall not be entitled to any further payment. Until
the holders of the Class J Partnership
2
<PAGE> 6
Preferred Units have been paid the Liquidation Preference in full, plus an
amount equal to all dividends (whether or not declared or earned) accumulated,
accrued and unpaid on the Class J Preferred Stock to the date of final
distribution to such holders, no payment shall be made to any holder of Junior
Partnership Units upon the liquidation, dissolution or winding up of the
Partnership. If, upon any liquidation, dissolution or winding up of the
Partnership, the assets of the Partnership, or proceeds thereof, distributable
among the holders of Class J Partnership Preferred Units shall be insufficient
to pay in full the preferential amount aforesaid and liquidating payments on any
Parity Partnership Units, then such assets, or the proceeds thereof, shall be
distributed among the holders of Class J Partnership Preferred Units and any
such Parity Partnership Units ratably in the same proportion as the respective
amounts that would be payable on such Class J Partnership Preferred Units and
any such other Parity Partnership Units if all amounts payable thereon were paid
in full. For the purposes of this Section 4, (i) a consolidation or merger of
the Partnership with one or more partnerships, or (ii) a sale or transfer of all
or substantially all of the Partnership's assets shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Partnership.
(b) Upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of Class
J Partnership Preferred Units and any Parity Partnership Units, as provided in
this Section 4, any other series or class or classes of Junior Partnership Units
shall, subject to the respective terms thereof, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Class J
Partnership Preferred Units and any Parity Partnership Units shall not be
entitled to share therein.
5. REDEMPTION.
Class J Partnership Preferred Units shall be redeemable by the
Partnership as follows:
(a) At any time that the Previous General Partner exercises
its right to redeem all or any of the shares of Class J Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of Class J
Partnership Preferred Units, at a redemption price per Class J Partnership
Preferred Unit equal to the same purchase price as the Previous General Partner
shall redeem the Class J Preferred Stock and such purchase price shall be paid
in the same manner (including but limited to, by means of issuance of long-term
indebtedness for purpose of such redemption) as paid by the
3
<PAGE> 7
Previous General Partner for the Class J Preferred Stock redeemed (the "Call
Date"), in the manner set forth herein; provided, however, that in the event of
a redemption of Class J Partnership Preferred Units, if the Call Date occurs
after a dividend record date for the Class J Preferred Stock and on or prior to
the related Distribution Payment Date, the distribution payable on such
Distribution Payment Date in respect of such Class J Partnership Preferred Units
called for redemption shall be payable on such Distribution Payment Date to the
holders of record of such Class J Partnership Preferred Units on the applicable
dividend record date, and shall not be payable as part of the redemption price
for such Class J Partnership Preferred Units.
(b) If the Partnership shall redeem Class J Partnership
Preferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash or other forms of consideration necessary to effect such redemption), (i)
except for payment of the redemption price, the Partnership shall not make any
further distributions on the Class J Partnership Preferred Units so called for
redemption, (ii) said units shall no longer be deemed to be outstanding, and
(iii) all rights of the holders thereof as holders of Class J Partnership
Preferred Units of the Partnership shall cease except the rights to receive the
cash payable upon such redemption, without interest thereon; provided, however,
that if a Call Date occurs after a dividend record date for the Class J
Preferred Stock and on or prior to the related Distribution Payment Date, the
full distribution payable on such Distribution Payment Date in respect of such
Class J Partnership Preferred Units called for redemption shall be payable on
such Distribution Payment Date to the holders of record of such Class J
Partnership Preferred Units on the applicable dividend record date
notwithstanding the prior redemption of such Class J Partnership Preferred
Units. No interest shall accrue for the benefit of the holders of Class J
Partnership Preferred Units to be redeemed on any cash set aside by the
Partnership.
6. STATUS OF REACQUIRED UNITS.
All Class J Partnership Preferred Units which shall have been issued
and reacquired in any manner by the Partnership shall be deemed cancelled.
7. CONVERSION.
Class J Partnership Preferred Units shall be convertible by the holders
thereof as follows:
(a) Upon any conversion of shares of Class J Preferred Stock
into shares of Common Stock, the General Partner shall cause a number of Class J
Partnership Preferred Units equal to the number of such converted shares of
Class J
4
<PAGE> 8
Preferred Stock to be converted by the holders thereof into Partnership Common
Units. The conversion ratio in effect from time to time for the conversion of
Class J Partnership Preferred Units into Partnership Common Units pursuant to
this Section 7 shall at all times be equal to, and shall be automatically
adjusted as necessary to reflect, the conversion ratio in effect from time to
time for the conversion of Class J Preferred Stock into Common Stock.
