(Apartment Income REIT Corp.) |
(AIMCO Properties, L.P.) |
||||
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Class A Common Stock |
ITEM 1.01. |
Entry into a Material Definitive Agreement. |
ITEM 2.01. |
Completion of Acquisition or Disposition of Assets. |
ITEM 3.02. |
Unregistered Sales of Equity Securities. |
ITEM 3.03. |
Material Modification to Rights of Security Holders. |
ITEM 5.01. |
Changes in Control of Registrant. |
ITEM 5.02. |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Name |
Position | |
Terry Considine | Chief Executive Officer | |
Lisa R. Cohn | President, General Counsel and Secretary | |
Keith M. Kimmel | President, Property Operations | |
Paul L. Beldin | Executive Vice President and Chief Financial Officer | |
Conor Wagner | Senior Vice President and Chief Investment Officer |
· | Apartment Income REIT Corp. Executive Severance Policy; |
· | Apartment Income REIT Corp. 2007 Stock Award and Incentive Plan; |
· | Apartment Income REIT Corp. 2020 Employee Stock Purchase Plan; and |
· | Apartment Income REIT Corp. 2020 Stock Award and Incentive Plan. |
ITEM 5.03. |
Amendments to Charter or Bylaws; Change in Fiscal Year. |
ITEM 8.01. |
Other Events. |
ITEM 9.01. |
Financial Statements and Exhibits. |
Dated: December 15, 2020 | ||||
APARTMENT INCOME REIT CORP. | ||||
/s/ Paul Beldin | ||||
Paul Beldin | ||||
Executive Vice President and Chief Financial Officer | ||||
AIMCO PROPERTIES, L.P. | ||||
By AIMCO-GP, Inc., its general partner | ||||
/s/ Paul Beldin | ||||
Paul Beldin | ||||
Executive Vice President and Chief Financial Officer |
Exhibit 2.1
EXECUTION VERSION
SEPARATION AND DISTRIBUTION AGREEMENT
by and among
APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
AIMCO OP L.P.,
APARTMENT INCOME REIT CORP.
and
AIMCO PROPERTIES, L.P.
dated as of
December 15, 2020
TABLE OF CONTENTS
ARTICLE I |
| |||||
DEFINITIONS |
| |||||
Section 1.1 |
Definitions |
2 | ||||
Section 1.2 |
Interpretation |
16 | ||||
ARTICLE II |
| |||||
THE RESTRUCTURING |
| |||||
Section 2.1 |
Transfers of Assets and Assumptions of Liabilities |
18 | ||||
Section 2.2 |
DevCo Assets and SpinCo Assets |
24 | ||||
Section 2.3 |
SpinCo Liabilities and DevCo Liabilities |
25 | ||||
Section 2.4 |
Termination of Intercompany Agreements |
26 | ||||
Section 2.5 |
Settlement of Intercompany Accounts |
27 | ||||
Section 2.6 |
Replacement of Guarantees |
27 | ||||
ARTICLE III |
| |||||
CERTAIN ACTIONS PRIOR TO THE DISTRIBUTION |
| |||||
Section 3.1 |
SEC and Other Securities Filings |
28 | ||||
Section 3.2 |
NYSE Listing Application |
28 | ||||
Section 3.3 |
Distribution Agent |
29 | ||||
Section 3.4 |
Governmental Approvals and Consents |
29 | ||||
Section 3.5 |
Ancillary Agreements |
29 | ||||
Section 3.6 |
Governance Matters |
29 | ||||
Section 3.7 |
Partnership Agreements |
29 | ||||
Section 3.8 |
DevCo OP Distribution and Internal Distribution |
29 | ||||
ARTICLE IV |
| |||||
THE DISTRIBUTION |
| |||||
Section 4.1 |
Distribution |
30 | ||||
ARTICLE V |
| |||||
CONDITIONS |
| |||||
Section 5.1 |
Conditions Precedent to Consummation of the Distribution |
32 | ||||
Section 5.2 |
Right Not to Close |
33 |
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ARTICLE VI |
| |||||
NO REPRESENTATIONS OR WARRANTIES |
| |||||
Section 6.1 |
Disclaimer of Representations and Warranties |
34 | ||||
Section 6.2 |
As Is, Where Is |
34 | ||||
ARTICLE VII |
| |||||
CERTAIN COVENANTS AND ADDITIONAL AGREEMENTS |
| |||||
Section 7.1 |
Insurance Policies |
34 | ||||
Section 7.2 |
No Restrictions on Post-Distribution Competitive Activities; Corporate Opportunities |
37 | ||||
Section 7.3 |
Legal Names and Other Parties Trademarks |
38 | ||||
Section 7.4 |
Preferred Stock Sale |
39 | ||||
ARTICLE VIII |
| |||||
ACCESS TO INFORMATION; CONFIDENTIALITY; PRIVILEGE |
| |||||
Section 8.1 |
Agreement for Exchange of Information |
40 | ||||
Section 8.2 |
Ownership of Information |
41 | ||||
Section 8.3 |
Compensation for Preserving, Gathering or Providing Information |
41 | ||||
Section 8.4 |
Retention of Records |
41 | ||||
Section 8.5 |
Limitation of Liability |
41 | ||||
Section 8.6 |
Production of Witnesses |
41 | ||||
Section 8.7 |
Confidentiality |
42 | ||||
Section 8.8 |
Privileged Matters |
44 | ||||
Section 8.9 |
Financial Information Certifications |
46 | ||||
ARTICLE IX |
| |||||
MUTUAL RELEASES; INDEMNIFICATION |
| |||||
Section 9.1 |
Release of Pre-Distribution Claims |
46 | ||||
Section 9.2 |
Indemnification by SpinCo |
47 | ||||
Section 9.3 |
Indemnification by DevCo |
48 | ||||
Section 9.4 |
Procedures for Indemnification |
49 | ||||
Section 9.5 |
Indemnification Obligations Net of Insurance Proceeds |
53 | ||||
Section 9.6 |
Indemnification Obligations Net of Taxes |
54 | ||||
Section 9.7 |
Contribution |
54 | ||||
Section 9.8 |
Remedies Cumulative |
54 | ||||
Section 9.9 |
Survival of Indemnities |
54 | ||||
Section 9.10 |
Limitation of Liability |
54 |
ii
ARTICLE X |
| |||||
DISPUTE RESOLUTION |
| |||||
Section 10.1 |
Appointed Representative |
55 | ||||
Section 10.2 |
Negotiation and Dispute Resolution |
55 | ||||
ARTICLE XI |
| |||||
TAX MATTERS |
| |||||
Section 11.1 |
Tax Returns and Payments |
58 | ||||
Section 11.2 |
Tax Covenants |
60 | ||||
Section 11.3 |
Tax Indemnification |
62 | ||||
Section 11.4 |
Tax Contests |
62 | ||||
Section 11.5 |
Cooperation |
63 | ||||
Section 11.6 |
Retention of Records; Access |
63 | ||||
ARTICLE XII |
| |||||
TERMINATION |
| |||||
Section 12.1 |
Termination |
64 | ||||
Section 12.2 |
Effect of Termination |
64 | ||||
ARTICLE XIII |
| |||||
MISCELLANEOUS |
| |||||
Section 13.1 |
