SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): May 22, 2000
HOME PROPERTIES OF NEW YORK, INC.
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(Exact name of registrant as specified in its charter)
Maryland 1-13136 16-1455126
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
850 Clinton Square, Rochester, New York 14604
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (716)546-4900
Not Applicable
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(Former name or former address, if changed since last report.)
<PAGE>
Item 5. OTHER EVENTS
On May 22, 2000, the Registrant entered into a Purchase Agreement with
The Prudential Insurance Company of America and Teachers Insurance and Annuity
Association of America (the "Purchasers") whereby the Registrant agreed to sell
to each of the Purchasers 200,000 shares of Series C Convertible Cumulative
Preferred Stock.
The related press release is attached hereto as Exhibit 99.1. The
Purchase Agreement is attached hereto as Exhibit 10.1 and the related Articles
Supplementary are attached hereto as Exhibit 3.1.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
c. Exhibits
Exhibit 3.1 Articles Supplementary
Exhibit 10.1 Purchase Agreement between Home Properties of New
York, Inc., The Prudential Insurance Company of America and
Teachers Insurance and Annuity Association of America.
Exhibit 99.1 Press Release
<PAGE>
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.
Dated: May 22, 2000 HOME PROPERTIES OF NEW YORK, INC.
(Registrant)
By: /s/ Amy L. Tait
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Amy L. Tait, Executive Vice President
EXHIBIT 3.1
Series C Convertible Cumulative
Preferred Stock
ARTICLES SUPPLEMENTARY
HOME PROPERTIES OF NEW YORK, INC.
Articles Supplementary Classifying and Designating a Series of
Preferred Stock as
Series C Convertible Cumulative
Preferred Stock and
Fixing Distribution and Other Preferences
and Rights of Such Series
Dated as of May 19, 2000
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
Articles Supplementary
Classifying and Designating a Series of
Preferred Stock as
Series C Convertible Cumulative
Preferred Stock and
Fixing Distribution and Other Preferences
and Rights of Such Series
Home Properties of New York, Inc., a Maryland corporation (the
"CORPORATION"), hereby certifies to the State Department of Assessments and
Taxation of Maryland pursuant to section 2-602(b) of the Annotated Code of
Maryland that:
FIRST: Pursuant to authority granted by the Amended and Restated Articles
of Incorporation of the Corporation, the Board of Directors adopted a
resolution at a meeting held on April 25, 2000 designating and classifying
600,000 unissued and undesignated shares of preferred stock as Series C
Convertible Cumulative Preferred Stock.
SECOND: The following is a description of the Series C Convertible
Cumulative Preferred Stock, including the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption thereof:
Section 1. NUMBER OF SHARES AND DESIGNATION. This class of preferred
stock shall be designated as Series C Convertible Cumulative Preferred Stock
and the number of shares which shall constitute such series shall not be more
than 600,000 shares, par value $0.01 per share, which number may be decreased
(but not below the number thereof then outstanding) from time to time by the
Board of Directors, or increased by the Board of Directors with the consent of
the holders of two-thirds of the Series C Preferred Stock outstanding at that
time.
Section 2. DEFINITIONS. For purposes of the Series C Preferred Stock,
the following terms shall have the meanings indicated:
"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 Series 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 City, New York are not required to be open.
<PAGE>
"CALL DATE" shall mean the date specified in the notice to holders
required under Section 5(e) as the Call Date.
"CHANGE OF CONTROL" shall mean each occurrence of any of the
following:
(i) the acquisition, directly or indirectly, by any individual or
entity or group (as such term is used in Section 13(d)(3) of the
Exchange Act) of beneficial ownership (as defined in Rule 13d-3
under the Exchange Act, except that such individual or entity shall
be deemed to have beneficial ownership of all shares that any such
individual or entity has the right to acquire, whether such right
is exercisable immediately or only after passage of time) of more
than 25% of the voting power, under ordinary circumstances, to
elect directors of the Corporation or more than 25% of the equity
interests in the Operating Partnership;
(ii)(A) the Corporation consolidates with or merges into another
entity or conveys, transfers, or leases outside the ordinary course
of business all or substantially all of its assets (including, but
not limited to, real property investments) to any individual or
entity, or (B) any entity consolidates with or merges into the
Corporation which, in the case of a merger or consolidation under
(A) or (B) is pursuant to a transaction in which the outstanding
Common Stock is reclassified or changed into or exchanged for cash,
securities or other property; PROVIDED, HOWEVER, that the events
described in this clause (ii) shall not be deemed to be a Change of
Control if the sole purpose and effect of such event is that the
Corporation is seeking to change its domicile or to change its form
of organization from a corporation to a statutory business trust;
or
(iii) other than with respect to the election, resignation or
replacement of any director designated, appointed or elected by the
holders of the Series A Preferred Stock or any other series of
preferred stock of the Corporation (each a "PREFERRED DIRECTOR"),
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the
Corporation (together with any new directors whose election by such
Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of a
majority of the directors of the Corporation (excluding Preferred
Directors) then still in office who were either directors at the
beginning of such period, or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
"CHANGE OF CONTROL PRICE" shall mean: (i) from and after the first
anniversary of the Issue Date through the day preceding the fifth
anniversary of the Issue Date, an amount per share of Series C Preferred
Stock equal to the Stated Value plus an amount equal to a 15% annual
return thereon from the Issue Date until the date of redemption of such
share of Series C Preferred Stock, compounded annually, less an amount
equal to the sum of the aggregate amount of cash dividends theretofore
paid or payable concurrently with such redemption on such share of Series
C Preferred Stock, plus an amount equal to a 15% annual return on such
cash dividends from the date of payment until the date of redemption of
such share of Series C Preferred Stock and (ii) beginning on the fifth
anniversary of the Issue Date, an amount equal to 100% of the Liquidation
Preference.
"CHANGE OF CONTROL RATE" shall have the meaning set forth in
Section 3(d).
"COMMON STOCK" shall mean the shares of Common Stock, par value
$0.01 per share, of the Corporation.
"CONSTITUENT PERSON" shall have the meaning set forth in Section
7(e).
"CONVERSION ADJUSTMENT PRICE" shall mean the price per share of
Common Stock which is the lesser of: (i) $29.95 (which shall be adjusted
in the case of any combination, (by reverse stock split or otherwise), of
its outstanding shares of Common Stock into a smaller number of shares);
or (ii) the Conversion Price.
"CONVERSION PRICE" shall mean the conversion price per share of
Common Stock into which the shares of Series C Preferred Stock are
convertible, as such Conversion Price may be adjusted pursuant to Section
7. The initial conversion price shall be $ 30.25 (equivalent to a
conversion rate of 3.30579 shares of Common Stock for each share of
Series C Preferred Stock).
"CURRENT MARKET PRICE" of publicly traded shares of Common Stock or
any other class of shares of capital stock or other security of the
Corporation or any other issuer for any day shall mean the last reported
sales 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 on such
day, regular way, in either case as reported on the New York Stock
Exchange ("NYSE") or, if such security is not listed or admitted for
trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, if not listed
or admitted for trading on any national securities exchange, on the
NASDAQ Stock Market ("NASDAQ") National Market System or, if such
security is not quoted on such National Market System, 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 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 NYSE member firm
regularly making a market in such security selected for such purpose by
the Board of Directors.
"DIVIDEND PAYMENT DATE" shall mean (i) for any Dividend Period with
respect to which the Corporation pays a dividend on the Common Stock, the
date on which such dividend is paid, or (ii) for any Dividend Period with
respect to which the Corporation does not pay a dividend on the Common
Stock, the last day of each month of February, May, August and November
or, if such date is not a Business Day, the next succeeding Business Day.
"DIVIDEND PAYMENT RECORD DATE" shall mean the date on which record
is to be taken for purposes of any dividend payment to be made on the
Series C Preferred Stock, which shall be the same date on which record is
to be taken for purposes of any dividend payment to be made on the Common
Stock, or if a dividend is not to be paid on the Common Stock on a date
selected by the Board of Directors.
"DIVIDEND PERIODS" shall mean quarterly dividend periods commencing
on 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 initial Dividend Period, which shall
commence on the Issue Date and end on and include the last calendar day
of the calendar quarter containing the Issue Date, and other than the
Dividend Period during which any shares of Series C Preferred Stock shall
be redeemed pursuant to Section 5 or repurchased pursuant to Section 6,
which shall end on and include the Call Date with respect to the shares
of Series C Preferred Stock being redeemed or the Repurchase Date for the
shares being repurchased, as the case may be).
"EFFECTIVE DATE" shall have the meaning set forth in Section 7(f).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXPIRATION TIME" shall have the meaning set forth in Section
7(d)(iv).
"FULLY JUNIOR STOCK" shall mean the Common Stock and any other
class or series of shares of capital stock of the Corporation now or
hereafter issued and outstanding over which the Series C Preferred Stock
has preference or priority in both (i) the payment of dividends and (ii)
the distribution of assets on any liquidation, dissolution or winding up
of the Corporation.
"FUNDAMENTAL CHANGE" shall mean each occurrence of any of the
following:
(i) the acquisition, directly or indirectly, by any Person of
Beneficial Ownership (as defined in the Amended and Restated
Articles of Incorporation of the Corporation) of more than 25% of
the Corporation's outstanding capital stock or more than 25% of the
voting power, under ordinary circumstances, to elect directors of
the Corporation or more than 25% of the equity interests in the
Operating Partnership;
(ii) other than with respect to the election, resignation or
replacement of any Preferred Director or the election of a new
director in replacement of any director who has died or resigned
(each a "Replacement Director"), during any period of two
consecutive years, the Board of Directors fails to nominate for
election by the stockholders of the Corporation a majority of the
individuals who at the beginning of such period constitute the
Board of Directors (together with any new directors whose election
by such Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of a
majority of the directors of the Corporation (excluding Preferred
Directors and Replacement Directors) then still in office who were
either directors at the beginning of such period, or whose election
or nomination for election was previously so approved);
(iii) the Corporation or one of its wholly-owned Subsidiaries is
not the sole general partner of the Operating Partnership;
(iv) the Corporation or any direct or indirect subsidiary of the
Corporation, in one transaction or a series of related
transactions, sells all or substantially all of the assets of the
Corporation and the Operating Partnership; acquires from any
individual or entity, whether by way of merger, consolidation,
purchase of stock or assets, lease or other form of business
combination, any entity, assets or business for aggregate
consideration payable in cash, securities, other property or any
combination of the foregoing, with a fair market value (as
determined in good faith by the Board of Directors of the
Corporation) exceeding 50% of Total Market Capitalization
determined prior to giving effect to the transaction or series of
related transactions described in this clause (iv) or in exchange
for a number of shares of Common Stock or common equity interests
of the Operating Partnership (or securities convertible into,
exercisable for or exchangeable for such securities) representing,
in the aggregate, more than 40% of the combined sum of the shares
outstanding immediately prior to such transaction or series of
related transactions of Common Stock and the common equity
interests in the Operating Partnership not held by the Corporation
or any direct or indirect subsidiary immediately prior to such
transaction or series of related transactions;
(v) the Corporation effects any recapitalization or restructuring
as a result of which more than 25% of the Common Stock is
reclassified into shares of preferred stock or changed into or
exchanged for cash, preferred stock, evidences of indebtedness,
other property (other than Common Stock of the Corporation) or any
combination of the foregoing;
(vi) the Corporation shall have incurred or suffered to exist
Indebtedness (as defined in the Purchase Agreement) exceeding 65%
of Total Value and such condition continues to exist 30 days; or
(vii) the de-listing by the Corporation or failure by the
Corporation to take reasonable actions within its control to not
maintain the listing of its Common Stock on the New York Stock
Exchange.
"FUNDS FROM OPERATIONS" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles) excluding gains
(or losses) from debt restructuring, and distributions in excess of
earnings allocated to other Operating Partnership interests or minority
interests (as reflected in the financial statements of the Corporation)
plus depreciation/amortization of assets unique to the real estate
industry, all computed in a manner consistent with the revised definition
of Funds From Operations adopted by the National Association of Real
Estate Investment Trusts (NAREIT), in its White Paper dated October,
1999, as such definitions may be modified from time to time, as
determined by the Corporation in good faith.
"ISSUE DATE" shall mean the date on which the shares of Series C
Preferred Stock are issued.
"JUNIOR STOCK" shall mean the Common Stock and any other class or
series of capital stock of the Corporation now or hereafter issued and
outstanding over which the Series C Preferred Stock has preference or
priority in the payment of dividends or in the distribution of assets on
any liquidation, dissolution or winding up of the Corporation.
"LIQUIDATION PREFERENCE" shall have the meaning set forth in
Section 4(a).
"NON-ELECTING SHARE" shall have the meaning set forth in Section
7(e).
"OPERATING PARTNERSHIP" shall mean Home Properties of New York,
L.P., and a New York limited partnership.
"PARITY STOCK" shall have the meaning set forth in Section 9(b).
"PERSON" shall mean any individual, firm, partnership, corporation,
limited liability company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"PURCHASED SHARES" shall have the meaning set forth in Section
7(d)(iv).
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
May ___, 2000 by and among the Corporation, the Operating Partnership and
The Prudential Insurance Company of America and Teachers Insurance and
Annuity Association of America.
"RECORD DATE" shall have the meaning set forth in Section 7(f).
"REDEMPTION PRICE" shall have the meaning set forth in Section
5(a).
"REIT TERMINATION EVENT" shall mean the earliest to occur of:
(i) the filing of a federal income tax return by the Corporation
for any taxable year on which the Corporation does not elect
to be taxed as a real estate investment trust;
(ii) the approval by the stockholders of the Corporation of a
proposal for the Corporation to cease to qualify as a real
estate investment trust;
(iii) the public announcement by the Corporation that it has ceased
to qualify as a real estate investment trust;
(iv) a determination by the Board of Directors of the Corporation,
based on the advice of counsel, that the Corporation has
ceased to qualify as a real estate investment trust; or
(v) the Corporation or its duly authorized representatives shall
receive a determination or conclusion, whether in proposed or
final form, from the Internal Revenue Service or one of its
representatives that the Corporation has failed to meet the
requirements for REIT qualification and taxation as a REIT
under Sections 856-860 of the Internal Revenue Code of 1986,
as amended, for one or more taxable years, occurring from and
after January 1, 1994, including, without limitation, a
statutory notice of deficiency, a notice of proposed
deficiency, a proposed or final revenue agent's report, a
Field Service Advice, Technical Advice Memorandum, or similar
conclusion; PROVIDED, HOWEVER, that if the determination or
conclusion is in proposed or draft form, such receipt shall
not constitute a "REIT Termination Event" unless such
determination or conclusion is not withdrawn or otherwise
terminated within 270 days following such receipt, or if the
Corporation receives an opinion of its independent counsel or
accountants that the Corporation's REIT status should be
upheld.
"REPURCHASE DATE" shall mean the date of repurchase of the shares
of Series C Preferred Stock or the date such payment is made available as
provided in Section 6(a)(iii).
"REPURCHASE OFFER" shall have the meaning set forth in Section
6(a)(ii).
"REPURCHASE PRICE" shall have the meaning set forth in Section
6(a)(i).
"SECURITIES" and "SECURITY" shall have the meanings set forth in
Section 7(d)(iii).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SENIOR STOCK" shall mean any class or series of capital stock of
the Corporation hereafter issued and outstanding which has preference or
priority over the Series C Preferred Stock in the payment of dividends or
in the distribution of assets on any liquidation, dissolution or winding
up of the Corporation.