(b) Holders of Class J Partnership Preferred Units at the
close of business on a distribution payment record date shall be entitled to
receive the distribution payable on such units on the corresponding Distribution
Payment Date notwithstanding the conversion thereof following such distribution
payment record date and prior to such Distribution Payment Date. Except as
provided above, the Partnership shall make no payment or allowance for unpaid
distributions on converted units or for distributions on the Partnership Common
Units issued upon such conversion. Each conversion of Class J Partnership
Preferred Units into Partnership Common Units shall be deemed to have been
effected at the same time and date that the corresponding conversion of Class J
Preferred Stock into Common Stock is deemed to have been effected.
(c) No fractional Partnership Common Units shall be issued
upon conversion of Class J Partnership Preferred Units. Instead of any
fractional Partnership Common Units that would otherwise be deliverable upon the
conversion of Class J Partnership Preferred Units, the Partnership shall pay to
the holder of such converted units an amount in cash equal to the cash payable
to a holder of an equivalent number of converted shares of Class J Preferred
Stock in lieu of fractional shares of Common Stock.
(d) The Partnership will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of (i) the issue or delivery
of Partnership Common Units or other securities or property on conversion or
redemption of Class J Partnership Preferred Units pursuant hereto, and (ii) the
issue or delivery of Common Stock or other securities or property on conversion
or redemption of Class J Preferred Stock pursuant to the terms hereof.
8. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(a) prior or senior to the Class J Partnership Preferred
Units, as to the payment of distributions and as to distributions of assets upon
liquidation, dissolution or
5
<PAGE> 9
winding up, if the holders of such class or series shall be entitled to the
receipt of distributions and of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of Class J Partnership Preferred Units ("Senior Partnership Units");
(b) on a parity with the Class J Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or other
denomination thereof be different from those of the Class J Partnership
Preferred Units if (i) such class or series of Partnership Units shall be Class
B Partnership Preferred Units, Class C Partnership Preferred Units, Class D
Partnership Preferred Units, Class G Partnership Preferred Units or Class H
Partnership Preferred Units or (ii) the holders of such class or series of
Partnership Units and the Class J Partnership Preferred Units shall be entitled
to the receipt of distributions and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid distributions per unit or other denomination or liquidation
preferences, without preference or priority one over the other (the Partnership
Units referred to in clauses (i) and (ii) of this paragraph being hereinafter
referred to, collectively, as "Parity Partnership Units"); and
(c) junior to the Class J Partnership Preferred Units, as to
the payment of distributions and as to the distribution of assets upon
liquidation, dissolution or winding up, if (i) such class or series of
Partnership Units shall be Partnership Common Units or Class I High Performance
Partnership Units or (ii) the holders of Class J Partnership Preferred Units
shall be entitled to receipt of distributions or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of such class or series of Partnership Units (the
Partnership Units referred to in clauses (i) and (ii) of this paragraph being
hereinafter referred to, collectively, as "Junior Partnership Units").
9. SPECIAL ALLOCATIONS.
(a) Gross income and, if necessary, gain shall be allocated to
the holders of Class J Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class J
Partnership Preferred Units receive a distribution on any Class J Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(b) If any Class J Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary,
6
<PAGE> 10
for subsequent Fiscal Years) (a) gross income and gain (in such relative
proportions as the General Partner in its discretion shall determine) shall be
allocated to the holders of Class J Partnership Preferred Units to the extent
that the redemption amounts paid or payable with respect to the Class J
Partnership Preferred Units so redeemed exceeds the aggregate Capital
Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class J Partnership Preferred Unit allocable to the Class J
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class J Partnership Preferred Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class J Partnership Preferred Unit
allocable to the Class J Partnership Preferred Units so redeemed exceeds the
redemption amount paid or payable with respect to the Class J Partnership
Preferred Units so redeemed.
10. RESTRICTIONS ON OWNERSHIP.
The Class J Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
11. GENERAL.
(a) The ownership of Class J Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit A
to the Agreement from time to time to the extent necessary to reflect accurately
the issuance of, and subsequent conversion, redemption, or any other event
having an effect on the ownership of, Class J Partnership Preferred Units.
(b) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class J Partnership Preferred
Units, are in addition to and not in limitation of any other rights or authority
of the General Partner or the Special Limited Partner, respectively, in any
other capacity under the Agreement or applicable law. In addition, nothing
contained herein shall be deemed to limit or otherwise restrict the authority of
the General Partner or the Special Limited Partner under the Agreement, other
than in their capacity as holders of the Class J Partnership Preferred Units.
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 43,681
<SECURITIES> 4,830
<RECEIVABLES> 11,545
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 138,413
<PP&E> 2,727,699
<DEPRECIATION> 330,365
<TOTAL-ASSETS> 3,121,949
<CURRENT-LIABILITIES> 131,799
<BONDS> 1,275,401
0
391,250
<COMMON> 483
<OTHER-SE> 1,129,794
<TOTAL-LIABILITY-AND-EQUITY> 3,121,949
<SALES> 0
<TOTAL-REVENUES> 279,668
<CGS> 0
<TOTAL-COSTS> 177,438
<OTHER-EXPENSES> 6,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,756
<INCOME-PRETAX> 51,844
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,844
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,844
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.79
</TABLE>