Further Assurances |
64 | ||||
Section 13.2 |
Payment of Expenses |
64 | ||||
Section 13.3 |
Amendments and Waivers |
64 | ||||
Section 13.4 |
Entire Agreement |
65 | ||||
Section 13.5 |
Survival of Agreements |
65 | ||||
Section 13.6 |
Third-Party Beneficiaries |
65 | ||||
Section 13.7 |
Notices |
65 | ||||
Section 13.8 |
Counterparts; Electronic Delivery |
66 | ||||
Section 13.9 |
Severability |
66 | ||||
Section 13.10 |
Assignability; Binding Effect |
66 | ||||
Section 13.11 |
Governing Law |
66 | ||||
Section 13.12 |
Construction |
67 | ||||
Section 13.13 |
Performance |
67 | ||||
Section 13.14 |
Title and Headings |
67 | ||||
Section 13.15 |
Exhibits and Schedules |
67 |
Exhibit A DevCo Subsidiaries |
iii
Schedules |
||
Schedule 1.1(a) |
Initial MLA Real Properties | |
Schedule 1.1(b) |
Shared Contracts | |
Schedule 1.1(c) |
Specified SpinCo Assets | |
Schedule 2.1(b)(ii) |
Deferred Assets and Deferred Liabilities | |
Schedule 2.2(a) |
Certain DevCo Assets | |
Schedule 2.2(a)(iv) |
DevCo Brands and Trademarks | |
Schedule 2.3(a)(x) |
Certain DevCo Liabilities | |
Schedule 2.3(b)(viii) |
Certain SpinCo Liabilities | |
Schedule 2.4(b)(ii) |
Surviving Intercompany Agreements | |
Schedule 13.2 |
SpinCo Transaction Expenses |
iv
SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION AGREEMENT (this Agreement) is entered into as of December 15, 2020, by and among Apartment Investment and Management Company, a Maryland corporation (DevCo), Aimco OP L.P., a Delaware limited partnership and a subsidiary of SpinCo OP (DevCo OP), Apartment Income REIT Corp., a Maryland corporation and a subsidiary of DevCo (SpinCo), and AIMCO Properties, L.P., a Delaware limited partnership and a subsidiary of SpinCo (SpinCo OP). DevCo, DevCo OP, SpinCo, and SpinCo OP are sometimes referred to herein individually as a Party, and collectively as the Parties. Capitalized terms used but not otherwise defined herein shall have the respective meanings set forth in Section 1.1.
RECITALS
WHEREAS, the DevCo Board has determined that it is advisable and in the best interests of DevCo and its stockholders to restructure the assets and liabilities of DevCo into two companies: (i) DevCo (together with DevCo OP) which, following consummation of the transactions contemplated herein, will own and conduct the DevCo Business; and (ii) SpinCo (together with SpinCo OP) which, following consummation of the transactions contemplated herein, will own and conduct the SpinCo Business;
WHEREAS, in furtherance thereof, the DevCo Board and the board of directors of SpinCo have approved certain transactions to occur prior to the Effective Time, including, the (i) transfer to and assumption by DevCo OP or its Subsidiaries of DevCos and SpinCo OPs, and each of their applicable Subsidiaries, respective direct or indirect right, title, and interest in and to all DevCo Assets and DevCo Liabilities in exchange for the DevCo OP Units, (ii) DevCo OP Distribution and (iii) Internal Distribution, all as more fully described and defined in this Agreement and the Ancillary Agreements (together with the other internal restructuring steps set forth in the Plan of Restructuring, the Restructuring);
WHEREAS, in furtherance thereof, the DevCo Board has approved the issuance of the SpinCo Preferred Stock to DevCo, to occur prior to the Effective Time, and entry into the Preferred Stock Sale Agreement, to occur following the Effective Time, as more fully described in this Agreement and the Ancillary Agreements;
WHEREAS, the DevCo Board, acting both on behalf of DevCo in its capacity as the sole stockholder of the general partner of SpinCo OP and on its own behalf, has also determined that it is advisable and in the best interests of DevCo and its stockholders and SpinCo OP and its limited partners to effect the Distribution following which, DevCo and SpinCo will be two independent, publicly traded companies;
WHEREAS, DevCo, acting as the sole member of DevCo OP GP, has determined that it is advisable and in the best interest of DevCo OP GP and DevCo to approve DevCo OP GP as the general partner of DevCo OP;
WHEREAS, DevCo OP has been organized solely for these purposes and has not engaged in activities except in preparation for the Restructuring and the Distribution;
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WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Restructuring and the Distribution and to set forth certain other agreements that will, following the Distribution, govern certain matters relating to the Restructuring and the Distribution and the relationship between DevCo and/or its Subsidiaries (including DevCo OP), on the one hand, and, SpinCo and/or its Subsidiaries (including SpinCo OP), on the other hand;
WHEREAS, the DevCo Board, in exploring and considering the transactions contemplated by this Agreement, endeavored to make SpinCo as simple and transparent as possible, and, accordingly, designed the transaction contemplated by this Agreement such that all assets and liabilities would generally be allocated to DevCo, other than those assets and liabilities intentionally allocated to SpinCo pursuant to the terms and conditions of this Agreement and the Ancillary Agreements, thereby creating SpinCo as a company with a simplified and pure-play business model; and
WHEREAS, it is the intention of the Parties that the SpinCo Distribution will be a taxable distribution under Section 301 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth or referenced in this Section 1.1:
AAA Rules has the meaning set forth in Section 10.2(a)(i).