"SERIES C PREFERRED STOCK" shall mean the shares of Series C
Convertible Cumulative Preferred 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 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 shares 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 shares of capital stock ranking on a parity with the
Series C Preferred Stock as to the payment of dividends 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
Series C Preferred Stock shall mean placing such funds in a separate
account or delivering such funds to a disbursing, paying or other similar
agent.
"STATED VALUE" shall mean $100.00 per share of Series C Preferred
Stock.
"TOTAL VALUE" shall mean as of any date the sum of: (i) the
Undepreciated Real Estate Assets; and (ii) all other assets of the
Corporation and its subsidiaries on a consolidated basis determined in
accordance with GAAP (but excluding intangibles and accounts receivable).
"TRADING DAY" shall mean any day on which the securities in
question are traded on the NYSE, or if such securities are not listed or
admitted for trading on the NYSE, on the principal national securities
exchange on which such securities are listed or admitted, or if not
listed or admitted for trading on any national securities exchange, on
the National Market System of NASDAQ, or if such securities are not
quoted on such National Market System, in the securities market in which
the securities are traded.
"TRANSACTION" shall have the meaning set forth in Section 7(e).
"TRANSFER AGENT" shall mean Chase Mellon Shareholder Services or
such other agent or agents of the Corporation as may be designated by the
Board of Directors or their designee as the transfer agent, registrar and
dividend disbursing agent for the Series C Preferred Stock.
"UNDEPRECIATED REAL ESTATE ASSETS" shall mean as of any date the
cost (original cost plus capital improvements) of real estate assets of
the Corporation and its subsidiaries on such date, before depreciation,
amortization, or other market value adjustments (as such market value
adjustments would otherwise be required by GAAP) determined on a
consolidated basis in accordance with GAAP.
"UNITS" shall mean Partnership Units as that term is defined in the
Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership, as amended.
"VOTING PREFERRED STOCK" shall have the meaning set forth in
Section 10.
Section 3. DIVIDENDS.
(a) The holders of shares of Series C Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors,
out of funds legally available for the payment of dividends accrued,
cumulative preferential dividends payable in arrears in cash in an amount
per share equal to the greatest of: (i) 8.75% of the Stated Value per
annum (equivalent to $ 8.75 per share of Series C Preferred Stock), (ii)
the ordinary cash dividends (determined on each Dividend Payment Date) on
the shares of Common Stock, or portion thereof, into which a share of
Series C Preferred Stock is convertible; or (iii) 9.25% if Section 3(c)
is applicable, 11.25% if either Sections 5(f) or 6(d) is applicable,
11.75% if both Section 3(c) and either of Sections 5(f) or 6(d) is
applicable and the Change of Control Rate if Section 3(d) is applicable.
The dividends referred to in clause (ii) of the preceding sentence shall
equal the number of shares of Common Stock, or portion thereof, into
which a share of Series C Preferred Stock is convertible, multiplied by
the most current quarterly dividend on a share of Common Stock declared
on or before the applicable Dividend Payment Date. If the Corporation
declares and pays an ordinary cash dividend on the Common Stock with
respect to a Dividend Period after a Dividend Payment Date is determined
pursuant to clause (ii) of the definition of Dividend Payment Date and
the dividend calculated pursuant to clause (ii) of this paragraph (a)
with respect to such Dividend Period is greater than the dividend
previously declared on the Series C Preferred Stock with respect to such
Dividend Period, the Corporation shall pay an additional dividend to the
holders of the Series C Preferred Stock on the date on which the dividend
on the Common Stock is paid, in an amount equal to the difference between
(y) the dividend calculated pursuant to clause (ii) of this paragraph (a)
and (z) the amount of dividends previously declared on the Series C
Preferred Stock with respect to such Dividend Period.
The dividends shall begin to accrue and shall be fully cumulative
from the first day of the applicable Dividend Period, whether or not in
any Dividend Period or Periods there shall be funds of the Corporation
legally available for the payment of such dividends, and shall be payable
quarterly in arrears, when, as and if declared by the Board of Directors,
on Dividend Payment Dates. Each such dividend shall be payable in
arrears to the holders of record of shares of Series C Preferred Stock as
they appear in the records of the Corporation at the close of business on
such record dates, not fewer than five (5) nor more than 50 days
preceding such Dividend Payment Dates thereof, as shall be fixed by the
Board of Directors. To the extent that a dividend required by this
Section 3 is not paid on any Dividend Payment Date, the amount not paid
shall accumulate and accrue interest at the annual rate of 8.75%, or if
Section 3(c) is applicable, 9.25%, or if either Section 5(f) or 6(d) is
applicable, 11.25%, or if both Section 3(c) and either of Sections 5(f)
or 6(d) is applicable, 11.75%, or if Section 3(d) is applicable, the
Change of Control Rate, compounded quarterly on each Dividend Payment
Date that it remains unpaid. Accrued and unpaid dividends (and any
interest thereon) for any past Dividend Periods may be declared and paid
at any time and for such interim periods, without reference to any
regular Dividend Payment Date, to holders of record on such date, not
fewer than five (5) nor more than 50 days preceding the payment date
thereof, as may be fixed by the Board of Directors. Any dividend payment
made on Series C Preferred Stock shall first be credited against the
earliest accrued but unpaid dividend due with respect to Series C
Preferred Stock which remains payable.
(b) The amount of dividends referred to in clause (i) and (iii) of
Section 3(a) payable for each full Dividend Period on the Series C
Preferred Stock shall be computed by dividing the annual dividend rate by
four. The initial Dividend Period will include a partial dividend for
the period from the Issue Date until the last calendar day of the
calendar quarter containing the Issue Date. The amount of dividends
payable either under clause (i), clause (ii) or clause (iii) for such
period, or any other period shorter than a full Dividend Period, on the
Series C Preferred Stock shall be computed on the basis of a 360-day
year of twelve 30-day months and the amount of such dividend shall equal
the dividend payable with respect to the Dividend Period multiplied by a
fraction (x) the numerator of which is (i) the number of days from the
Issue Date to the end of the Dividend Period, or (ii) the number of days
from the beginning of the Dividend Period to the Call Date or the
Repurchase Date, as the case may be, and (y) the denominator of which is
90. Holders of shares of Series C Preferred Stock shall not be entitled
to any dividends, whether payable in cash, property or shares, in excess
of cumulative dividends, as herein provided, on the Series C Preferred
Stock.
(c) If at any time the Corporation shall have breached the
covenants set forth in Section 5.07, Section 5.08 or Section 5.13 of the
Purchase Agreement, the dividend rate payable upon the shares of Series C
Preferred Stock pursuant to paragraph (a) (i) of this Section 3 shall be
increased to 9.25% per annum, from the date of such breach until the date
such breach shall have been cured and shall no longer be continuing,
subject to revesting in the event of any subsequent breach of such
covenant which continues as aforesaid. For purposes of this Section
3(c), the date of breach shall be deemed to mean the first day on which
such breach occurs. If the existence of such breach is determined after
the dividend record date for the quarter in which the breach occurred
(the "Default Quarter"), then the dividend for the next quarter shall
equal the sum of the dividend as computed in accordance with this Section
3 plus an amount equal to the difference between the dividend actually
paid in the Default Quarter and the dividend that would have been paid
for the Default Quarter if the breach had been known by the Corporation
on the record date of the Default Quarter.
(d) If at any time a Change of Control shall occur, the dividend
rate payable upon the shares of Series C Preferred Stock shall be
increased from and after the date of such Change of Control to a per
annum rate equal to 8.00% above the then published (in the Wall Street
Journal) U.S. Treasury maturing on the date closest to the five year
anniversary of the date the Change of Control occurs, such rate to be
fixed as of the date such Change of Control occurs (the "CHANGE OF
CONTROL RATE").
(e) So long as any shares of Series C Preferred Stock are
outstanding, no dividends, except as described in the immediately
following sentence, shall be declared or paid or set apart for payment on
any class or series of Parity Stock for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment on the Series C Preferred Stock for all Dividend Periods
terminating on or prior to the dividend payment date on 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 Series C Preferred Stock and all dividends declared upon
any other class or series of Parity Stock (having cumulative dividend
rights) shall be declared ratably in proportion to the respective amounts
of dividends accumulated and unpaid on the Series C Preferred Stock and
accumulated and unpaid on such Parity Stock.
(f) So long as any shares of Series C Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid
solely in shares of, or options, warrants or rights to subscribe for or
purchase shares of, Fully Junior Stock) shall be declared or paid or set
apart for payment or other distribution shall be declared or made or set
apart for payment upon Junior Stock, nor shall any 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 Junior Stock) by the Corporation,
directly or indirectly (except by conversion into or exchange for Fully
Junior Stock), unless in each case (i) the full cumulative dividends (and
interest thereon) on all outstanding Senior Stock, Series C Preferred
Stock and any other Parity Stock of the Corporation shall have been or
contemporaneously are declared and paid or declared and set apart for
payment for all dividend periods with respect to the Senior Stock, all
past Dividend Periods with respect to the Series C Preferred Stock and
all past dividend periods with respect to such Parity Stock, (ii)
sufficient funds shall have been or contemporaneously are set apart for
the payment in full of the dividend for the current dividend period with
respect to the Senior Stock, the current Dividend Period with respect to
the Series C Preferred Stock and the current dividend period with respect
to such Parity Stock and (iii) sufficient funds shall have been or
contemporaneously are set apart for payment in full of any obligations of
the Corporation in respect of Series C Preferred Stock called for
redemption by the Corporation pursuant to Section 5 or required to be
repurchased by any Holder pursuant to Section 6.
(g) No distributions on Series C Preferred Stock shall be declared
by the Board of Directors or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of
the Corporation, including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for payment or
provides that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration or payment shall be restricted or prohibited by law.
Section 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 assets 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 the Series C Preferred Stock shall be entitled
to receive the greater of (x) One Hundred Dollars ($100.00) per share of
Series C Preferred Stock plus an amount equal to all dividends (whether
or not declared) accumulated, accrued and unpaid thereon (and any
interest thereon as calculated pursuant to Section 3(a)) to the date of
final distribution to such holders or (y) the amount per share a holder
would receive if such holder converted his or her Series C Preferred
Stock into Common Stock immediately prior to such liquidation,
dissolution or winding-up, (the "LIQUIDATION PREFERENCE"); but such
holders shall not be entitled to any further payment; PROVIDED, that the
dividend payable with respect to the Dividend Period containing the date
of final distribution shall be equal to the greater of (i) the dividend
provided in Section 3(a)(i) or (iii) as applicable or (ii) the dividend
determined pursuant to Section 3(a)(ii) for the preceding Dividend
Period. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of the shares of Series 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 Series C Preferred Stock and any such
other Parity Stock ratably in accordance with the respective amounts that
would be payable on such Series 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, real estate investment trusts
or other entities, (ii) a sale, lease or conveyance of all or
substantially all of the Corporation's property or business, 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) Subject to the rights of the holders of shares of any series or
class or classes of shares of capital stock ranking on a parity with or
prior to the Series C Preferred Stock upon liquidation, dissolution or
winding up, upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of
the Series C Preferred Stock, as provided in this Section 4, any other
series or class or classes of Junior Stock shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the
holders of the Series C Preferred Stock shall not be entitled to share
therein.
(c) Notwithstanding subclause (a) above, at any time prior to the
payment of the Liquidation Preference, the holders of the Series C
Preferred Stock may exercise their conversion rights pursuant to Section
7 hereof.
Section 5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Except as provided in paragraph (b) below, the Series C
Preferred Stock shall not be redeemable by the Corporation prior to the
fifth anniversary of the Issue Date. The Series C Preferred Stock may be
redeemed, in whole, but not in part, at the option of the Corporation at
any time on or after the fifth anniversary of the Issue Date out of funds
legally available therefor at a redemption price payable in cash equal to
the Stated Value per share of Series C Preferred Stock (the "REDEMPTION
PRICE").
(b) If a Change of Control shall occur on or after the first
anniversary of the Issue Date, the Corporation shall have the right, to
the extent that the Corporation shall have funds legally available
therefor, to redeem, in whole, but not in part, the outstanding shares of
Series C Preferred Stock at a redemption price payable in cash in an
amount equal to the Change of Control Price, by notice in writing to the
holders of Series C Preferred Stock no later than 30 days following the
occurrence of such Change of Control.
(c) Upon any redemption of shares of Series C Preferred Stock
pursuant to this Section 5, and except for dividends paid pursuant to the
next sentence, the Corporation shall pay all dividends (whether or not
declared) accumulated, accrued and unpaid thereon (and any interest
thereon), if any, to the Call Date. If the Call Date falls after a
Dividend Payment Record Date and prior to the corresponding Dividend
Payment Date, then each holder of shares of Series C Preferred Stock at
the close of business on such Dividend Payment Record Date shall be
entitled to the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding any redemption of such shares
before such Dividend Payment Date.
(d) If full cumulative dividends on the Series C Preferred Stock
and any other class or series of Parity Stock of the Corporation have not
been declared and paid or declared and set apart for payment, the Series
C Preferred Stock may not be redeemed under paragraph (a) or (b) of this
Section 5 and, except as provided in Section 6(b) of the Purchase
Agreement, the Corporation may not purchase or acquire shares of Series C
Preferred Stock, otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of Series C Preferred Stock. The
Corporation may not exercise its redemption rights pursuant to Section 5
(a) or (b) above unless there are sufficient legally available funds to
redeem all shares of Series C Preferred Stock. Notwithstanding anything
contained in this Section 5 to the contrary, at any time prior to the
Call Date, the holders of the Series C Preferred Stock may exercise their
conversion rights pursuant to Section 7 hereof.
(e) Notice of the redemption of any shares of Series C Preferred
Stock under this Section 5 shall be mailed by overnight courier or
registered U.S. mail to each holder of record of shares of Series C
Preferred Stock to be redeemed at the address of each such holder as
shown on the Corporation's records, not fewer than 30 nor more than 60
days prior to the Call Date. Neither the failure to mail any notice
required by this paragraph (e), 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
mailed notice shall state, as appropriate: (1) the Call Date; (2) the
redemption price; (3) the place or places at which certificates for such
shares are to be surrendered; (4) the then-current Conversion Price; and
(5) that dividends on the shares to be redeemed shall cease to accrue on
such Call Date except as otherwise provided herein. Notice having been
mailed as aforesaid, from and after the Call Date (unless the Corporation
shall fail to make available an amount of cash necessary to effect such
redemption), (i) except as otherwise provided herein, dividends on the
shares of Series C Preferred Stock so called for redemption shall cease
to accrue, (ii) such shares shall no longer be deemed to be outstanding,
and (iii) all rights of the holders thereof as holders of shares of
Series C Preferred Stock of the Corporation shall cease (except the
rights to convert or to receive the redemption price, without interest
thereon, upon surrender and endorsement of their certificates if so
required and to receive any dividends accrued and payable thereon to the
Call Date). The Corporation's obligation to provide cash 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 an office in the
Borough of Manhattan, City of New York, and that has, or is an affiliate
of a bank or trust company that has, capital and surplus of at least
$500,000,000, the funds in cash necessary for such redemption, in trust,
with irrevocable instructions that such cash be applied to the redemption
of the shares of Series C Preferred Stock so called for redemption. No
interest shall accrue for the benefit of the holders of shares of Series
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 six (6) months from the Call Date shall revert to the
general funds of the Corporation, after which reversion the holders of
such shares so called for redemption shall look only to the general funds
of the Corporation for the payment of such cash.
Immediately after the surrender in accordance with such notice of
the certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Corporation shall so require and if the
notice shall so state), such shares shall be exchanged for the Redemption
Price or Change of Control Price, as applicable, (without interest
thereon) for which such shares have been redeemed.