Access Period has the meaning set forth in Section 8.1(a).
Action means any demand, claim, action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.
Affiliate means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person; provided, however, that (a) the members of the DevCo Group and (b) the members of the SpinCo Group shall not be deemed Affiliates of each other following the Distribution. For this purpose, control of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of voting securities, by contract or otherwise.
Agreement has the meaning set forth in the preamble to this Agreement and includes all Exhibits and Schedules attached hereto or delivered pursuant hereto.
2
AIMCO/Bethesda means AIMCO/Bethesda Holdings, Inc., a Delaware corporation.
AIMCO Benefit Arrangements has the meaning set forth in the Employee Matters Agreement.
Ancillary Agreements has the meaning set forth in Section 3.5.
Appointed Representative has the meaning set forth in Section 10.1.
Appropriate Member of the DevCo Group has the meaning set forth in Section 9.3.
Appropriate Member of the SpinCo Group has the meaning set forth in Section 9.2.
Asset means all rights, properties or other assets, whether real, personal or mixed, tangible or intangible, of any kind, nature and description, whether accrued, contingent or otherwise, and wherever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.
Business Day means a day other than a Saturday, a Sunday or a day on which banking institutions located in the State of Delaware, New York or Maryland are authorized or obligated by applicable Law or executive order to close.
Chairperson has the meaning set forth in Section 10.2(a)(iii).
Code means the Internal Revenue Code of 1986, as amended.
Colorado Courts has the meaning set forth in Section 10.2(a)(xi).
Commercial Agreements means, collectively, the Master Leasing Agreement (and the Initial Leases thereunder), the Master Services Agreement and the Property Management Agreements.
Confidential Information means all confidential and proprietary information concerning a Party or any member of such Partys Group or their respective businesses that is either in the possession of the other Party or any member of such other Partys Group (including confidential and proprietary information in their possession prior to the date hereof) or furnished by the first Party or any member of such Partys Group or their respective representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise (except to the extent that such information can be shown to have been (a) in the public domain or generally available to the public, other than as a result of a disclosure by such other Party or any member of such other Partys Group or any of their respective representatives in violation of this Agreement, (b) later lawfully acquired from other sources by such other Party or any member of such other Partys Group, which sources are not known by such other Party to be bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (c) independently developed or generated without reference to or use of any proprietary or confidential information of the first Party or any member of such Partys Group).
3
Consent means any consent, waiver or approval from, or notification requirement to, any Person other than a member of either Group.
Contract means any written, oral, implied or other contract, agreement, addenda, covenant, lease, license, guaranty, indemnity, representation, warranty, assignment, sales order, purchase order, power of attorney, instrument or other commitment, assurance, undertaking, understanding or arrangement that is binding on any Person or entity or any part of its property under applicable Law.
Core SpinCo Properties means the properties designated as such and set forth on Schedule 1.1(c).
Deferred Asset and Deferred Liability have the respective meanings set forth in Section 2.1(b)(ii).
DevCo has the meaning set forth in the preamble to this Agreement.
DevCo Assets has the meaning set forth in Section 2.2(a).
DevCo Board means the board of directors of DevCo.
DevCo Business means any business now or formerly conducted by DevCo and its present and former Affiliates, other than the SpinCo Business.
DevCo Common Stock means the common stock, par value $0.01 per share, of DevCo.
DevCo Contracts means any Contract listed or described in Schedule 2.2(a) and any other Contract that relates exclusively to the DevCo Business (it being understood and agreed that Contracts related to property management matters do not exclusively relate to the DevCo Business unless they exclusively relate to the DevCo Retained Properties).
DevCo Credit Facility means one or more credit facilities to be entered into by one or more members of the DevCo Group prior to the Effective Time.
DevCo D&O Policies has the meaning set forth in Section 7.1.
DevCo Group means DevCo, the DevCo Subsidiaries and each other Person that becomes a Subsidiary of DevCo after the Distribution.
DevCo Guarantee means any Guarantee issued, entered into or otherwise put in place by any member of the DevCo Group to support or facilitate, or otherwise in respect of, (a) the obligations of any member of the SpinCo Group or the SpinCo Business or (b) Contracts, commitments, Liabilities or permits of any member of the SpinCo Group or the SpinCo Business.
DevCo Indemnitees means each member of the DevCo Group and its Affiliates (other than any member of the SpinCo Group) and each of their respective current, former or future directors, officers, agents, managers, trustees, and employees (in each case, in such Persons
4
respective capacity as such) and their respective heirs, executors, administrators, successors and assigns.
DevCo Liabilities has the meaning set forth in Section 2.3(a).
DevCo OP has the meaning set forth in the preamble to this Agreement.
DevCo OP Distribution means the distribution by SpinCo OP of all of the DevCo OP Units, on a pro rata basis, to the SpinCo OP Record Holders of SpinCo OP Common Units.
DevCo OP GP means Aimco OP GP, LLC, a Delaware limited liability company.
DevCo OP Information Statement means the information statement filed as Exhibit 99.1 to the DevCo OP Registration Statement, and any related documentation to be provided to holders of SpinCo OP Common Units in connection with the Distribution, as amended from time to time by any amendments or supplements thereto.
DevCo OP Registration Statement has the meaning set forth in the defined term Registration Statements.
DevCo OP Units means the partnership common units in DevCo OP.
DevCo Post-Closing Claims has the meaning set forth in Section 7.1(b)(ii).
DevCo Property Debt means the Specified Construction Debt and any and all property level indebtedness for borrowed money with respect to the DevCo Retained Properties.
DevCo Record Holders means the holders of record of DevCo Common Stock at the close of business on the Record Date.
DevCo Retained Properties means, collectively, each of those certain real properties commonly known as (a) Royal Crest Estates (Warwick) (RI), Royal Crest Estates (Marlboro) (MA), Waterford Village (MA), Wexford Village (MA), Royal Crest Estates (Nashua) (NH), 1001 Brickell Bay Tower (FL), the Yacht Club at Brickell (adjacent to 1001 Brickell Bay Tower) (FL), Hamilton on the Bay (FL), The Bluffs at Pacifica (CA), St. George Villas (SC), Casa del Hermosa (CA), Casa del Sur (CA), Casa del Norte, (CA) and Casa del Mar (CA) (the Parkmerced Loan and the foregoing, collectively, the DevCo Seed Properties) and (b) AIMCO 118-122 West 23rd Street (NY), Hillmeade (TN), 1045 on the Park Apartment Homes (GA), Plantation Gardens (FL), Elm Creek (IL), Willow Bend (IL), Evanston Place (IL), Yorktown Apartments (IL), Hyde Park Tower (IL), 2200 Grace (IL), Bank Lofts (CO), Cedar Rim (WA), Pathfinder Village (CA), 2900 on First Apartments (WA), AIMCO 173 East 90th Street (NY) and AIMCO 237 Ninth Avenue (NY) (the properties set forth in clause (b), collectively, the DevCo Other Properties), in each case (clauses (a) and (b)), together with and including easements, whether as owner, mortgagee or holder of a Security Interest (other than, in the case of the DevCo Other Properties, the SpinCo Specified Security Interest) in such property, lessor, sublessor, lessee, sublessee or otherwise, and including all buildings or barges located thereon, and all associated parking areas, fixtures and all other improvements located thereon, and including all rights, benefits, privileges, tenements, hereditaments, covenants, conditions,
5
restrictions, easements and other appurtenances on such property or otherwise appertaining to or benefitting such property and/or the improvements situated thereon, and including all mineral rights, development rights, air and water rights, subsurface rights, vested rights entitling, or prospective rights which may entitle, the owner of such property to related easements, land use rights, viewshed rights, density credits, water, sewer, electrical and other utility service, credits and/or rebates, strips and gores and any land lying in the bed of any street, road, alley, open or proposed, adjoining such property, and all other rights of way and other appurtenances used or connected with the beneficial use or enjoyment of such property.
DevCo Shared Pre-Closing Occurrence-Based Policies has the meaning set forth in Section 7.1(b)(i).
DevCo Subsidiaries means DevCo OP, the other entities listed on Exhibit A hereto and any other entities that will be a Subsidiary of DevCo after giving effect to the transactions set forth in the Plan of Restructuring, any Subsidiary of any such entities and any direct or indirect Subsidiary of DevCo formed after the date of this Agreement and prior to the Distribution, in each case, that does not cease to be a subsidiary of DevCo as a result of the Plan of Restructuring.
DevCo Tax Liabilities has the meaning set forth in Section 11.1(a)(i).
Dispute has the meaning set forth in Section 10.2(a).
Dispute Notice has the meaning set forth in Section 10.2(a).
Distribution means the DevCo OP Distribution, the Internal Distribution and the SpinCo Distribution.
Distribution Agent means Computershare Trust Company, N.A.
Distribution Date means the date on which the Distribution occurs, such date to be determined by, or under the authority of, the DevCo Board, in its sole and absolute discretion.
Effective Time means 12:01 a.m. on the Distribution Date, or such other time agreed to by the Parties from time to time.
Employee Matters Agreement means the Employee Matters Agreement, substantially in the form of Exhibit 10.2 to the SpinCo Registration Statement and Exhibit 10.3 to the DevCo OP Registration Statement, to be entered into by DevCo, DevCo OP, SpinCo OP, and SpinCo prior to the Effective Time.
Environmental Law means any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.
Environmental Liabilities means all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to
6
environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any product take-back requirements or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.
Escrow Account has the meaning set forth in Section 9.4(h)(ii)(A).
Exchange Act means the Securities Exchange Act of 1934, as amended.
Expense Amount has the meaning set forth in Section 9.4(h)(ii).
Expense Amount Accountants Letter has the meaning set forth in Section 9.4(h)(ii)(A).
Expense Amount Tax Opinion has the meaning set forth in Section 9.4(h)(ii)(A).
Final Determination means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by an acceptance on an IRS Form 870 or 870-AD (or any successor forms thereto), or by a comparable form or agreement pursuant to the laws of a state, local, or non-United States taxing jurisdiction, except that acceptance on an IRS Form 870 or 870-AD or comparable form or agreement will not constitute a Final Determination to the extent that such form or agreement reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for refund or the right of the Taxing Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree, or other order of a court of competent jurisdiction which is or has become final and unappealable; (c) by a closing agreement or accepted offer in compromise pursuant to Sections 7121 or 7122 of the Code, or a comparable agreement pursuant to the laws of a state, local, or non-United States jurisdiction; (d) by any allowance of a refund or credit in respect of an overpayment of a Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) or, where such periods are undefined or indefinite, in accordance with ordinary course limitation periods, by the jurisdiction imposing such Tax; (e) by a final settlement resulting from a treaty-based competent authority determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties.
Governmental Approval means any notice, report or other filing to be given to or made with, or any release, consent, substitution, approval, amendment, registration, permit or authorization from, any Governmental Authority.
Governmental Authority means any U.S. federal, state, local or non-U.S. court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority.
Group means the DevCo Group or the SpinCo Group, as the context requires.
7
Guarantee means any guarantee (including guarantees of performance or payment under Contracts, commitments, Liabilities and permits), letter of credit or other credit or credit support arrangement or similar assurance, including surety bonds, bid bonds, advance payment bonds, performance bonds, payment bonds, retention and/or warranty bonds or other bonds or similar instruments.
Hazardous Materials means any chemical, material, substance, waste, pollutant, emission, discharge, Release or contaminant that could result in Liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, toxic mold, lead (including lead-based paint), electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.