(f) If the Corporation does not pay the full Redemption Price, in
accordance with this Section 5 (in circumstances where the Redemption
Price is not the Change of Control Price), the dividend rate payable upon
the shares of Series C Preferred Stock pursuant to Section 3(a) of these
Articles Supplementary shall be increased to 11.25% per annum, from the
date of such failure until the full Redemption Price has been paid.
Section 6. REPURCHASE UPON FUNDAMENTAL CHANGE OR REIT TERMINATION EVENT.
(a) If a Fundamental Change or REIT Termination Event shall
occur:
(i) Each holder of shares of Series C Preferred Stock shall have
the right to require the Corporation, to the extent that the
Corporation shall have funds legally available therefor, to
repurchase, in whole or in part, such holder's shares of
Series C Preferred Stock held on the date that such holder
receives the notice described in subsection 6(a)(ii) at a
repurchase price (the "REPURCHASE PRICE") payable in cash in
an amount equal to 105% of the Stated Value plus an amount
equal to all dividends (whether or not declared),
accumulated, accrued and unpaid thereon (and any interest
thereon) to the date of the repurchase in each case as
described below; PROVIDED, HOWEVER, that if a REIT
Termination Event or Fundamental Change occurs subsequent to
five (5) years following the Issue Date, the Repurchase Price
shall equal 100% of the Stated Value plus an amount equal to
all dividends (whether or not declared), accumulated, accrued
and unpaid thereon (and any interest thereon) to the date of
the repurchase.
(ii) Within ten (10) days following the Corporation becoming aware
that a Fundamental Change or REIT Termination Event has
occurred, the Corporation shall mail by overnight courier or
registered U.S. mail a notice (the "REPURCHASE OFFER") to
each holder of shares of Series C Preferred Stock stating (A)
that a Fundamental Change or REIT Termination Event has
occurred, describing in general terms the nature of such
event, and that such holder has the right to require the
Corporation to repurchase all shares of Series C Preferred
Stock then held by such holder in cash; (B) the Repurchase
Date (which shall be a Business Day, no earlier than 30 days
and no later than 60 days from the date such notice is
mailed, or such later date as may be necessary to comply with
the requirements of the Exchange Act); (C) the Repurchase
Price; (D) the place or places at which certificates for such
shares are to be surrendered; (E) that dividends on the
shares to be repurchased shall cease to accrue on such
Repurchase Date except as otherwise provided herein; and
(F) the instructions determined by the Corporation,
consistent with this subsection, that such holder must follow
in connection with the repurchase of its shares of Series C
Preferred Stock.
(iii) On the Repurchase Date, the Corporation shall, to the extent
lawful (and to the extent any payment is unlawful, promptly
after the date on which such payment thereafter becomes
lawful), accept for payment the shares of Series C Preferred
Stock tendered pursuant to the Repurchase Offer described in
Subsection 6(a)(ii). The Corporation's obligation to provide
cash in accordance with Subsection 6(a)(ii) shall be deemed
fulfilled if, on or before the Repurchase Date, the
Corporation shall deposit with a bank or trust company (which
may be an affiliate of the Corporation) that has an office in
the Borough of Manhattan, City of New York, and that has, or
is an affiliate of a bank or trust company that has, capital
and surplus of at least $500,000,000, the funds necessary for
such repurchase of all shares of Series C Preferred Stock so
tendered, in trust, with irrevocable instructions that such
funds be applied to the repurchase of the shares of Series C
Preferred Stock so tendered for repurchase. No interest
shall accrue for the benefit of the holders of shares of
Series C Preferred Stock to be repurchased on any funds so
set aside by the Corporation. Subject to applicable escheat
laws, any such funds unclaimed at the end of six months from
the Repurchase Date shall revert to the general funds of the
Corporation, after which reversion the holders of such shares
so called for repurchase shall look only to the general funds
of the Corporation for the payment of such funds.
(iv) Immediately after the surrender in accordance with such
notice of the certificates for any such shares so repurchased
(properly endorsed or assigned for transfer, if the
Corporation shall so require and if the notice shall so
state), such shares shall be exchanged for any cash (without
interest thereon) for which such shares have been
repurchased.
(b) Notwithstanding anything else herein, to the extent they are
applicable to any such repurchase, the Corporation will comply with any
federal and state securities laws, rules and regulations and all time
periods and requirements shall be adjusted accordingly.
(c) The Corporation may, upon ten (10) Business Days' advance
notice to each holder of the Series C Preferred Stock of a Fundamental
Change, request a waiver of such holder's rights under this Section 6;
PROVIDED, HOWEVER, that the failure of any holder to respond to or
otherwise act upon such request shall not be deemed to create or imply a
waiver or otherwise affect any holder's rights under this Section 6.
(d) If the Corporation does not pay the full Repurchase Price in
accordance with this Section 6, the dividend rate payable upon the shares
of Series C Preferred Stock pursuant to Section 3(a) of these Articles
Supplementary shall be increased to 11.25% per annum, from the date of
such failure until the full Repurchase Price has been paid.
Section 7. CONVERSION. Holders of shares of Series C 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 and the provisions of Article VII of the Corporation's Articles
of Incorporation, a holder of shares of Series C Preferred Stock shall
have the right, at any time, at his or her option, to convert such shares
into the number of fully paid and non-assessable shares of Common Stock
obtained by dividing the aggregate Stated Value of such shares plus any
accumulated, accrued and unpaid dividends (except for the quarter in
which the conversion occurred, whether or not declared) (and any interest
thereon through the date of conversion) by the Conversion Price (as in
effect at the time and on the date provided for in the last paragraph of
paragraph (b) of this Section 7).
(b) In order to exercise the conversion right, the holder of each
share of Series C 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 Series C Preferred Stock. Unless the shares
issuable on conversion are to be issued in the same name as the name in
which such Series C Preferred Stock is registered, each share surrendered
for conversion shall be accompanied by instruments of transfer, in form
reasonably 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 Series C 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. The
Corporation shall make no payment or allowance for undeclared dividends
on the shares of Series C Preferred Stock that would have accrued
otherwise in the quarter in which the conversion occurred.
As promptly as practicable after the surrender of certificates for
shares of Series C Preferred Stock as aforesaid (and in any event within
three (3) business days following such surrender), the Corporation shall
issue and shall deliver at such office to such holder, or on his or her
written order, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such shares 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. In addition,
the Corporation shall issue and deliver to such a holder a certificate or
certificates evidencing any shares of Series C Preferred Stock that were
evidenced by the certificate or certificates delivered to the Corporation
in connection with such conversion but that were not converted.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for
the shares of Series C Preferred Stock to be converted shall have been
surrendered and such notice shall have been 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 share 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 share transfer books
are open, but such conversion shall be at the Conversion Price in effect
on the date on which such surrendered shares shall have been surrendered
and such notice is received by the Corporation.
(c) No fractional shares or scrip representing fractions of shares
of Common Stock shall be issued upon conversion of the shares of Series C
Preferred Stock. Instead of any fractional interest in a share of Common
Stock that would otherwise be deliverable upon the conversion of a share
of Series C 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 Series C 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 shares in shares of
Common Stock, (B) subdivide (by any share split, share dividend,
recapitalization or otherwise) its outstanding shares of Common
Stock into a greater number of shares, (C) combine (by reverse
stock split or otherwise) its outstanding shares of Common Stock
into a smaller number of shares or (D) issue any shares of capital
stock by reclassification of its shares of 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 Business Day next 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 shares of Series C Preferred Stock thereafter surrendered
for conversion shall be entitled to receive the number of shares 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 as if such shares of Series C Preferred Stock had
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 subparagraph (i) shall become effective
immediately after the opening of business on the Business 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 Business
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 mentioned below) to subscribe for or purchase shares of
Common Stock at a price per share less than the Conversion
Adjustment Price per share of 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 Business Day next following such record
date shall be adjusted to equal the price determined by dividing:
(a) the sum of (1) the product derived by multiplying (i) the
Conversion Price in effect immediately prior to such issuance or
sale times (ii) the outstanding shares of Common Stock immediately
prior to such issuance or sale, plus (2) the gross proceeds, if
any, received by the Corporation upon such issuance or sale
(including any gross consideration payable upon exercise of such
rights, options or warrants; by (b) the outstanding shares of
Common Stock (including the number of additional shares of Common
Stock offered for subscription or purchase pursuant to such rights,
options or warrants) immediately after such issuance or sale.
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
shares of Common Stock to subscribe for or purchase shares of
Common Stock at less than the Conversion Adjustment Price, 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 distribute to all holders of
Common Stock any securities of the Corporation (other than shares
of Common Stock) or evidence of its indebtedness or assets
(excluding cumulative cash dividends or distributions paid with
respect to the shares of Common Stock after December 31, 1999 which
are not in excess of the following: the sum of (A) the
Corporation's cumulative undistributed Funds from Operations at
December 31, 1999, plus (B) the cumulative amount of Funds from
Operations, as determined by the Board of Directors, after December
31, 1999, minus (C) the cumulative amount of dividends accrued or
paid in respect of the Series C Preferred Stock or any other class
or series of preferred stock of the Corporation after the Issue
Date) or rights, options or warrants to subscribe for or purchase
any of its securities (excluding those rights, options and warrants
issued to all holders of shares of Common Stock entitling them for
a period expiring within 45 days after the record date referred to
in subparagraph (ii) above to subscribe for or purchase shares of
Common Stock, which rights and warrants are referred to in and
treated under subparagraph (ii) above) (any of the foregoing being
hereinafter in this subparagraph (iii) collectively called the
"SECURITIES" and individually a "SECURITY"), then in each such case
the Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying (x) the Conversion Price in effect
immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such
distribution by (y) a fraction, the numerator of which shall be the
Conversion Price per share of Common Stock on the record date for
the determination of stockholders entitled to receive such
distribution less the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive), of
the portion of the Securities or assets or evidences of
indebtedness so distributed or of such rights, options or warrants
applicable to one share of Common Stock, and the denominator of
which shall be the Conversion Price per share of Common Stock on
the record date for the determination of stockholders entitled to
receive such distribution. Such adjustment shall become effective
immediately at the opening of business on the Business Day next
following (except as provided in paragraph (h) below) the record
date for the determination of stockholders entitled to receive such
distribution. For the purposes of this subparagraph (iii), the
distribution of a Security, which is distributed not only to the
holders of the shares of Common Stock on the date fixed for the
determination of stockholders entitled to such distribution of such
Security, but also is distributed with each share of Common Stock
delivered to a Person converting a share of Series C Preferred
Stock after such determination date, shall not require an
adjustment of the Conversion Price pursuant to this subparagraph
(iii); PROVIDED that on the date, if any, on which a person
converting a share of Series C Preferred Stock would no longer be
entitled to receive such Security with a share of Common Stock
(other than as a result of the termination of all such Securities),
a distribution of such Securities shall be deemed to have occurred
and the Conversion Price shall be adjusted as provided in this
subparagraph (iii) (and such day shall be deemed to be "the date
fixed for the determination of the stockholders entitled to receive
such distribution" and "the record date" within the meaning of the
two preceding sentences).
(iv) In case a tender or exchange offer (which term shall not
include open market repurchases by the Corporation) made by the
Corporation or any subsidiary of the Corporation for all or any
portion of the shares of Common Stock shall expire and such tender
or exchange offer shall involve the payment by the Corporation or
such subsidiary of consideration per share of Common Stock having a
fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in
a resolution of the Board of Directors), at the last time (the
"EXPIRATION TIME") tenders or exchanges may be made pursuant to
such tender or exchange offer, that exceeds the Conversion
Adjustment Price per share of Common Stock on the Trading Day next
succeeding the Expiration Time, the Conversion Price shall be
reduced to equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph, by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time, multiplied by the Conversion
Adjustment Price per share of Common Stock on the Trading Day next
succeeding the Expiration Time, and the denominator shall be the
sum of (A) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based upon the
acceptance (up to any maximum specified in the terms of the tender
or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any maximum, being referred to as the "PURCHASED
SHARES") and (B) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Conversion Adjustment Price per share of Common Stock
on the Trading Day next succeeding the Expiration Time, such
reduction to become effective immediately prior to the opening of
business on the day following the Expiration Time.
(v) If the Corporation shall, after the Issue Date, issue or
sell shares of its Common Stock or securities convertible or
exchangeable into Common Stock ("Convertible Securities") for a
gross consideration per share (including any gross consideration
payable upon conversion or exchange of the Convertible Securities)
less than the Conversion Adjustment Price in effect immediately
prior to the time of such issue or sale, then upon such issue or
sale, the Conversion Price shall be reduced to an amount determined
by dividing (a) the sum of (1) the product derived by multiplying
(i) the Conversion Price in effect immediately prior to such
issuance or sale times (ii) the outstanding shares of Common Stock
immediately prior to such issuance or sale, plus (2) the gross
proceeds, if any, received by the Corporation upon such issuance or
sale (including any gross consideration payable upon conversion or
exchange of the Convertible Securities) , by (b) the outstanding
shares of Common Stock (assuming the full conversion or exercise of
all such Convertible Securities) immediately after such issuance or
sale.
(vi) 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 subparagraph (vi) 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 subparagraph
(vi)) 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 Common Stock. Notwithstanding any other provisions of
this Section 7, the Corporation shall not be required to make any
adjustment of the Conversion Price: (a) for the issuance of 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 additional optional amounts of
cash in shares of Common Stock under such plan; (b) the issuance of
options and the shares of Common Stock issued upon exercise of such
options pursuant to an employee or director stock option program
approved by the Board of Directors of the Corporation; or (c) the
issuance of limited partnership interests in the Operating
Partnership, or any other equity or debt securities which are
convertible, directly or indirectly, into or exchangeable for
Common Stock in connection with the acquisition of property or real
estate operating businesses or equity interests in such businesses
and the Common Stock issued upon conversion thereof. All
calculations under this Section 7 shall be made to the nearest cent
(with $.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 (d) 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 share
dividends, subdivision of shares, reclassification or combination
of shares, distribution of rights or warrants to purchase shares or
securities, or distribution of other assets (other than cash
dividends) hereafter made by the Corporation to its stockholders
shall not be taxable.
(e) If the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory share
exchange, self tender offer for all or substantially all of its Common
Stock, sale of all or substantially all of the Corporation's assets or
recapitalization of the shares of Common Stock and excluding any
transaction as to which subparagraph (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 all or substantially all of the shares of
Common Stock are converted into the right to receive shares, securities
or other property (including cash or any combination thereof), each share
of Series C Preferred Stock which is not redeemed or converted into the
right to receive shares, securities or other property prior to such
Transaction shall thereafter be convertible into the kind and amount of
shares, securities and other property (including cash or any combination
thereof) receivable upon the consummation of such Transaction by a holder
of that number of shares of Common Stock into which one share of Series C
Preferred Stock was convertible immediately prior to such Transaction,
assuming such holder of Common Stock (i) is not a Person with which the
Corporation consolidated or into which the Corporation merged or which
merged into the Corporation or to which such sale or transfer was made,
as the case may be ("CONSTITUENT PERSON"), or an affiliate of a
Constituent Person and (ii) failed to exercise his rights of election, if
any, as to the kind or amount of shares, securities and other property
(including cash) receivable upon such Transaction (provided that if the
kind or amount of shares, securities and other property (including cash)
receivable upon such Transaction is not the same for each share of Common
Stock held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such
rights of election shall not have been exercised ("NON-ELECTING SHARE"),
then for the purpose of this paragraph (e) the kind and amount of shares,
securities and other property (including cash) receivable upon such
Transaction by each Non-Electing Share shall be deemed to be the kind and
amount so receivable per share by a plurality of the Non-Electing
Shares). 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 shares of Series C Preferred Stock that will contain
provisions enabling the holders of the shares of Series C Preferred Stock
that remain outstanding after such Transaction to convert into the
consideration received by holders of shares 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.