Indebtedness of any specified Person means (a) all obligations of such specified Person for borrowed money or arising out of any extension of credit to or for the account of such specified Person (including reimbursement or payment obligations with respect to surety bonds, letters of credit, bankers acceptances and similar instruments), (b) all obligations of such specified Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such specified Person upon which interest charges are customarily paid, (d) all obligations of such specified Person under conditional sale or other title retention agreements relating to Assets purchased by such specified Person, (e) all obligations of such specified Person issued or assumed as the deferred purchase price of property or services, (f) all Liabilities secured by (or for which any Person to which any such Liability is owed has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, lien, pledge or other encumbrance on property owned or acquired by such specified Person (or upon any revenues, income or profits of such specified Person therefrom), whether or not the obligations secured thereby have been assumed by the specified Person or otherwise become Liabilities of the specified Person, (g) all capital lease obligations of such specified Person, (h) all securities or other similar instruments convertible or exchangeable into any of the foregoing, and (i) any Liability of others of a type described in any of the preceding clauses (a) through (h) in respect of which the specified Person has incurred, assumed or acquired a Liability by means of a Guarantee.
Indemnifiable Loss has the meaning set forth in Section 9.5.
Indemnifying Party has the meaning set forth in Section 9.4(a).
Indemnitee means any DevCo Indemnitee or any SpinCo Indemnitee.
Indemnity Payment has the meaning set forth in Section 9.5.
Initial Leases means the lease agreements with respect to the Initial MLA Real Properties between a member of the SpinCo Group, as landlord, and a member of the DevCo Group, as tenant.
8
Initial MLA Real Properties means that certain real property set forth on Schedule 1.1(a) which will be leased by a member of the SpinCo Group, as landlord, to a member of the DevCo Group, as tenant, pursuant to and in accordance with the terms of the Master Leasing Agreement.
Insurance Policies means any insurance policies and insurance Contracts, including, without limitation, general liability, property and casualty, workers compensation, automobile, directors and officers liability, errors and omissions, employee dishonesty and fiduciary liability policies, whether, in each case, in the nature of primary, excess, umbrella or self-insurance coverage, together with all rights, benefits and privileges thereunder.
Insurance Proceeds means those monies (in each case, net of any out-of-pocket costs or expenses incurred in the collection thereof):
(a) received by an insured Person from any insurer, insurance underwriter, mutual protection and indemnity club or other risk collective, excluding any proceeds received directly or indirectly (such as through reinsurance arrangements) from any captive insurance Subsidiary of the insured Person; or
(b) paid on behalf of an insured Person by any insurer, insurance underwriter, mutual protection and indemnity club or other risk collective, excluding any such payment made directly or indirectly (such as through reinsurance arrangements) from any captive insurance Subsidiary of the insured Person, on behalf of the insured.
Intellectual Property Agreements means the IP Cross License.
Intercompany Account means any receivable, payable or loan between any member of the DevCo Group, on the one hand, and any member of the SpinCo Group, on the other hand, that exists prior to the Effective Time and is reflected in the records of the relevant members of the DevCo Group and the SpinCo Group, except for any such receivable, payable or loan that arises pursuant to this Agreement or any Ancillary Agreement.
Intercompany Agreement means any Contract between or among any member of the DevCo Group, on the one hand, and any member of the SpinCo Group, on the other hand, entered into prior to the Effective Time, but excluding any Contract (a) to which a Person other than any member of the DevCo Group or the SpinCo Group is also a party and (b) that arises pursuant to this Agreement or any Ancillary Agreement.
Internal Distribution means the internal distributions of all DevCo OP Units held by SpinCo and SpinCo OP GP to DevCo immediately following the DevCo OP Distribution.
IP Cross License means the IP Cross License to be entered into by DevCo, DevCo OP, SpinCo, and SpinCo OP prior to the Effective Time.
IRS means the Internal Revenue Service.
Law means any law, statute, ordinance, code, rule, regulation, order, writ, proclamation, judgment, injunction or decree of any Governmental Authority.
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Liabilities means any and all Indebtedness, liabilities and obligations, whether accrued, fixed or contingent, mature or inchoate, known or unknown, reflected on a balance sheet or otherwise, including those arising under any Law, Action or any judgment of any Governmental Authority or any award of any arbitrator of any kind, and those arising under any Contract.
Losses means any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, interest costs, Taxes, fines and expenses (including the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and attorneys, accountants, consultants and other professionals fees and expenses incurred in the investigation, defense, litigation or arbitration thereof or the enforcement of rights hereunder).
Manager means AIR Property Management Company, LLC, a Delaware limited liability company.
Master Leasing Agreement means the Master Leasing Agreement, substantially in the form of Exhibit 10.3 to the SpinCo Registration Statement and Exhibit 10.4 to the DevCo OP Registration Statement, to be entered into by certain members of the DevCo Group and certain members of the SpinCo Group prior to the Effective Time.
Master Services Agreement means the Master Services Agreement, substantially in the form of Exhibit 10.1 to the SpinCo Registration Statement and Exhibit 10.2 to the DevCo OP Registration Statement, to be entered into by DevCo, DevCo OP, SpinCo and SpinCo OP prior to the Effective Time.
Nashua Transfer Agreement means the Membership Interest Transfer Agreement, to be entered into on or prior to the Distribution Date by SpinCo OP and DevCo OP.
New SpinCo Contract has the meaning set forth in Section 2.1(f)(i).
Nonqualifying Income means any amount that is treated as gross income for purposes of Section 856 of the Code and which is not Qualifying Income.
NYSE means the New York Stock Exchange.
NYSE Listing Application has the meaning set forth in Section 3.2(a).
Other Party Marks has the meaning set forth in Section 7.3(a).
Partial Assignments and Releases has the meaning set forth in Section 2.1(f)(i).
Party or Parties has the meaning set forth in the preamble to this Agreement.
Person means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
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Plan of Restructuring means the document delivered by DevCo to SpinCo that describes the detailed transaction steps to effect the internal restructuring to be undertaken prior to the Effective Time.
Post-Closing Period means any taxable year or other taxable period beginning after the Distribution Date.
Pre-Closing Period means any taxable year or other taxable period that ends on or before the Distribution Date.
Preferred Stock Sale Agreement means a binding agreement entered into between DevCo and certain unrelated third parties prior to the Effective Time pursuant to which DevCo shall sell the SpinCo Preferred Stock to such third parties immediately following the SpinCo Distribution (the Preferred Stock Sale).