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock (other than cash dividends or
distributions paid with respect to the shares of Common Stock after
December 31, 1999 not in excess of the sum of the Corporation's
cumulative undistributed Funds from Operations at December 31,
1999, plus the cumulative amount of Funds from Operations, as
determined by the Board of Directors, after December 31, 1999,
minus the cumulative amount of dividends accrued or paid in respect
of the shares of Series C Preferred Stock or any other class or
series of preferred stock of the Corporation after the Issue Date);
or
(ii) the Corporation shall authorize the granting to all
holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase any shares of any class or any other
rights, options or warrants; or
(iii) there shall be any reclassification of the shares of
Common Stock (other than an event to which subparagraph (d)(i) of
this Section 7 applies) 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 a
self tender offer by the Corporation for all or substantially all
of its outstanding shares of Common Stock or the sale or transfer
of all or substantially all of the assets of the Corporation as an
entirety;
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; or
(v) there shall be any other event which would require an
adjustment to the Conversion Price pursuant to this Section 7;
then the Corporation shall cause to be filed with the Transfer Agent and
shall cause to be mailed to the holders of shares of Series C Preferred
Stock at their addresses as shown on the records of the Corporation a
notice stating (A) the date on which a record is to be taken (the "RECORD
DATE") for the purpose of such dividend, distribution or granting of
rights, options or warrants, or, if a record is not to be taken, the date
as of which the holders of shares of Common Stock of record to be
entitled to such dividend, distribution or rights, options or warrants
are to be determined or (B) the date on which such reclassification,
consolidation, merger, statutory share exchange, self tender offer, sale,
transfer, liquidation, dissolution or winding up is expected to become
effective (the "EFFECTIVE DATE"), and the date as of which it is expected
that holders of shares 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, self tender offer, transfer, liquidation,
dissolution or winding up. Such notice shall be given to the holders of
shares of Series C Preferred Stock as promptly as possible, but in all
cases at least ten (10) days prior to the Record Date for purposes of
clause (A) above and the Effective Date for purposes of clause (B) above,
as the case may be. 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 of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holder of each share of Series
C Preferred Stock at such holder's last address as shown on the 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 Series C
Preferred Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the shares of 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 shares of capital stock of the Corporation in a
reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 7. If any action or transaction
would require adjustment of the Conversion Price pursuant to more than
one paragraph of this Section 7, only one adjustment shall be made and
such adjustment shall be the amount of adjustment that has the highest
absolute value.
(j) If the Corporation shall take any action affecting the shares
of Common Stock, other than actions described in this Section 7, that in
the opinion of the Board of Directors would materially and adversely
affect the conversion rights of the holders of the shares of Series C
Preferred Stock, the Conversion Price for the shares of Series C
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 in the circumstances.
(k) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock, for the purpose of
effecting conversion of the shares of Series C Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all
outstanding shares of Series C Preferred Stock not theretofore converted.
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 Series C Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued
upon conversion of the shares of Series C Preferred Stock shall be
validly issued, fully paid and non-assessable. Before taking any action
that would cause an adjustment reducing the Conversion Price below the
then-par value of the shares of Common Stock deliverable upon conversion
of the shares of Series C Preferred Stock, the Corporation will take any
action that, in the opinion of its counsel, may be necessary in order
that the Corporation may validly and legally issue fully paid and
(subject to any customary qualification based upon the nature of a real
estate investment trust) non-assessable shares of Common Stock at such
adjusted Conversion Price.
The Corporation shall endeavor to list the shares of Common Stock
required to be delivered upon conversion of the shares of Series C
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.
The Corporation shall endeavor to comply with all federal and state
securities laws and regulations thereunder in connection with the
issuance of any securities that the Corporation shall be obligated to
deliver upon conversion of the shares of Series C Preferred Stock. The
certificates evidencing such securities shall bear such legends
restricting transfer thereof in the absence of registration under
applicable securities laws or an exemption therefrom as the Corporation
may in good faith deem appropriate.
(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 of the shares of Series C 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 Series C 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.
Section 8. SHARES TO BE RETIRED. All shares of Series C Preferred Stock
which shall have been issued and reacquired in any manner by the Corporation
shall be restored to the status of authorized but unissued shares of capital
stock of the Corporation, without designation as to class or series.
Section 9. RANKING. Any class or series of shares of capital stock of
the Corporation shall be deemed to rank:
(a) prior to the shares of Series 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 shares of Series C Preferred Stock;
(b) on a parity with the shares of Series 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 shall be different from those of the shares of Series C
Preferred Stock, if the holders of such class or series and the shares of
Series 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
(and any interest thereon) per share or liquidation preferences, without
preference or priority one over the other ("PARITY STOCK");
(c) junior to the shares of Series C Preferred Stock, as to the
payment of dividends or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series shall be
Junior Stock; and
(d) junior to the shares of Series C Preferred Stock, as to the
payment of dividends and as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series shall be
Fully Junior Stock.
Section 10. VOTING. If and whenever six (6) quarterly dividends (whether
or not consecutive) payable on the shares of Series 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 declared, the number of directors then constituting
the Board of Directors shall be increased by two (2) and the holders of Series
C Preferred Stock, together with the holders of shares of every other series of
Parity Stock (any such other series, the "VOTING PREFERRED STOCK"), voting as a
single class regardless of series, shall be entitled to elect the two (2)
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 shares of Series C Preferred Stock and the Voting
Preferred Stock called as hereinafter provided. Whenever all arrears in
dividends on the shares of Series 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 shares of Series C
Preferred Stock and the Voting Preferred Stock to elect such additional two (2)
directors shall cease (but subject always to the same provision for the vesting
of such voting rights in the case of any similar future arrearage in quarterly
dividends), and the terms of office of all persons elected as directors by the
holders of the shares of Series C Preferred Stock and the Voting Preferred
Stock shall forthwith terminate and the number of the Board of Directors shall
be reduced accordingly. At any time after such voting power shall have been so
vested in the holders of shares of Series C Preferred Stock and the Voting
Preferred Stock, the Secretary of the Corporation may, and upon the written
request of any holder of shares of Series C Preferred Stock (addressed to the
Secretary at the principal office of the Corporation) shall, call a special
meeting of the holders of the shares of Series C Preferred Stock and of the
Voting Preferred Stock for the election of the 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 shares of Series C Preferred Stock may
call such meeting, upon the notice above provided, and for that purpose shall
have access to the records 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 shares of Series C 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 shares of Series 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.
So long as any shares of Series C Preferred Stock are outstanding, in
addition to any other vote or consent of stockholders required by law or by the
Corporation's Articles of Incorporation, the affirmative vote of at least 66-
2/3% of the votes entitled to be cast by the holders of the shares of Series C
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:
(a) Any amendment, alteration or repeal of any of the provisions of
the Corporation's Amended and Restated Articles of Incorporation, as
amended, the Corporation's By-Laws, as amended, or these Articles
Supplementary, as amended, that materially and adversely affects the
voting powers, rights or preferences of the holders of the shares of
Series C Preferred Stock; PROVIDED, HOWEVER, that the amendment of the
provisions of the Corporation's Amended and Restated Articles of
Incorporation so as to authorize or create or increase the authorized
amount of any shares of Fully Junior Stock, any shares of Junior Stock
that are not senior in any respect to the Series C Preferred Stock, or
any shares of Parity Stock shall not be deemed to materially adversely
affect the voting powers, rights or preferences of the holders of shares
of Series C Preferred Stock; or
(b) A share exchange that affects the shares of Series C Preferred
Stock, a consolidation with or merger of the Corporation into another
entity, or a consolidation with or merger of another entity into the
Corporation, unless in each such case each share of Series C Preferred
Stock (i) shall remain outstanding without a material and adverse change
to its terms and rights or (ii) shall be converted into or exchanged for
convertible preferred stock of the surviving entity having preferences,
conversion or other rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms or conditions of redemption
thereof identical to that of a share of Series C Preferred Stock (except
for changes that do not materially and adversely affect the holders of
the shares of Series C Preferred Stock); or
(c) The authorization, reclassification or creation of, or the
increase in the authorized amount of, any shares of any class or series
or any security convertible into shares of any class ranking prior to the
shares of Series C Preferred Stock in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation or in the
payment of dividends; or
(d) Any increase in the authorized amount of shares of Series C
Preferred Stock or decrease in the authorized amount of shares of Series
C Preferred Stock below the number of shares then issued and outstanding;
PROVIDED, HOWEVER, that no such vote of the holders of shares of Series 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 or repurchase of all shares of Series C
Preferred Stock at the time outstanding to the extent such redemption or
repurchase is authorized by Sections 5 or 6 of these Articles Supplementary.
For purposes of the foregoing provisions of this Section 10, each share
of Series C Preferred Stock shall have one (1) vote per share, except that when
any other series of Preferred Stock shall have the right to vote with the
shares of Series C Preferred Stock as a single class on any matter, then the
shares of Series C Preferred Stock and such other series shall have with
respect to such matters one (1) vote per $100.00 of stated Liquidation
Preference. Except as otherwise required by applicable law or as set forth
herein, the shares of Series 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 Corporation action.
Section 11. RECORD HOLDERS. The Corporation and the Transfer Agent may
deem and treat the record holder of any shares of Series 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.
Section 12. LOST, ETC. CERTIFICATES. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or mutilation
of any certificate representing any of the shares of Series C Preferred Stock
and, in case of any such loss, theft or destruction, upon delivery of indemnity
satisfactory to the Corporation, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Corporation will at its
expense make and deliver a new certificate, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated certificate. Upon surrender of any
certificate representing any of the shares of Series C Preferred Stock to the
Corporation at its principal office, the Corporation at its expense will issue
in exchange thereof and deliver to the holder of the surrendered certificate a
new certificate or certificates, in such denomination or denominations as may
be requested by such holder.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to
be signed its name and on its behalf by its authorized officers who acknowledge
that these Articles Supplementary are the act of the Corporation, that to the
best of their knowledge, information and belief, all matters and facts set
forth herein relating to the authorization and approval of this document are
true in all material respects and this statement is made under penalties of
perjury.
May 19, 2000
HOME PROPERTIES OF NEW YORK, INC.
By: /S/ Amy L. Tait
Name: Amy L. Tait
Its: Executive Vice President
I, Ann M. McCormick, Secretary, hereby acknowledge on behalf of Home Properties
of New York, Inc. that the foregoing Articles Supplementary are the corporate
act of said corporation under penalties of perjury.
Attest:
/s/ Ann M. McCormick
NAME Ann M. McCormick
Secretary
EXHIBIT 10.1
HOME PROPERTIES OF NEW YORK, INC.,
HOME PROPERTIES OF NEW YORK, L.P.,
AND
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
SERIES C CONVERTIBLE CUMULATIVE PREFERRED STOCK
PURCHASE AGREEMENT
Dated as of May 22, 2000
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of May 22, 2000, by and among HOME
PROPERTIES OF NEW YORK, INC., a Maryland corporation (the "COMPANY"), HOME
PROPERTIES OF NEW YORK, L.P., a New York limited partnership (the "OPERATING
PARTNERSHIP"), and The Prudential Insurance Company of America, a New Jersey
mutual insurance company ("PRUDENTIAL") and Teachers Insurance and Annuity
Association of America, a New York insurance company ("TIAA") (each of
Prudential and TIAA, a "Purchaser", and, collectively, the "Purchasers").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the Purchasers,
and the Purchasers desire to severally purchase from the Company, 400,000
shares of Series C Convertible Cumulative Preferred Stock, par value $0.01 per
share (the "SHARES"), of the Company, having the terms and conditions set forth
in the Articles Supplementary to the Amended and Restated Articles of
Incorporation (the "ARTICLES") of the Company, in the form set forth in
EXHIBIT A hereto (the "SERIES C ARTICLES SUPPLEMENTARY"), in accordance with
and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties
and agreements herein contained, the parties hereto agree as follows:
Section 1. SALE AND PURCHASE. In reliance upon the representations
and warranties contained herein and subject to the terms and conditions hereof,
on the Closing Date (which is the date hereof), the Company agrees to sell to
the Purchasers, and each Purchaser severally agrees to purchase, the Shares, in
the amount of 200,000 Shares for each of Prudential and TIAA . The Company has
adopted and filed with the State Department of Assessments and Taxation of
Maryland (the "SDAT"), and the SDAT has accepted for filing, on or before the
Closing the Series C Articles Supplementary.
Section 2. CLOSING.
2.01 PLACE AND DATE. The closing of the sale and purchase of the
Shares (the "CLOSING") is taking place on the date hereof at the offices of
Clifford Chance Rogers & Wells, LLP, 200 Park Avenue, New York, New York 10166
concurrently with the execution and delivery of this Agreement.
2.02. PURCHASE OF SHARES; PAYMENT OF PURCHASE PRICE. At the
Closing, the Purchasers will severally purchase, and the Company will sell to
the Purchasers, the Shares, at a per Share cash price of $100.00, resulting in
an aggregate cash purchase price of $40,000,000 (the "PURCHASE PRICE"). At the
Closing, each Purchaser will deliver cash in an amount of $20,000,000 by wire
transfer in immediately available funds in full payment for the 200,000 Shares
being purchased by such Purchaser, and the Company will deliver to each such
Purchaser certificates representing the Shares in the names and in the
denominations requested by each Purchaser. The obligation of each Purchaser to
purchase Shares under this Agreement is several and not joint, and no Purchaser
shall have any obligation or liability under this Agreement for any other
Purchaser or for the performance or non-performance by any other Purchaser
under this Agreement.
2.03. CLOSING DELIVERIES. At the Closing the following
conditions are to be performed to the satisfaction of each Purchaser (unless
waived by each Purchaser in its sole and absolute discretion) prior to the
Purchasers becoming severally obligated hereunder to fund their allocable
portion of the Purchase Price:
(a) the Company is delivering Shares which have been fully
registered under the Securities Act of 1933 (the "SECURITIES ACT") and under
such state securities laws which require such registration (together with the
Securities Act, "SECURITIES LAWS"), and which will be convertible into shares
of Common Stock which have been fully registered under the Securities Laws,
which Shares and Common Stock will be freely transferable upon acquisition by
any Holder;
(b) Nixon Peabody, LLP, counsel for the Company, is delivering
to each of the Purchasers an opinion with respect to the Company's status as a
real estate investment trust in the form of EXHIBIT B hereto;
(c) Nixon Peabody, LLP, counsel for the Company, is delivering
to each of the Purchasers an opinion in the form of EXHIBIT C hereto;
(d) the general counsel of the Company is delivering to each of
the Purchasers an opinion in the form of EXHIBIT D hereto;
(e) the Company is delivering to each of the Purchasers a waiver
of the ownership limitations set forth in the Articles in the form of EXHIBIT E
hereto; (the "OWNERSHIP WAIVER"); and
(f) the Operating Partnership is delivering to the Company an
amendment to the Operating Partnership's Second Amended and Restated Agreement
of Limited Partnership (the "L.P. AGREEMENT") establishing a series of
preferred units (the "UNITS") of the Operating Partnership in the form of
EXHIBIT F hereto (the "OP AMENDMENT");
(g) The Company is causing to be delivered to the Purchasers a
letter from Duff & Phelps Credit Rating Co. confirming the rating of the Shares
as not less than BBB- (the "RATING LETTER") in the form of EXHIBIT G hereto;
(h) The Company is delivering to each of the Purchasers an
officers' certificate in the form of EXHIBIT H hereto with appropriate
schedules (the "OFFICERS' CERTIFICATE") and such other documents, certificates
and opinions as the Purchasers may reasonably request;
(i) The Company and Prudential Investment Management Services
LLC ("PIMS") are entering into and delivering an agreement (the "AGENCY FEE
AND WARRANT AGREEMENT") in the form of EXHIBIT I hereto, and the Company shall
have performed all obligations required thereunder in connection with the
issuance of the Shares, including the payment of a placement fee and the
issuance of certain warrants as set forth in the Agency Fee and Warrant
Agreement; and
(j) Each party indicated in the Agency Fee and Warrant
Agreement is receiving Warrants in the form of EXHIBIT J hereto from the
Company ("WARRANTS") to purchase shares of Common Stock.
(k) On the date of the Closing, the purchase of the Shares by
each Purchaser shall: (i) be permitted by the laws and regulations of each
jurisdiction to which the applicable Purchaser is subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction as to
the character of the particular investment; (ii) not violate any applicable law
or regulation; and (iii) not subject the applicable Purchaser to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect prior to the date hereof. If
requested by the Purchasers, the Purchasers shall have received an Officer's
Certificate certifying as to such matters of fact as the Purchasers may
reasonably specify to enable the Purchasers to determine whether such purchase
is so permitted.
2.04. EXPENSES. At the Closing, the Company shall pay or cause to
be paid all of the Purchasers' actual third party due diligence expenses and
outside legal and consulting fees in connection with the transaction
contemplated hereby, not to exceed $75,000 in the aggregate. Prudential shall
furnish the Company with supporting documentation, in reasonable detail, for
such expenses.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
OPERATING Partnership. The Company and the Operating Partnership, jointly and
severally, represent, warrant and covenant to each Purchaser as follows:
3.01. STATUS; POWER AND AUTHORITY.
(a) Each of the Company and the Operating Partnership is a
corporation or partnership duly organized, validly existing and (in the case of
the Company) in good standing under the laws of its state of organization and
has all requisite power and authority to enter into and perform its obligations
under each of the Transaction Documents (as defined below) to which it is a
party and to consummate the transactions contemplated hereby and thereby,
including the issuance of the Shares, and to own, lease and operate its
properties and conduct its business as now being conducted or proposed to be
conducted as described in the Exchange Act Reports (as defined below), and is
duly qualified or registered to transact business and is in good standing under
the laws of each other jurisdiction in which its owns or leases properties, or
conducts any business, so as to require such qualification or registration,
except where the failure to do so would not reasonably be expected to have a
Material Adverse Effect (as defined below).
(b) The Subsidiaries (as defined below) are listed on SCHEDULE
3.1(B) and have each been duly organized and are validly existing and in good
standing under the laws of their respective jurisdictions of incorporation or
formation and have all requisite power and authority to own, lease and operate
their properties and to conduct their businesses as now being conducted or
proposed to be conducted as described in the Exchange Act Reports, and each
Subsidiary is duly qualified or registered to transact business and is in good
standing under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification or
registration, except where the failure to be in good standing or to so qualify
or register would not reasonably be expected to have a Material Adverse Effect.
(c) As used in this Agreement, "SUBSIDIARIES" means any entities
that would be treated as consolidated subsidiaries of the Company or the
Operating Partnership for financial accounting purposes under generally
accepted accounting principles ("GAAP") as applied in the United States
including, without limitation, the entities listed on SCHEDULE 3.1(B).
(d) As used in this Agreement, "MATERIAL ADVERSE EFFECT" means
any event, circumstance or condition that has or is reasonably expected to have
a material adverse effect on the business, assets, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company, the
Operating Partnership and the Subsidiaries taken as a whole or that would
materially impair the Company's or the Operating Partnership's ability to
perform its obligations under, or otherwise affect the enforceability or
validity of, the Transaction Documents.
(e) As used in this Agreement, "TRANSACTION DOCUMENTS" means
each of this Agreement, the Agency Fee and Warrant Agreement, the Series C
Articles Supplementary, the OP Amendment, the Warrants and the Ownership
Waiver.
3.02. NO MATERIAL VIOLATION OR CONFLICT. The execution and
delivery by the Company and the Operating Partnership of each of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated herein and therein (including the sale and delivery
of the Shares and the issuance of the Warrants) will not conflict with or
result in a breach or violation by the Company or the Operating Partnership
of, or constitute a default, or an event which with notice or passage of time
or both could become a default, by the Company or the Operating Partnership
under or result in the creation of any lien, security interest or encumbrance
upon the stock or assets of the Company, the Operating Partnership or any of
the Subsidiaries or, as to clause (ii) below, impose any additional monetary
obligations on the Company, the Operating Partnership, or any Subsidiary under,
or modify the contractual obligations of any party under, or give rise to any
right of termination, amendment, acceleration or cancellation under, (i) the
Articles or the by-laws of the Company or the L.P. Agreement, (ii) any
contract, agreement or instrument to which the Company, the Operating
Partnership or any of the Subsidiaries is a party or by which the Company, the
Operating Partnership or any of the Subsidiaries is bound or to which any of
their properties are subject or (iii) any existing applicable law, rule,
published regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Company, the Operating
Partnership or any of the Subsidiaries or any of their properties or assets,
except, in the case of clauses (ii) and (iii), for such conflicts, breaches,
defaults, liens, security interests or encumbrances upon the stock or assets of
the Company, the Operating Partnership or any of the Subsidiaries, or
imposition of additional monetary obligations which, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
3.03. NO MATERIAL DEFAULT. (a) None of the Company, the
Operating Partnership or the Subsidiaries is in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any agreement, contract, commitment, instrument, plan or undertaking
(including, without limitation, any and all leases, mortgages, and other
contractual arrangements with respect to real property) material to the
business of the Company, the Operating Partnership and the Subsidiaries taken
as a whole (collectively, the "CONTRACTS") and (b) no event has occurred which,
with or without the giving of notice or lapse of time or both, would constitute
or result in a default thereunder except, in the case of each of (a) and (b),
for such defaults or events as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each of the
Contracts is valid and enforceable in accordance with its terms except to the
extent that enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and except for those failures of Contracts (or
provisions thereof) to be valid or enforceable which would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect. None of
the Company's bonds, debentures, notes or other evidences of indebtedness are
in default as to principal or interest, as of the date hereof.
3.04. SHARES. The Company has all requisite corporate right,
power and authority to issue, sell, and deliver the Shares and the Warrants as
contemplated by this Agreement; the Shares and the issuance of the Warrants
have been duly authorized, and upon such issuance, sale and delivery, and
payment of the Purchase Price therefor as contemplated by this Agreement and
the Warrants, the Purchasers will receive good and valid title to the Shares
and the recipients of Warrants will receive good title to the Warrants, free
and clear of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind and such Shares and the Warrants will be fully paid and
non-assessable, not subject to any preemptive rights and will have been issued
and sold in compliance with all applicable Federal, State and local laws. The
shares of Common Stock, par value $.01, of the Company (the "COMMON STOCK")
issuable upon conversion of the Shares and the exercise of the Warrants have
been duly authorized and have been reserved for such purpose. Upon such
conversion or exercise, the Purchasers, with respect to the Shares, and
recipients of the Warrants, with respect to the Warrants, will receive the
appropriate number of shares of Common Stock free and clear of any pledge,
lien, security interest, charge, claim, equity or encumbrance of any kind
created or permitted to exist by the Company and such shares of Common Stock
will be fully paid and nonassessable, not subject to any preemptive rights and
will have been issued and sold in compliance with all applicable Federal, State
and local laws. The form of certificates evidencing the Shares and the
Warrants, and upon conversion or exercise thereof, the Common Stock, will
comply with all applicable legal requirements and the rules of the New York
Stock Exchange ("NYSE") and with all applicable requirements of the Articles
and By-laws of the Company (the "BYLAWS").
3.05. OBLIGATIONS BINDING The execution and delivery of each of
the Transaction Documents by the Company and the Operating Partnership, the
issuance of the Shares and the Warrants, and the issuance of the Common Stock
upon the conversion or exercise thereof and the consummation of the
transactions contemplated thereby have been duly authorized by the Company's
Board of Directors, and no further consent or authorization of the Company, its
Board of Directors, Shareholders, the Operating Partnership, its limited
partners, any governmental authority (except with respect to the filing of the
Series C Articles Supplementary) or any other third party is required for such
execution, delivery, issuance or consummation. Each of the Transaction
Documents to which it is a party has been duly executed and delivered by the
Company or the Operating Partnership, as the case may be, and constitutes the
legal, valid and binding obligation of the Company or the Operating
Partnership, as the case may be, enforceable against it in accordance with its
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) equitable principles of
general applicability relating to the availability of specific performance,
injunctive relief or other equitable remedies.
3.06. INVESTMENT COMPANY. Neither the Company nor the Operating
Partnership is required to register as an "investment company" and, to the
knowledge of the Company and the Operating Partnership, neither is directly nor
indirectly controlled by any person which is required to register as an
"investment company," within the meaning of and under the Investment Company
Act of 1940 as amended, (the "1940 ACT"), and the transactions contemplated by
the Transaction Documents will not cause the Company or the Operating
Partnership to become an "investment company" subject to registration under the
1940 Act.
3.07. REIT STATUS. The Company is and has been, commencing with
the Company's taxable year ended 1994, and upon the sale of the Shares and
Warrants will continue to be, organized and operated in conformity with the
requirements for qualification and taxation as a real estate investment trust
("REIT") under Sections 856 through 860 of the U.S. Internal Revenue Code of
1986, as amended (the "CODE"), and the present and contemplated method of
operation, assets and income of the Company, the Operating Partnership and the
Subsidiaries do and will enable the Company to meet the requirements for
qualification and taxation as a REIT under the Code for the taxable year ending
December 31, 2000, and in the future. The Company is not currently a "pension
- -held REIT" within the meaning of Code Section 856(h)(3)(D) and the Treasury
Regulations promulgated thereunder.
3.08. CAPITALIZATION.
(a) The authorized capital stock of the Company as of the date
of this Agreement prior to the adoption of the Series C Articles Supplementary
consists of 80,000,000 shares of Common Stock, of which, as of the date of this
Agreement, 20,256,753 shares were issued and outstanding, 10,000,000 shares of
excess stock, par value $0.01 per share, none of which is outstanding, and
10,000,000 shares of Preferred Stock, par value $0.01 per share, 1,666,667
shares of which are issued and outstanding as the Company's Series A Senior
Convertible Preferred Stock and 2,000,000 of which are issued and outstanding
as the Company's Series B Convertible Cumulative Preferred Stock. All of the
issued and outstanding shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and nonassessable and are
free from preemptive rights assessable, and have been issued and sold in
compliance with all applicable Federal, State and local laws.
(b) As of March 31, 2000, the outstanding partnership interests
in the Operating Partnership consist of a general partnership interest held by
the Company representing a 1.00% interest in the Operating Partnership,
19,679,433 common units held by Home Properties Trust, a Maryland real estate
investment trust and a wholly owned subsidiary of the Company, representing in
the aggregate a 50.2% interest in the Operating Partnership, 15,461,880 common
units representing in the aggregate a 39.4% interest in the Operating
Partnership, one Class A Limited Partnership Interest with a stated value of
$35,000,000 (the "CLASS A INTEREST") and 2,000,000 units of Class B limited
partnership interests (the "CLASS B INTEREST").
(c) Except as set forth on SCHEDULE 3.8, there are no
outstanding options, warrants, rights or other securities exercisable for,
exchangeable for or convertible into equity securities of the Company or the
Operating Partnership.
(d) There are no antidilution or price adjustment provisions
contained in any security issued by the Company or the Operating Partnership
(or in any agreement providing rights to any security holder of the Company or
Operating Partnership) that will be triggered by the issuance of the Shares or
the Warrants or the exercise of any conversion privilege in respect thereto.
The Company and the Operating Partnership are not parties to and do not have
any knowledge of, any agreement with respect to voting of either of their
securities.
3.09. REGISTRATION. The Shares, the Warrants and the shares of
Common Stock issuable upon the conversion or exercise of the foregoing have
been registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT") and any applicable state securities and local law, and are freely
tradable. No further registration or qualification of such Shares, Warrants or
shares of Common Stock under any securities laws is required in connection with
the offer, sale and delivery of the Shares, Warrants or shares of Common Stock
in the manner contemplated in this Agreement.
3.10. FINANCIAL STATEMENTS. The financial statements and
supporting schedules included in the Company's periodic filings filed pursuant
to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), are
complete and correct in all material respects, are materially consistent with
the books and records of the Company, the Operating Partnership and the
Subsidiaries, comply as to form in all material respects with applicable
accounting requirements and to the rules and regulations of the Securities and
Exchange Commission with respect thereto, and present fairly in all material
respects the consolidated financial position of the Company, the Operating
Partnership and the Subsidiaries as of the dates specified (subject to normal
year-end audit adjustments in the case of unaudited interim financial
statements) and the consolidated results of their operations and cash flows for
the periods specified (subject to normal year-end audit adjustments in the case
of unaudited interim financial statements); such financial statements,
including the related schedules and notes thereto, were prepared in conformity
with GAAP on a consistent basis during the periods involved, except as
indicated therein or in the notes thereto. The historical financial information
and property information provided by the Company to the Purchasers and the
information contained in the Company's press release, dated April 27, 2000
with respect to its first quarter financial results is true and correct, in all
material respects, and accurately sets forth the financial results of the
properties set forth therein. Such information, together with the Company's
and the Operating Partnership's periodic filings pursuant to the Exchange Act,
which filings include but are not limited to the Company's Annual Report on
Form 10-K filed on March 30, 2000, Registration Statement on Form S-3 filed on
January 18, 2000, Current Report on Form 8-K dated April 5, 2000, and Proxy
Statement on form DEF 14A dated March 29, 2000 (collectively, the "EXCHANGE ACT
REPORTS"), do not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading.
Neither the Company, the Operating Partnership nor any of the Subsidiaries has
any material liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due), other than: (i) liabilities disclosed
in the Exchange Act Reports , (ii) liabilities which have arisen after the date
of the last Exchange Act Report in the ordinary course of business, including
those set forth on SCHEDULE 3.10, and (iii) liabilities which could not
reasonably be expected to have a Material Adverse Effect. The Prospectus
Supplement filed by the Company to effect the registration of the Shares and
Warrants and the Common Stock issuable upon the exercise or conversion thereof
does not contain an untrue statement of fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
3.11. EXCHANGE ACT COMPLIANCE. The Company has timely filed all
documents required to be filed with the Securities and Exchange Commission
pursuant to the Exchange Act and the rules and regulations thereunder. All
such documents, when so filed, complied in form and substance in all material
respects with the Exchange Act and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.12. NO MATERIAL ADVERSE CHANGES. Since December 31, 1999,
except as or as disclosed herein pursuant to SCHEDULE 3.10 to the Disclosure
Schedule: (i) there has been no event, circumstance or condition relating to
or affecting the business, assets, liabilities, results of operations,
condition (financial or otherwise) of the Company, the Operating Partnership
and the Subsidiaries taken as a whole, or the earnings or the ability to
continue to conduct business in the usual and ordinary course of the Company,
the Operating Partnership and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business, which would reasonably be expected
to have a Material Adverse Effect; and (ii) except for the transactions
contemplated by the Transaction Documents or as set forth in the Exchange Act
Reports, there has been no material transaction entered into by the Company,
the Operating Partnership or any of the Subsidiaries other than (a)
transactions in the ordinary course of business or (b) transactions which would
not reasonably be expected to have a Material Adverse Effect; and (iii) there
have not been any changes in the capital stock or any material increases in the
Indebtedness of the Company, the Operating Partnership or any of the
Subsidiaries or any increase in the regular dividend or the declaration or
payment of a special dividend on any security or interest of the Company, the
Operating Partnership or any of the Subsidiaries.