Property Management Agreements means, collectively, (a) the Property Management Agreement, substantially in the form of Exhibit 10.5 to the SpinCo Registration Statement and Exhibit 10.11 to the DevCo OP Registration Statement, relating to the DevCo Other Properties, to be entered into by Manager and James-Oxford Limited Partnership prior to the Effective Time, (b) the Property Management Agreement, substantially in the form of Exhibit 10.12 to the DevCo OP Registration Statement, relating to the Initial MLA Real Properties, to be entered into by Manager and Aimco Development Company, LLC, a Delaware limited liability company, prior to the Effective Time and (c) the Property Management Agreement, substantially in the form of Exhibit 10.10 to the DevCo OP Registration Statement, relating to a majority of the DevCo Seed Properties, to be entered into by Manager and DevCo OP prior to the Effective Time.
Property Taxes means any real, personal and intangible ad valorem property Taxes imposed or required to be withheld by any Taxing Authority, including any interest, additions or penalties applicable or related thereto.
Proposed Damages Award has the meaning set forth in Section 10.2(a)(v).
Protected REIT means any entity that (a) has elected to be taxed as a REIT, and (b) either (i) is an Indemnitee or (ii) owns a direct or indirect equity interest in any Indemnitee and is treated for purposes of Section 856 of the Code as owning all or a portion of the assets of such Indemnitee or as receiving all or a portion of the Indemnitees income.
Qualifying Income means gross income that is described in Section 856(c)(3) of the Code.
Record Date means the date determined by the DevCo Board, acting both on behalf of DevCo in its capacity as the sole stockholder of the general partner of SpinCo OP and on its own behalf, as the record date for determining holders of DevCo Common Stock entitled to receive shares of SpinCo Common Stock in the SpinCo Distribution and for determining holders of SpinCo OP Common Units entitled to receive DevCo OP Units in the DevCo OP Distribution.
Record Holders means the DevCo Record Holders and SpinCo OP Record Holders.
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Registration Statements means (a) the registration statement on Form 10 of SpinCo with respect to the registration under Section 12(b) of the Exchange Act of the SpinCo Common Stock to be distributed in the Distribution, as amended from time to time by any amendments or supplements thereto (the SpinCo Registration Statement), and (b) the registration statement on Form 10 of DevCo OP with respect to the registration under Section 12(g) of the Exchange Act of the DevCo OP Units to be distributed in the Distribution, as amended from time to time by any amendments or supplements thereto (the DevCo OP Registration Statement).
REIT means a real estate investment trust as defined in Sections 856 through and including 860 of the Code.
REIT Qualification Ruling has the meaning set forth in Section 9.4(h)(ii)(A).
REIT Requirements means the requirements imposed on REITs pursuant to Sections 856 through and including 860 of the Code.
Release means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including ambient air, surface water, groundwater and surface or subsurface strata).
Release Document has the meaning set forth in Section 9.4(h)(ii)(A).
Representatives has the meaning set forth in Section 8.7(a).
Restructuring has the meaning set forth in the recitals to this Agreement.
SEC means the United States Securities and Exchange Commission.
Security Interest means any mortgage, security interest, pledge, lien, charge, claim, option, indenture, right to acquire, right of first refusal, deed of trust, licenses to third parties, leases to third parties, security agreements, voting or other restriction, covenant, condition, encroachment, restriction on transfer, restriction or limitation on use of real or personal property or any other encumbrance of any nature whatsoever, imperfections in or failure of title or defect of title.
Shared Contract means each of the contracts set forth on Schedule 1.1(b) that relate to the operations or conduct of both the DevCo Business and the SpinCo Business.
Solvent means, (1) with respect to DevCo OP and SpinCo OP, as of the applicable time of determination, that, on a pro forma basis, (a) the fair value of the assets of each DevCo OP and SpinCo OP on a consolidated basis would exceed their respective stated liabilities, identified contingent liabilities and off-balance sheet liabilities on a consolidated basis, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specified property of the limited partnership, except that the fair value of property that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds that liability; (b) each of DevCo OP and SpinCo OP will be able to pay its
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respective debts as they become absolute, due and mature; and (c) each of DevCo OP and SpinCo OP will not have unreasonably small capital for the business in which it is engaged; and (2) with respect to DevCo and SpinCo, as of the applicable time of determination, that, on a pro forma basis (a) the fair value of the total assets of each of DevCo and SpinCo would exceed (i) their respective total liabilities plus (ii) the amount that would be needed to satisfy any preferential rights upon dissolution if DevCo and SpinCo, as applicable, were to be dissolved at the time of the SpinCo Distribution; (b) each of DevCo and SpinCo should be able to pay its respective indebtedness as such indebtedness becomes due in the usual course of business; and (c) each of DevCo and SpinCo should not have an unreasonably small amount of assets for the business in which it is engaged.
Specified Construction Debt means the liabilities, if any, related to, arising out of or resulting from any construction financing facilities related to Flamingo Point North Tower entered into on or prior to the Distribution Date (if any).
Specified DevCo Liabilities has the meaning set forth in Section 2.3(a).
Specified JO Common Units means those certain common units in James Oxford LP to be retained by a member of the SpinCo Group in accordance with the Plan of Restructuring.
Specified PM TRS Preferred Stock means that certain preferred stock of AIR Property Management TRS, LLC with an initial liquidation preference equal to the sum of (a) $1.00 per Series A Preferred Share and (b) all accumulated but unpaid distributions thereon through and including the date of payment to be issued to members of the DevCo Group in accordance with the Plan of Restructuring.
Specified Promissory Note means those certain secured promissory notes in an aggregate principal amount of $534,000,000 issued by a subsidiary of DevCo OP to members of the SpinCo Group in accordance with the Plan of Restructuring.
Specified SpinCo Assets means (a) all right, title and interest of SpinCo and/or its applicable Subsidiaries in and to the Initial MLA Real Properties (including any associated and appurtenant rights and interests held by or granted to the fee owner of such real property, but excluding the interests and rights of DevCo and its Subsidiaries, as tenants, in and to the Initial MLA Real Properties under and pursuant to the Initial Leases), (b) all equity interests in the SpinCo and its Subsidiaries (other than the Specified PM TRS Preferred Stock), (c) the Specified Promissory Note and (d) any and all Assets set forth on Schedule 1.1(c).