3.13. LITIGATION. There is no action, suit, investigation or
proceeding (whether or not purportedly on behalf of the Company, the Operating
Partnership or any of the Subsidiaries) before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the best knowledge of
the Company or the Operating Partnership, threatened against or affecting the
Company, the Operating Partnership or any of the Subsidiaries, which in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
SCHEDULE 3.13 to the Disclosure Schedule hereto contains a complete list of
each action presently pending against the Company, the Operating Partnership or
any Subsidiary that is not covered by insurance procured by the Company, the
Operating Partnership or any Subsidiary, and a list of any judgment or
settlement made on behalf of any of the foregoing during the preceding 12
months other than under such insurance policies.
3.14. TITLE TO PROPERTIES; LEASEHOLD INTERESTS.
(a) Except for matters which individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect:
(i) the Company, the Operating Partnership or one or more of the Subsidiaries,
has good and marketable title to all real properties it owns free from
easements, liens, pledges, claims, charges, options, defects, preferential
purchase rights, rights of first refusal or other encumbrances and has good
title or an enforceable leasehold interest, license or other lawful right to
use all other assets that are used in the Company's, the Operating
Partnership's or one or more of the Subsidiaries' business substantially in the
manner in which they currently are operated, in each case, subject only to
Permitted Exceptions (as herein defined) and no notice has been issued alleging
any default in compliance with the terms and provisions of any of the
covenants, conditions, restrictions, rights-of-way or easements constituting
one or more of the Permitted Exceptions or alleging a violation of any zoning,
building, fire, health code or other applicable laws or regulations with
respect to the properties; (ii) all leases under which the Company, the
Operating Partnership or any of the Subsidiaries leases any property are in
full force and effect, and neither the Company, the Operating Partnership nor
any such Subsidiary is in default in any material respect of any of the terms
or provisions of any of such leases and to the Company's and the Operating
Partnership's knowledge no claim has been asserted by anyone adverse to any
such entity's rights as lessee under any of such leases, or affecting or
questioning any such entity's right to the continued possession or use of the
properties under any such leases or asserting a default under any such leases,
(iii) all liens, charges or encumbrances on or affecting any of the property
and assets of the Company, the Operating Partnership and the Subsidiaries which
are required to be disclosed in the Company's Exchange Act Reports are
disclosed therein; and (iv) there is no judicial, municipal or administrative
action, suit, arbitration, proceeding or investigation pending or threatened
against, relating to or affecting the Company, the Operating Partnership or any
Subsidiary, their assets or properties, before any court or Governmental
Authority (as defined below), including, without limitation, proceedings for or
involving collections, , alleged building code or environmental or zoning
violation, alleged to have occurred at any of the properties or by reason of
the condition, use of, or operations on any of the properties. While there may
be actions, suits and other proceedings pending or threatened against, relating
to or affecting the Company, the Operating Partnership or any Subsidiary
involving condemnation, eminent domain, personal injuries or property damage,
such matters are not reasonably expected to have a Material Adverse Effect.
(b) As used in this Agreement, "PERMITTED EXCEPTIONS" means:
(i) real estate taxes and assessments not yet due and payable; (ii) covenants,
restrictions, easements and other similar agreements, PROVIDED that the same
are not violated by existing improvements or the current or proposed use and
operation of the Company's, the Operating Partnership's or any Subsidiary's
property; (iii) zoning laws, ordinances and regulations, building codes, rules
and other governmental laws, regulations, rules and orders affecting any of the
Company's, the Operating Partnership's or any Subsidiary's property, PROVIDED
that the same are not violated by existing improvements or the current or
proposed use and operation of such property; (iv) any imperfection of title
which does not materially and adversely affect the current or proposed use,
operation or enjoyment of any of the Company's, the Operating Partnership's or
any Subsidiary's real property and does not render title to such real property
unmarketable or uninsurable and does not materially impair the value of such
property; and (v) mortgage financings which are disclosed in the Exchange Act
Reports or on Schedule 3.10 to the Disclosure Schedule.
3.15. ENVIRONMENTAL COMPLIANCE.
(a) Except for such matters which individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect,
the Company, the Operating Partnership and each of the Subsidiaries has
complied and is in compliance with all Environmental Laws (as hereinafter
defined).
(b) Except for such notices relating to matters which
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect, notice of violation or other written communication
has been received by the Company, the Operating Partnership or any of their
Subsidiaries from any Governmental Authority or any other entity or person,
alleging or suggesting an Environmental Law violation in respect of any
property owned by any of them.
(c) Neither the Company, the Operating Partnership nor any of
the Subsidiaries, nor any of their agents, licensees, invitees, tenants or any
other person or entity has used, will use or will permit to be used any real
property owned, leased or occupied by any such party for the purpose of
handling, storing, burying, retaining, refining, transporting, processing,
manufacturing, generating, producing, spilling, seeping, leaking, escaping,
leaching, pumping, pouring, emitting, emptying, discharging, injecting,
dumping, transferring or otherwise disposing of or dealing with Hazardous
Materials. Neither the Company, the Operating Partnership nor any of the
Subsidiaries will be deemed to be in breach of the foregoing with respect to
(i) maintenance and use of underground heating fuel oil tanks, provided such
maintenance and use is in full compliance with all applicable Environmental
Laws, and (ii) storage and use of cleaning solvents and other chemicals used in
the routine maintenance of the properties, provided such storage and use is in
full compliance with all applicable Environmental Laws.
(d) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, neither the Company,
the Operating Partnership nor any of the Subsidiaries is aware of (i) any
seepage, leak, escape, leach, discharge, injection, release, emission, spill,
pumping, pouring, emptying or dumping of Hazardous Materials into waters on or
adjacent to any real property owned, leased or occupied by any such party, or
onto lands from which Hazardous Materials might seep, flow or drain into such
waters; or (ii) the use of any nearby or adjacent property which would likely
create any liability on the part of the Company, the Operating Partnership or
any of their Subsidiaries under the Environmental Laws or that would require
reporting to or notification by the Company, the Operating Partnership, or any
of their Subsidiaries to any Governmental Authority
(e) Except as disclosed on Schedule 3.13 to the Disclosure
Schedule, and such matters as would not reasonably be expected to have a
Material Adverse Effect, the Company and the Operating Partnership and the
Subsidiaries have no knowledge of any occurrence or circumstance that, with
notice or passage of time or both, would be likely to give rise to a claim
under or pursuant to any federal, state or local Environmental Law pertaining
to Hazardous Materials on or originating from any real property owned or
occupied by the Company, the Operating Partnership or any of the Subsidiaries.
(f) No land owned by the Company, the Operating Partnership or
any of the Subsidiaries is included or, to the actual knowledge of the Company,
proposed for inclusion on the National Priorities List issued pursuant to
CERCLA (as hereinafter defined) by the United States Environmental Protection
Agency (the "EPA") or on the inventory of other potential "Problem" sites
issued by the EPA and has not otherwise been publicly identified by the EPA as
a potential CERCLA site or included or proposed for inclusion on any list or
inventory issued pursuant to any other Environmental Law or issued by any other
Governmental Authority .
(g) As used herein, "HAZARDOUS MATERIALS" shall include without
limitation any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, toxic substances or related materials, asbestos or
any hazardous material as defined by any federal, state or local environmental
law, ordinance, rule or regulation, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA"), the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Section 1801 ET
SEQ., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 9601 ET SEQ., the Emergency Planning and Community Right-to-
Know Act of 1986, 42 U.S.C. Section 11001 ET SEQ., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 ET SEQ., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 ET
SEQ., the Clean Air Act, 42 U.S.C.Section 7401 ET SEQ., the Clean
Water Act (Federal Water Pollution Control Act), 33 U.S.C.
Section 1251 ET SEQ., the Safe Drinking Water Act, 42 U.S.C.
Section 300F to 300j-11, and the Occupational Safety and Health Act,
29 U.S.C. Section 651 ET SEQ., as any of the above statutes may be
amended from time to time, and in the regulations adopted and publications
promulgated pursuant to each of the foregoing and any other rules, ordinances,
codes, licenses, statutes, regulations, permits, orders, approvals, plans,
authorizations, concessions and similar items of all Governmental Authorities
and all applicable, judicial, administrative and regulatory decrees, judgments
and orders, any of which relate to the protection of human health or the
environment from the effects of Hazardous Materials (collectively,
"ENVIRONMENTAL LAWS") or by any federal, state or local governmental authority
having or claiming jurisdiction over the properties and assets of the Company,
the Operating Partnership and the Subsidiaries (a "GOVERNMENTAL AUTHORITY").
3.16 TAXES. The Company, the Operating Partnership and the
Subsidiaries have timely filed or filed for extensions of the filing period and
filed within such extended period all federal, state, local, foreign and other
tax returns, reports, information returns and statements (except for returns,
reports, information returns and statements the failure of which to timely file
would not reasonably be expected to result in any Material Adverse Effect)
required to be filed by them. The Company, the Operating Partnership and the
Subsidiaries have paid or caused to be paid all material taxes (including
interest and penalties) that are due and payable by the Company, the Operating
Partnership and the Subsidiaries (whether or not shown on such tax returns),
except those taxes which are being contested by the Company, the Operating
Partnership and the Subsidiaries in good faith by appropriate proceedings and
in respect of which adequate reserves are being maintained on the Company's,
the Operating Partnership's and the Subsidiaries' books in accordance with GAAP
consistently applied. The Company, the Operating Partnership and the
Subsidiaries do not have any material liabilities for taxes other than those
incurred in the ordinary course of business and in respect of which adequate
reserves are being maintained by the Company, the Operating Partnership and the
Subsidiaries in accordance with GAAP consistently applied. Except as set forth
on SCHEDULE 3.16 hereto, no federal, state, foreign, local or other tax
returns for the Company, the Operating Partnership and the Subsidiaries have
been audited by the Internal Revenue Service or other taxing authority. No
deficiency or assessment with respect to, or proposed adjustment of, the
Company's, the Operating Partnership's or any of the Subsidiaries' federal,
state, local, foreign or other tax returns is pending or, to the best of the
Company's and the Operating Partnership's knowledge, threatened. There is no
tax lien, whether imposed by any federal, state, local or other tax authority,
outstanding against the assets, properties or business of the Company, the
Operating Partnership, or any Subsidiary. There are no applicable taxes, fees
or other governmental charges payable by the Company, the Operating Partnership
or any of the Subsidiaries in connection with the execution and delivery of
Transaction Documents or the issuance to the Purchasers by the Company of the
Shares, the Warrants, or the shares of Common Stock issuable upon conversion or
exercise thereof other than filing fees and/or taxes related to the filing of
the Series C Articles Supplementary and any fees and charges in connection with
the registration of the Shares, the Warrants and the Common Stock.
3.17 INSURANCE. The Company, the Operating Partnership and the
Subsidiaries each carry or are entitled to the benefits of insurance from
financially sound and reputable insurers in such amounts and covering such
risks as is reasonably sufficient under the circumstances or is customary in
the industry and all such insurance is in full force and effect. Schedule 3.17
to the Disclosed Schedule sets forth a summary of all such insurance coverage.
3.18. EMPLOYEES, ERISA. The Company, the Operating Partnership
and the Subsidiaries have good relationships with their employees and have not
had any substantial labor problems that would reasonably be expected to have a
Material Adverse Effect. There is no strike or work stoppage existing or, to
the knowledge of the Company and the Operating Partnership, threatened against
the Company, the Operating Partnership or the Subsidiaries. The Company and
the Operating Partnership do not have any knowledge as to any intentions of any
key employee or any group of employees to leave the employ of the Company, the
Operating Partnership or any Subsidiary where such departure would reasonably
be expected to have a Material Adverse Effect. Other than as disclosed in any
Exchange Act Report and on SCHEDULE 3.18 to the Disclosure Schedule, the
Company, the Operating Partnership and the Subsidiaries have not established,
sponsored, maintained, made any contributions to or been obligated by law to
establish, maintain, sponsor or make any contributions to any "employee pension
benefit plan" or any material "employee welfare benefit plan" (as such terms
are defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including, without limitation, any "multi-employer plan," or any
other program, plan, or policy which provided payouts, benefits or
reimbursements to employees (collectively, "BENEFIT PLANS") except where the
liabilities associated with such Benefit Plan or Plans would not reasonably be
expected to have a Material Adverse Effect. The Company, the Operating
Partnership, the Subsidiaries and each Benefit Plan are in compliance with all
applicable laws relating to the employment of labor, including bargaining and
the payment of social security and other taxes, and with ERISA, except where
the failure to so comply would not reasonably be expected to have a Material
Adverse Effect. There is no material suit, action, dispute, claim,
arbitration, or legal, administrative or other proceeding or governmental
investigation pending, or threatened, alleging any breach of the terms of any
Benefit Plan or of any fiduciary duties thereunder or violation of any
applicable statute, law, rule or regulation with respect to any Benefit Plan.
No Benefit Plan is or has ever been subject to Title IV of ERISA or Section 412
of the Code.
3.19. GOVERNMENTAL AND OTHER CONSENTS. Other than such consents
as have been obtained and filings under applicable federal and state securities
laws , which the Company has obtained, and the filing of the Series C Articles
Supplementary, no consent, approval or authorization of, or declaration or
filing with, any Governmental Authority or third party on the part of the
Company or the Operating Partnership is required for the valid execution,
delivery or performance of any of the Transaction Documents or the valid offer,
issuance, sale and delivery of the Shares and the Warrants (or shares of Common
Stock issuable upon conversion or exercise thereof).
3.20. LEGAL COMPLIANCE. Except as disclosed in any Exchange Act
Reports, the Company, the Operating Partnership and the Subsidiaries are in
compliance with all applicable laws, rules, regulations, orders, licenses,
judgments, writs, injunctions, decrees or demands, except to the extent that
failure to comply would not reasonably be expected to have a Material Adverse
Effect. The properties are being used (and the improvements thereon have been
constructed) in accordance with all applicable zoning and building codes and
ordinances. The Company, the Operating Partnership and the Subsidiaries have
all necessary permits, licenses and other authorizations required to conduct
their businesses as currently conducted, and as proposed to be conducted,
except where a failure to have such permits, licenses or other authorizations
would not reasonably be expected to have a Material Adverse Effect. Neither
the Company, the Operating Partnership nor any Subsidiary has violated any
domestic or foreign law or any regulation or requirement, which violation has
or could be reasonably likely to have a Material Adverse Effect, and neither
the Company, the Operating Partnership nor any Subsidiary has received notice
of any such violation. There are no adverse orders, judgments, writs,
injunctions, decrees or demands of any court or administrative body, domestic
or foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company, the Operating Partnership or the
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
3.21 BROKERS FEES; EXPENSES. Other than PIMS and Mercury
Partners, the Company has not dealt with any broker, finder, commission agent
or other person in connection with the placement of the Shares or the Warrants,
and is not obligated to pay any broker's fee or commission in connection
therewith, except as set forth in the Agency Fee and Warrant Agreement.
Except for Mercury Partners and as set forth in Section 2.04 or in respect of
paying its own legal expenses in connection with the issuance of the Shares or
the Warrants, the Company is not obligated to pay any fees or reimburse any
expenses to any other party.
3.22. AFFILIATE TRANSACTIONS. Except as set forth on Schedule
3.22 to the Disclosure Schedule or as disclosed in the Exchange Act Reports,
neither the Company nor the Operating Partnership has any transactions required
to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the
Securities and Exchange Commission with any director or executive officers of
the Company.
3.23. DISCLOSURE. The Company has provided the Purchasers with
the information attached hereto as SCHEDULE 3.23 to the Disclosure Schedule
(the "Investment Summary"). Neither this Agreement, the Transaction Documents,
the Investment Summary, or any exhibit or schedule hereto or thereto nor any
other statements made or certificates delivered in connection with the issuance
of the Shares or the Warrants, contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading, provided that any forward looking information contained in the
Investment Summary is based on the reasonable assumptions of the Company's
management and the Company is not hereby making any representation that its
expectations will be achieved.
3.24. DIVIDENDS. Other than the dividend payment priorities
established in connection with the issuance of the Company's Series A Senior
Convertible Preferred Stock, the Series B Cumulative Preferred Stock and as set
forth in the Series C Articles Supplementary and in the Credit Agreement
between the Operating Partnership and Manufacturers and Traders Trust Company,
there are no agreements that restrict the right of the Company to declare and
pay dividends on its capital stock.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Section Each Purchaser represents, warrants and covenants to
the Company and the Operating Partnership as of the date hereof as follows:
4.01. OWNERSHIP LIMITATIONS. Such Purchaser has received a copy
of the Articles, and understands and is and will be in compliance with the
restrictions on transfer and ownership of the Company's capital stock included
therein as modified by the Ownership Waiver.
4.02 AGREEMENT. This Agreement has been duly authorized by
all necessary action on the part of such Purchaser, and this Agreement has been
duly executed and delivered by such Purchaser and constitute the legal, valid
and binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as such enforceability may be limited by:
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws now or hereafter in effect relating to creditors' rights
generally; and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
Section 5. COVENANTS OF THE COMPANY.
5.01. FILING OF EXCHANGE ACT REPORTS. After the date of this
Agreement, the Company will timely file all documents required to be filed with
the Securities and Exchange Commission pursuant to Section 13 or 15 of the
Exchange Act and will use its best efforts to maintain its eligibility to use
Form S-3 under the Securities Act.
5.02. MAINTENANCE OF REIT STATUS. The Company will use its best
efforts to continue to qualify and be taxed as a real estate investment trust
pursuant to Sections 856 through 860 of the Code. The Company (i) will not
voluntarily terminate its status as a real estate investment trust, and (ii)
will promptly provide to each Purchaser all notices, correspondence or other
written communications received by the Company from the Internal Revenue
Service relating to the Company's and the Operating Partnership's status as a
real estate investment trust, subject to appropriate confidentiality
agreements.
5.03. NO PUBLIC DISCLOSURE. Neither the Company, the Operating
Partnership nor any affiliate of the Company or the Operating Partnership will
make any public disclosure concerning the transactions contemplated by this
Agreement unless such disclosure has been provided to each Purchaser at least
two (2) business days prior to such disclosure. Unless in the reasonable
opinion of counsel to the Company such disclosure is required by applicable
law, neither the Company, the Operating Partnership nor any affiliate of the
Company or the Operating Partnership will make any such public disclosure
without the prior written consent of Purchasers owning a majority of the
Shares. Attached to this Agreement as EXHIBIT K is a copy of a press release
issued by the Company in connection with a prior issuance of preferred stock.
The Purchasers acknowledge and agree that the Company may issue a press release
containing similar information after the Closing provided that the Purchasers
shall have the right to approve the accuracy of the information contained in
that press release prior to its issuance. Once the Purchasers' prior consent
has been obtained with respect to a public disclosure, the same (or
substantially identical) disclosure may subsequently be disclosed by the
Company or the Operating Partnership without further approval by the
Purchasers.
5.04. SUBSEQUENT OPINIONS OF INDEPENDENT PUBLIC ACCOUNTANTS OR
INDEPENDENT COUNSEL. So long as any of the Shares remain issued and
outstanding, the Company shall provide the Purchasers with any opinions
regarding the Company's status as a real estate investment trust received from
the Company's independent public accountants or a nationally recognized law
firm in connection with any subsequent financings.
5.05. COMMON STOCK. The Company covenants and agrees that it
shall at all times reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued shares of Common Stock solely
for the purpose of effecting conversion of the Shares or exercise of the
Warrants, the full number of shares of Common Stock as shall then be
deliverable upon the conversion of all outstanding Shares or exercise of all
Warrants not theretofore converted or exercised into Common Stock. Such shares
of Common Stock shall, when issued or delivered, be validly issued and fully
paid and non-assessable, registered under the Securities Act, not be subject to
any preemptive rights, be free and clear of all pledges, liens, security
interests charges, claims or other encumbrances of any kind and will have been
issued in compliance with all applicable laws.
5.06. LISTING. The Company covenants and agrees that it shall
cause the shares of Common Stock deliverable upon the conversion of the Shares
or exercise of the Warrants to be listed on the NYSE.
5.07. LIMITATIONS ON INDEBTEDNESS. The Company covenants and
agrees that, so long as any Shares remain outstanding, neither the Company, the
Operating Partnership nor any Subsidiary shall incur or suffer to exist any
Indebtedness that would result in the Company's ratio of consolidated
Indebtedness to Total Market Capitalization exceeding 70%. The Company will
provide each of the Purchasers with a certificate of its Chief Financial
Officer certifying the Company's, the Operating Partnership's and the
Subsidiaries' compliance with this Section 5.07 within forty-five (45) days
after each calendar quarter.
For the purposes of this Agreement:
(a) "INDEBTEDNESS" shall mean, without duplication on a
consolidated basis (i) all obligations of the Company, the Operating
Partnership or any Subsidiary for borrowed money, (ii) all obligations of the
Company, the Operating Partnership or any Subsidiary evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of the Company,
the Operating Partnership or any Subsidiary under conditional sale or other
title retention agreements relating to property purchased by the Company, the
Operating Partnership or any Subsidiary, (iv) all obligations of the Company,
the Operating Partnership or any Subsidiary issued or assumed as the deferred
purchase price of property or services (other than accounts payable to
suppliers and similar accrued liabilities incurred in the ordinary course of
business and paid in a manner consistent with industry practice), (v) all other
obligations, contingent or otherwise, which, in accordance with GAAP, should be
classified on the Company's, the Operating Partnership's or any Subsidiary's
balance sheets as liabilities, whether or not so classified, (vi) all
liabilities secured by any mortgage, pledge, security interest, lien charge or
other encumbrance existing on any property or asset now owned by, or acquired
by, the Company, the Operating Partnership, or any Subsidiary, (vii) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any lien or
security interest on property owned or acquired by the Company, the Operating
Partnership or any Subsidiary whether or not the obligations secured thereby
have been assumed, (viii) all Capitalized Lease Obligations of the Company, the
Operating Partnership or any Subsidiary, (ix) all Guarantees of the Company,
the Operating Partnership or any Subsidiary, (x) all obligations (including but
not limited to reimbursement obligations) relating to the issuance of letters
of credit for the account of the Company, the Operating Partnership or any
Subsidiary, (xi) all obligations arising out of foreign exchange contracts, and
(xii) all obligations arising out of interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance, currency
spot and forward contracts and other agreements or arrangements designed to
provide protection against fluctuations in interest or currency exchange rates,
as valued in accordance with GAAP consistently applied.
(b) "GUARANTEES" of the Company, the Operating Partnership or
any Subsidiary shall mean (without duplication on a consolidated basis) all
obligations (other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of the Company, the Operating
Partnership or any Subsidiary guaranteeing, any Indebtedness, dividend or other
obligation of any other person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, all obligations incurred
through an agreement, contingent or otherwise, by the Company, the Operating
Partnership or any Subsidiary : (i) to purchase such Indebtedness or
obligation or any property or assets constituting security therefor, (ii) to
advance or supply funds: (x) for the purchase or payment of such Indebtedness
or obligation, (y) to maintain working capital or other balance sheet condition
or otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (iii) to lease property or to purchase
securities or other property or services primarily for the purpose of assuring
the owner of such Indebtedness or obligation of the ability of the primary
obligor to make payment of such Indebtedness or obligation, or (iv) otherwise
to assure the owner of the Indebtedness or obligation of the primary obligor
against loss in respect thereof, PROVIDED, HOWEVER, that the term "Guarantees"
shall not include (y) guarantees of completion unless and until a claim for
payment has been made thereunder, at which time such completion guarantee shall
be deemed Indebtedness to the extent of the claim, and (z) Low Income Housing
Credit Guarantees, unless and until a claim for payment is made thereunder. For
the purposes of any computations made under this Agreement, a Guarantee in
respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation, liability or
dividend.
(c) "CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations
of the Company, the Operating Partnership or any Subsidiary under any capital
lease which under GAAP are required to be reflected as a liability on a
consolidated balance sheet of the Company.
(d) "LOW INCOME HOUSING CREDIT GUARANTEES" means assurances by
the Company or the Operating Partnership to limited partners of certain
affiliates of the Company that the properties developed and operated by such
affiliates will be kept in compliance with applicable provisions of the Code
to avoid loss or recapture of low income housing tax credits.
(e) "CURRENT MARKET PRICE" of the Common Stock as of any date
shall mean the average, for the 20 consecutive Trading Days preceding the date
of determination, of the last reported sales 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 on such day, regular way, in either case as reported on the
NYSE or, if such security is not listed or admitted for trading on the NYSE, on
the principal national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any national
securities exchange, on the NASDAQ Stock Market ("NASDAQ") National Market
System or, if such security is not quoted on such National Market System, 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 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 NYSE member firm regularly
making a market in such security selected for such purpose by the Board of
Directors.
(f) "Total Market Capitalization" as of any date shall mean
the sum of (1)(x) the Current Market Price multiplied by (y) the sum of (i) the
aggregate number of shares of Common Stock outstanding as of such date, plus
(ii) the aggregate number of common units of the Operating Partnership
outstanding as of such date not owned by the Company or any of its
Subsidiaries, plus (2)(x) the aggregate liquidation preference of all shares of
preferred stock of the Company outstanding as of such date, plus (y) the
aggregate liquidation preference of any preferred units of the Operating
Partnership outstanding as of such date not owned by the Company or any of its
Subsidiaries, plus (3) the aggregate of the items of outstanding indebtedness
of the Company set forth in items (i) through (iv), and (vi) of the definition
of "Indebtedness" above.
5.08. INCURRENCE COVENANT. The Company covenants and agrees that,
so long as any Shares remain outstanding, the ratio of EBITDA to Fixed
Charges in each calendar quarter shall be greater than 1.75 to 1.0. The
Company will provide each Purchaser with a certificate of its Chief
Financial Officer certifying the Company's compliance with this Section 5.08
within thirty (30) days after each calendar quarter.
For the purpose of this Agreement:
(a) "EBITDA" means, for any period, the Consolidated Businesses'
earnings before giving effect to expenses for interest, taxes, depreciation and
amortization.
(b) "FIXED CHARGES" means with respect to any fixed period, the
sum of (1) Total Interest Expense; and (2) the aggregate of all dividends paid
or accrued on the Company's preferred stock.
(c) "CONSOLIDATED BUSINESSES" means the Company, the Operating
Partnership, and their Subsidiaries.
(d) "TOTAL INTEREST EXPENSE" means, for any period, the sum of:
(i) interest expense of the Consolidated Businesses paid during such period;
and (ii) interest expense of the Consolidated Businesses accrued and/or
capitalized for such period in each case including participating interest
expense, the amortization of loan fees, original issue discount, non-cash
interest payment, the interest component of Capitalized Lease Obligations and
hedging costs but excluding extraordinary interest expense, and net of
amortization of deferred costs associated with new financings or refinancings
of existing Indebtedness.
5.09. OPERATING PARTNERSHIP SECURITIES. Concurrent with the
Closing, the Company shall cause the Operating Partnership to issue to the
Company or one of its wholly owned Subsidiaries 400,000 Units with the
designations, preferences and other rights, terms and provisions set forth in
the OP Amendment attached as EXHIBIT F hereto, and the Company shall cause the
Operating Partnership to keep such Units outstanding and the Company (or its
Subsidiaries) shall continue to own such Units, for so long as the Shares are
outstanding, subject to redemption or conversion as provided for in the OP
Amendment. So long as any Units are outstanding, the Company shall not permit
the Operating Partnership to authorize, reclassify or create any securities of
any class or series or any security convertible into securities of any class or
series ranking prior to the Units in the distribution of assets upon any
liquidation, dissolution or winding up of the Operating Partnership or in the
payment of distributions except for the Class A Interest.
5.10. COMPANY TRANSACTIONS. Except as otherwise provided in
paragraph (b) of Section 6, the Company agrees that it shall not repurchase
any of the Shares except pursuant to an offer made on the same terms to the
holders of all outstanding Shares.
5.11 COMPLIANCE WITH LAWS. The Company shall comply and shall
cause each Subsidiary to comply with all applicable laws, rules, regulations
and orders, including, without limitation, the Occupational Safety and Health
Act of 1970, as amended, ERISA, the Americans with Disabilities Act of 1990, as
amended, and all Environmental Laws, noncompliance with which could reasonably
be expected to have a Material Adverse Effect.
5.12 RESTRICTIVE AGREEMENTS PROHIBITED. (a) Except as
described in Section 3.24, the Company will not enter into, become a party to,
allow to exist or adopt any contract, indenture, agreement or instrument, or
any note, debenture, bond or other security or enter into any amendment of any
provision of the Articles or Bylaws, containing provisions which would by its
terms restrict or limit the ability of the Company to pay the full amount of
the dividends on the Shares at the rates and on the dates fixed in the Series C
Articles Supplementary or which otherwise restrict the Company's performance of
this Agreement, the terms of the Shares or the Warrants; provided that
covenants or other provisions requiring the maintenance of reasonable minimum
levels of shareholders' equity or net worth, cash flow, current assets and
similar items and agreements relating to the future issuance of preferred stock
on a parity with the Shares shall not be deemed to limit, impair or otherwise
modify the obligations of the Company to declare and pay dividends on the
Shares as and when the same are due and payable.
(b) Except as could not be reasonably expected to have a Material
Adverse Effect, the Company will not permit any Subsidiary to be a party to or
bound by any contract, indenture, agreement, instrument or any note, debenture,
bond or other security under the terms of which such Subsidiary's right to
declare and pay dividends or make other distributions on or in respect of its
capital stock is restricted; provided that covenants or other provisions
requiring the maintenance of reasonable minimum levels of shareholders' equity
or net worth, cash flow, current assets and similar items shall not be deemed
to limit, impair or otherwise modify the obligations of the Subsidiaries to
declare and pay dividends on capital stock as and when the same are due and
payable or to redeem shares of capital stock.
5.13 MAINTENANCE OF RATING OF THE SHARES. The Company
covenants and agrees that, so long as any Shares remain outstanding, the
Company shall maintain a rating on the Shares by at least one nationally
recognized statistical rating organization, including but not limited to Duff &
Phelps Credit Rating Co.
5.14 INVESTMENT COMPANY STATUS. The Company covenants and
agrees that it will take no action which would require it to be registered as
an "investment company" within the meaning of the 1940 Act.
5.15 Notices. The Company agrees that it shall promptly
notify each of the Purchasers of: (i) the occurrence of any event or condition
that could reasonably be expected to have a Material Adverse Effect; (ii) any
material default under any material debt instrument or other material document;
and (iii) any additional rating or removal, cancellation or termination of the
rating on the Shares obtained by the Company.