Specified SpinCo Liabilities has the meaning set forth in Section 2.3(b).
SpinCo has the meaning set forth in the preamble to this Agreement.
SpinCo Assets has the meaning set forth in Section 2.2(b).
SpinCo Business means the business of owning and managing stabilized multi-family apartment buildings and maintaining a portfolio with property management operations as conducted by DevCo and its Subsidiaries (including SpinCo and its Subsidiaries) as of immediately prior to the Effective Time.
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SpinCo Business Contracts has the meaning set forth in Section 2.1(f)(i).
SpinCo Common Stock means the common stock, par value $0.01 per share, of SpinCo.
SpinCo Credit Facility means (a) the definitive agreements with respect to the amendment, amendment and restatement or modification, dated at or prior to the Effective Time, of that certain Second Amended and Restated Senior Secured Credit Agreement, dated as of June 30, 2017, among DevCo, SpinCo OP, and AIMCO/Bethesda as borrowers, the lenders party thereto from time to time and KeyBank National Association, as administrative agent, swing line lender and letter of credit issuer (the Historical Credit Facility) (and in the case of an amendment and/or modification without an amendment and restatement, the definitive documents with respect to the Historical Credit Facility) or (b) the definitive agreements with respect to the refinancing of the Historical Credit Facility, in each case (clauses (a) and (b)), to which certain members of the SpinCo Group are party.
SpinCo Distribution means the distribution by DevCo of all of the SpinCo Common Stock, on a pro rata basis, to the DevCo Record Holders of DevCo Common Stock.
SpinCo Group means SpinCo and each Person (other than any member of the DevCo Group) that is a direct or indirect Subsidiary of SpinCo (other than those constituting a Subsidiary pursuant to Section 2.1(b)) immediately after the Effective Time, and each Person that becomes a Subsidiary of SpinCo after the Effective Time.
SpinCo Guarantee means any Guarantee issued, entered into or otherwise put in place by any member of the SpinCo Group to support or facilitate, or otherwise in respect of, (a) the obligations of any member of the DevCo Group or the DevCo Business or (b) Contracts, commitments, Liabilities or permits of any member of the DevCo Group or the DevCo Business.
SpinCo Indemnitees means each member of the SpinCo Group and their Affiliates and each of their respective current, former or future directors, officers, agents, managers, trustees, and employees (in each case, in such Persons respective capacity as such) and their respective heirs, executors, administrators, successors and assigns.
SpinCo Information Statement means the information statement filed as Exhibit 99.1 to the SpinCo Registration Statement, and any related documentation to be provided to holders of DevCo Common Stock in connection with the Distribution, as amended from time to time by any amendments or supplements thereto.
SpinCo Liabilities has the meaning set forth in Section 2.3(b).
SpinCo Post-Closing Claims has the meaning set forth in Section 7.1(b)(i).
SpinCo OP has the meaning set forth in the preamble to this Agreement.
SpinCo OP GP means AIMCO-GP, Inc., a Delaware corporation.
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SpinCo OP Record Holders means the holders of record of SpinCo OP Common Units at the close of business on the Record Date.
SpinCo OP Common Units means the partnership common units in SpinCo OP and the Class I High Performance Partnership Units of SpinCo OP.
SpinCo Preferred Stock means the Class A preferred stock of SpinCo with an initial aggregate liquidation preference of $2,000,000 to be issued to DevCo in accordance with the Plan of Restructuring and sold thereafter by DevCo to unrelated third parties pursuant to the Preferred Stock Sale.
SpinCo Registration Statement has the meaning set forth in the defined term Registration Statements.
SpinCo REIT Subsidiary means any Subsidiary of SpinCo that has or will elect to be treated as a REIT for U.S. federal income tax purposes.
SpinCo Shared Pre-Closing Occurrence-Based Policies has the meaning set forth in Section 7.1(b)(ii).
SpinCo Specified Security Interest means the security interest in the equity interests of James Oxford LP held by Aimco REIT Sub, LLC, granted pursuant to that certain pledge agreement, by Aimco REIT Sub, LLC in favor of SpinCo OP, as collateral agent for the benefit of SpinCo OP and AIMCO/Bethesda as holders of the notes.
SpinCo Tax Liabilities has the meaning set forth in Section 11.1(a)(iii)(A).
Straddle Period means any taxable period commencing on or prior to, and ending after, the Distribution Date.
Subsidiary means, with respect to any specified Person, any corporation, partnership, limited liability company, joint venture or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such specified Person or by any one or more of its subsidiaries, or by such specified Person and one or more of its Subsidiaries.
Surviving Intercompany Agreements has the meaning set forth in Section 2.4(b).
Tax Advisor means Tax counsel of recognized national standing or a Big Four accounting firm, in either case, with experience in the tax area involved in the Tax Dispute or issue.
Tax Contest means any audit, review, examination, dispute, suit, action, proposed assessment or other administrative or judicial proceeding with respect to Taxes.
Tax Dispute has the meaning set forth in Section 11.1(f).
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Tax Return means any return, report, certificate, form, or similar statement or document (including any attachments thereto and any information return, amended tax return, claim for refund, or declaration of estimated tax) supplied to or filed with, or required to be supplied to or filed with, a Taxing Authority, or any bill for or notice related to ad valorem or other similar Taxes received from a Taxing Authority, in each case, in connection with the determination, assessment, or collection of any Tax or the administration of any Laws or administrative requirements relating to any Tax.
Taxes means (a) any and all U.S. federal, state, local and foreign taxes, including income, alternative or add-on minimum, gross receipts, profits, lease, service, service use, wage, employment, workers compensation, business occupation, environmental, estimated, excise, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, withholding, social security, unemployment, disability, ad valorem, capital stock, paid in capital, recording, registration, property, real property gains, value added, business license, custom duties, built-in gains, prohibited transaction (as defined in Section 857(b)(6) of the Code), and other taxes, charges, fees, levies, imposts, duties or assessments of any kind whatsoever, imposed or required to be withheld by any Taxing Authority, including any interest, additions to Tax, or penalties applicable or related thereto and (b) any liability for the Taxes of any Person under Section 1.1502-6 of the Treasury Regulations (or similar provision of state or local law).