Section 6. RESTRICTIONS ON TRANSFER.
(a) The Purchasers agrees not to transfer, convey, assign,
pledge or hypothecate any of the Shares or the shares of Common Stock obtained
upon conversion of the Shares except in a transaction in compliance with
applicable securities laws.
(b) The Purchasers agrees that they shall not sell more than
200,000 of the Shares to any purchaser or group of affiliated purchasers
(excluding sales to persons who are Purchasers or affiliates of the Purchasers)
without first offering to sell such Shares to the Company. Such offer (the
"OFFER") shall: (i) be in writing (the "OFFER NOTICE"); (ii) specify the
number of Shares proposed to be transferred; and (iii) specify the proposed
sale price for the Shares proposed to be sold. Within ten (10) business days
after the Company receives the Offer Notice from the Purchaser(s), the Company
shall notify the Purchaser(s) in writing whether it irrevocably elects to
purchase all, but not less than all, such Shares on the terms of the Offer. If
the Company shall have exercised its right to purchase such Shares pursuant to
this paragraph, then, within ten (10) business days after delivery of notice of
acceptance of the Offer by the Company, at the offices of the Company or such
other place as may be mutually agreed upon, the Company shall pay the aggregate
purchase price for the Shares by wire transfer of immediately available funds
to the account designated by the Purchaser(s) and the Purchaser(s) shall
deliver to the Company the certificates representing such Shares free and clear
of any liens, charges and encumbrances, duly endorsed in blank, or accompanied
by stock powers duly executed in blank. If the Company does not give the
Purchaser(s) such notice of acceptance within such ten (10) business day
period, then the Offer shall be deemed to be rejected. If the Company rejects
(or is deemed to reject) the Offer, then during the next 90 days the
Purchaser(s) shall be free to consummate the transaction described in the Offer
Notice at 95% of the price set forth therein or a higher price; provided that
if the Purchaser(s) do not consummate such transaction within 90 days after the
Company has (or is deemed to have) rejected the Offer, then the provisions of
this Section 6(b) shall again apply to any sale, transfer or other disposition
of any Shares.
As a condition to any sale, transfer or other disposition pursuant
to this Section 6, the Purchasers will obtain a representation from the
transferee that such transfer will not cause the transferee to exceed the
Company's Ownership Limit, as defined in the Articles.
Section 7. COMPANY REQUESTS FOR AN INCREASE IN SERIES C SHARES.
The Company may at any time request that the Purchasers approve an increase in
the number of Shares for purposes of selling such additional Shares to third
parties; PROVIDED, HOWEVER, that the Purchasers shall have no obligation,
express or implied, to approve such request.
Section 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties hereto contained in this
Agreement or otherwise made in writing in connection with the transactions
contemplated herein shall survive the making of this Agreement and sale of the
Shares, through and until the expiration of the applicable statute of
limitations with respect thereto.
Section 9. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered by hand or overnight courier or sent
by first-class mail, postage pre-paid, or by telecopy, as follows:
Section If to the Purchaser(s):
The Prudential Insurance Company of America
c/o Prudential Real Estate Investors
8 Campus Drive, 4{th} Floor
Parsippany, New Jersey 07090
Attention: Merchant Banking Group
Fax: (973) 734-1475
and
Teachers Insurance and Annuity Association of America
730 Third Avenue
8th Floor
New York, New York 10017
Attn: Andrew A. Duffy, Director
Fax: (212) 916-6960
with a copy to:
Clifford Chance Rogers & Wells, LLP
200 Park Avenue
New York, New York 10160
Attention: Jay L. Bernstein, Esq.
Fax: (212) 878-8375
If to the Company, at:
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
Attention: Amy L. Tait, Executive Vice President
Facsimile: (716) 546-5433
and
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
Attention: Ann M. McCormick, General Counsel
Facsimile: (716) 232-3147
or, in each case, at such address and to the attention of such person
as either party shall have furnished to the other by notice.
Section 10. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement and the other Transaction Documents
constitute the entire understanding between the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings
of the parties, whether oral or written. This Agreement may be modified or
terminated only by an instrument in writing signed by the Company and the
Purchasers holding 70% of the Shares then outstanding.
Section 11. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding on and shall inure to the benefit of
the successors and assigns of the parties hereto and any assign and/or
successor of each Purchaser shall succeed to (and have the right to enforce)
all of such Purchaser's rights hereunder, except for the Ownership Waiver.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement.
Section 12. HEADINGS.
The headings of the sections of this Agreement are solely for
convenience of reference and shall not affect the meaning of any of the
provisions hereof.
Section 13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, including, without limitation, Section 5-
1401 of the New York General Obligations Law, without giving effect to the
principles of conflicts of law; PROVIDED, HOWEVER, that matters relating to the
issuance of the Shares, the terms of the Shares and other internal corporate
matters relating to the Company shall be governed by the laws of the State of
Maryland. Each of the parties hereto irrevocably and unconditionally consents
to submit to the exclusive jurisdiction of the courts of the State of New York
and of the United States of America, in each case located in the County of New
York, for any action, proceeding or investigation in any court or before any
governmental authority ("LITIGATION") arising out of or relating to the
Transaction Documents and the transactions contemplated hereby and thereby, and
further agrees that service of any process, summons, notice or document by U.S.
Registered Mail to its respective address set forth in the Transaction
Documents shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably
and unconditionally waives any objection to the laying of venue of any
Litigation arising out of the Transaction Documents or the transactions
contemplated hereby and thereby in the courts of the State of New York or the
United States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such Litigation brought in any such court
has been brought in an inconvenient forum. Each of the parties irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
and all rights to trial by jury in connection with any Litigation arising out
of or relating to the Transaction Documents or the transactions contemplated
hereby and thereby.
Section 14. COUNTERPARTS.
This Agreement may be executed in one or more separate counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
Section 15. ISSUANCE AND OTHER TAXES.
The Company shall pay or cause to be paid all stamp, stamp duty,
stamp duty reserve, documentary, registration, transfer or similar taxes
required to be paid in connection with the issuance and sale to the Purchasers
of the Shares and the issuance of the Warrants, and shall cause all appropriate
stock transfer tax stamps to be affixed to the certificates representing the
Shares and Warrants so sold and delivered. The Company shall file,
independently or jointly with each Purchaser, as the law requires, all transfer
tax filings required to be filed by it in connection with the sale and delivery
to such Purchaser of the Shares and Warrants.
Section 16. NO DELAY, WAIVER.
No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any waiver on
the part of any party of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. Any waiver or consent by the Purchasers that can be given hereunder
shall require the consent of the Purchasers holding 70% of the Shares then
outstanding.
Section 17. SEVERABILITY.
If any provision of this Agreement, or the application of any such
provision to any person or circumstance, shall be held invalid by a court of
competent jurisdiction, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
held invalid, shall not be affected thereby.
Section 18. LOST, ETC. CERTIFICATES.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate representing any of the
Shares and, in case of any such loss, theft or destruction, upon delivery of
indemnity satisfactory to the Company, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Company will at its expense
make and deliver a new certificate, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated certificate. Upon surrender of any certificate
representing any of the Shares to the Company at its principal office, the
Company at its expense will issue in exchange therefor and deliver to the
holder of the surrendered certificate a new certificate or certificates, in
such denomination or denominations as may be requested by such holder.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above-written.
HOME PROPERTIES OF NEW YORK, INC.
By: /s/ Amy L. Tait
Name: Amy L. Tait
Title: Executive Vice President
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.,
its General Partner
/s/ Amy L. Tait
Name: Amy L. Tait
Title: Executive Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: ________________________________
Name: ________________________________
Title: ________________________________
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA
By: ________________________________
Name: ________________________________
Title: ________________________________
Section 1. ..........................................Sale and Purchase 1
Section 2. ....................................................Closing 1
2.01. .............................................Place and Date 1
2.02. ..............Purchase of Shares; Payment of Purchase Price 1
2.03. .........................................Closing Deliveries 1
2.04. ...................................................Expenses 2
Section 3. Representations and Warranties of the Company and the Operating
Partnership 3
3.01. ................................Status; Power and Authority 3
3.02. ..........................No Material Violation or Conflict 3
3.03. ........................................No Material Default 4
3.04. .....................................................Shares 4
3.05. ........................................Obligations Binding 5
3.06. .........................................Investment Company 5
3.07. ................................................REIT Status 5
3.08. .............................................Capitalization 5
3.09. ...............................................Registration 6
3.10. .......................................Financial Statements 6
3.11. ....................................Exchange Act Compliance 7
3.12. ................................No Material Adverse Changes 7
3.13. .................................................Litigation 7
3.14. ...................Title to Properties; Leasehold Interests 7
3.15. ...................................Environmental Compliance 8
3.16. ......................................................Taxes 9
3.17. ..................................................Insurance 10
3.18. ...........................................Employees, ERISA 10
3.19. ............................Governmental and Other Consents 11
3.20. ...........................................Legal Compliance 11
3.21. .....................................Brokers Fees; Expenses 11
3.22. .....................................Affiliate Transactions 11
3.23. .................................................Disclosure 11
3.24. ..................................................Dividends 11
Section 4. Representations and Warranties of the Purchaser 12
4.01. ......................................Ownership Limitations 12
4.02. ..................................................Agreement 12
Section 5. ...................................Covenants of the Company 12
5.01. .............................Filing of Exchange Act Reports 12
5.02. .................................Maintenance of REIT Status 12
5.03. .......................................No Public Disclosure 12
5.04. Subsequent Opinions of Independent Public Accountants or
Independent Counsel 13
5.05. ...............................................Common Stock 13
5.06. ....................................................Listing 13
5.07. ................................Limitations on Indebtedness 13
5.08. ........................................Incurrence Covenant 15
5.09. ...........................Operating Partnership Securities 15
5.10. .......................................Company Transactions 16
5.11. .......................................Compliance with Laws 16
5.12. ..........................Restrictive Agreements Prohibited 16
5.13. ........................Maintenance of Rating of the Shares 16
5.14. ..................................Investment Company Status 16
5.15. ....................................................Notices 16
Section 6. ...................................Restrictions on Transfer 16
Section 7. ........Company Requests for an Increase in Series C Shares 16
Section 8. .................Survival of Representations and Warranties 17
Section 9. ....................................................Notices 17
Section 10. Entire Agreement; Amendments 17
Section 11. Successors and Assigns 18
Section 12. Headings 18
Section 13. Governing Law 18
Section 14. Counterparts 18
Section 15. Issuance and Other Taxes 18
Section 16. No Delay, Waiver 19
Section 17. Severability 19
Section 18. Lost, etc. Certificates 19
<PAGE>
Exhibits
Exhibit A Form of Series C Articles Supplementary
Exhibit B Form of Tax Counsel Opinion
Exhibit C Form of Legal Counsel Opinion
Exhibit D Form of General Counsel Opinion
Exhibit E Form of Ownership Waiver
Exhibit F Form of Amendment to the Second Amended and Restated
Agreement of Limited Partnership
Exhibit G Form of Duff & Phelps Rating Letter
Exhibit H Form of Officers Certificate
Exhibit I Form of Agency Fee and Warrant Agreement
Exhibit J Form of Warrants
Exhibit K Form of Press Release
SCHEDULES
Schedule 3.1(b Schedule of Subsidiaries
Schedule 3.8 Schedule of Outstanding Options, Warrants, Rights or Other
Securities of the Company or the Operating Partnership
Schedule 3.10 Schedule of Certain Liabilities
Schedule 3.13 Schedule of Litigation
Schedule 3.16 Schedule of Federal and State Income Tax Audits
Schedule 3.17 Schedule of Insurance
Schedule 3.18 Schedule of Benefit Plans
Schedule 3.22 Schedule of Affiliate Transactions
Schedule 3.23 Schedule of Disclosure Documents
HOME PROPERTIES ISSUES INVESTMENT GRADE
CONVERTIBLE PREFERRED EQUITY
FOR IMMEDIATE RELEASE:
Monday, May 22, 2000
Rochester, New York/ PR Newswire/ -- Home Properties (NYSE:HME) has
completed the sale of $40 million of Series C Cumulative Convertible
Preferred Stock ("Series C Preferred Stock") through a private
transaction with affiliates of Prudential Real Estate Investors
("Prudential") and Teachers Insurance and Annuity Association of America
("Teachers"). Duff & Phelps Credit Rating Co. ("DCR") has assigned an
initial corporate credit rating of 'BBB' (Triple-B) to Home Properties,
with a rating of 'BBB-' (Triple-B Minus) for its convertible preferred
shares.
The Series C Cumulative Convertible Preferred Stock carries an annual
dividend rate equal to the greater of 8.75% or the actual dividend paid
on the number of the Company's common shares into which the Series C
Preferred Stock is convertible. The Series C Preferred Stock has a
conversion price of $30.25 per share and can be redeemed at the Company's
option after five years. In addition, the Company issued warrants to
purchase 160,000 common shares at a price of $30.25 per share, expiring
in five years. Proceeds will initially be used to fully repay the
Company's unsecured revolving credit facility [under its unsecured
line of credit] , thereby freeing up resources to fund potential
acquisitions and property upgrades. This transaction reduces the
Company's debt-to-total-market capitalization ratio to 39% and virtually
eliminates its exposure to floating rate debt. Mercury Partners LLC
acted as financial advisor to Home Properties in connection with the
transaction.
According to Amy L. Tait, Executive Vice President of Home Properties,
"We are delighted to have Prudential and Teachers invest with us, and we
look forward to expanding these relationships in the future. In
addition, our new investment grade public rating may provide improved
access to alternative sources of capital to support our continued
expansion."
Marc R. Halle, Vice President of Prudential Real Estate Investors, said,
"We are pleased to be able to provide capital to Home Properties, which
has a unique strategy and a successful track record of buying and
repositioning apartment communities in supply-constrained markets. We
have confidence in the management team's ability to deliver continued
favorable results."
PRUDENTIAL ACTED AS LEAD INVESTOR IN NEGOTIATING THE TRANSACTION ON
BEHALF OF PRUDENTIAL AND TEACHERS. PRUDENTIAL REAL ESTATE INVESTORS IS
THE REAL ESTATE MONEY MANAGEMENT AND ADVISORY ARM OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA. PRUDENTIAL REAL ESTATE INVESTORS MANAGES
MORE THAN $14 BILLION ON BEHALF OF 300 INSTITUTIONAL CLIENTS IN THE
UNITED STATES, EUROPE, AND ASIA.
Home Properties, the 11{th} largest apartment company in the United
States, is a fully integrated, self-administered, and self-managed real
estate investment trust ("REIT"). With operations in select Northeast,
Midwest, and Mid-Atlantic markets, the Company owns, operates, acquires,
rehabilitates, and develops apartment communities. Currently, Home
Properties operates 297 communities containing 47,155 apartment units.
Of these, 36,331 units in 135 communities are owned directly by the
Company, 7,690 units are partially owned and managed by the Company as
general partner, and 3,134 units are managed for other owners. The
Company also manages 1.7 million square feet of commercial space. Home
Properties' common stock is traded on the New York Stock Exchange under
the symbol "HME" and on the Berlin Stock Exchange under the symbol "HMP
GR." For more information, please visit Home Properties' new Web site at
WWW.HOMEPROPERTIES.COM.
*****
FOR FURTHER INFORMATION:
Amy L. Tait, Executive Vice President, 716-246-4108
David Gardner, Chief Financial Officer, 716-246-4113
Home Properties of New York, Inc.