Taxing Authority means any Governmental Authority or other authority in connection with the determination, assessment or collection or any Tax or the administration of any Laws or administrative requirements related to any Tax.
Third-Party Claim has the meaning set forth in Section 9.4(b).
Third-Party Consents means any consents or approvals required from third parties to assign, convey or transfer the Shared Contracts to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.
Trademarks means all United States and foreign trademarks, service marks, corporate names, trade names, domain names, social media addresses and handles, logos, slogans, trade dress and other similar designations of source or origin, whether registered or unregistered, together with the goodwill symbolized by any of the foregoing.
Transactions means the Restructuring, the Distribution and any other transactions contemplated by this Agreement or any Ancillary Agreement.
Transfer Taxes means all sales, use, privilege, transfer, documentary, stamp, recording and similar Taxes and fees (including any penalties, interest or additions thereto) imposed upon any Party in connection with the Transactions.
Treasury Regulations means the final and temporary (but not proposed) income Tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
Section 1.2 Interpretation. In this Agreement and the Ancillary Agreements, unless the context clearly indicates otherwise:
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(a) words used in the singular include the plural and words used in the plural include the singular;
(b) the words include, includes and including shall be deemed to be followed by the words without limitation;
(c) the word or shall have the inclusive meaning represented by the phrase and/or;
(d) relative to the determination of any period of time, from means from and including, to means to but excluding and through means through and including;
(e) accounting terms used herein shall have the meanings historically ascribed to them by DevCo and its Subsidiaries in their internal accounting and financial policies and procedures in effect immediately prior to the date of this Agreement;
(f) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;
(g) reference to any Law means such Law (including any and all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;
(h) references to any Person include such Persons successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement; a reference to such Persons Affiliates shall be deemed to mean such Persons Affiliates following the Distribution and any reference to a third party shall be deemed to mean a Person who is not a Party or an Affiliate of a Party;
(i) if there is any conflict between the provisions of the main body of this Agreement or an Ancillary Agreement and the Exhibits and Schedules hereto or thereto, the provisions of the main body of this Agreement or the Ancillary Agreement, as applicable, shall control unless explicitly stated otherwise in such Exhibit or Schedule;
(j) if there is any conflict between the provisions of this Agreement and any Ancillary Agreement, the provisions of such Ancillary Agreement shall control (but only with respect to the subject matter thereof) unless explicitly stated otherwise therein; and
(k) any portion of this Agreement or any Ancillary Agreement obligating a Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party shall also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be.
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ARTICLE II
THE RESTRUCTURING
Section 2.1 Transfers of Assets and Assumptions of Liabilities.
(a) Transfers Prior to Effective Time. Subject to Section 2.1(b), and in accordance with the Plan of Restructuring, DevCo and SpinCo agree to take all actions necessary so that, prior to the Effective Time, the Parties shall complete the Restructuring in accordance with the Plan of Restructuring. As part of the Plan of Restructuring, and without limiting the other steps set forth in the Plan of Restructuring:
(i) SpinCo OP shall, and shall cause its applicable Subsidiaries to, sell, assign, transfer, convey, and deliver to DevCo OP or its Subsidiaries, and DevCo OP and such DevCo Subsidiaries shall accept from SpinCo OP and its applicable Subsidiaries, to the extent not already owned by the DevCo Group, all of SpinCo OPs and such Subsidiaries respective direct or indirect right, title, and interest in and to all DevCo Assets (other than the interests in AIMCO Royal Crest Nashua, L.L.C.), in exchange for which DevCo OP shall issue the DevCo OP Units to SpinCo OP; and
(ii) DevCo OP or its Subsidiaries shall accept and assume, to the extent the DevCo Group is not already liable therefor, all the DevCo Liabilities (other than the DevCo Liabilities of AIMCO Royal Crest Nashua, L.L.C.) in accordance with their respective terms, regardless of when or where such DevCo Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such DevCo Liabilities are asserted or determined (including any DevCo Liabilities arising out of claims made by DevCos or SpinCos respective directors, officers, employees, agents, managers, trustees, Subsidiaries or Affiliates against any member of the DevCo Group or the SpinCo Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the DevCo Group or the SpinCo Group, or any of their respective directors, officers, employees, agents, managers, trustees, Subsidiaries or Affiliates.
(b) Deferred Transfers and Assumptions.
(i) Nothing in this Agreement or in any Ancillary Agreement will be deemed to require the transfer of any Assets or the assumption of any Liabilities that by their terms or by operation of Law cannot be transferred or assumed.
(ii) To the extent that any transfer of Assets or assumption of Liabilities contemplated by this Agreement or any Ancillary Agreement is not consummated prior to the Effective Time as a result of an absence or non-satisfaction of any required Consent, Governmental Approval and/or other condition, including those set forth on Schedule 2.1(b)(ii), (such Assets or Liabilities, a Deferred Asset or a Deferred Liability, as applicable), the Parties will use reasonable efforts to effect such
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transfers or assumptions as promptly following the Effective Time as practicable. If and when the Consents, Governmental Approvals and/or other conditions, the absence or non-satisfaction of which gave rise to a Deferred Asset or Deferred Liability, are obtained or satisfied, the transfer or assumption of such Deferred Asset or Deferred Liability will be effected in accordance with and subject to the terms of this Agreement or the applicable Ancillary Agreement.
(iii) From and after the Effective Time until such time as a Deferred Asset or Deferred Liability is transferred or assumed, as applicable, (A) the Party retaining such Deferred Asset will thereafter hold such Deferred Asset for the use and benefit of the Party entitled thereto (at the expense of the Party entitled thereto) and (B) the Party intended to assume such Deferred Liability will pay or reimburse the Party retaining such Deferred Liability for all amounts paid or incurred in connection with the retention of such Deferred Liability; it being agreed that the Party retaining such Deferred Asset or Deferred Liability will not be obligated, in connection with the foregoing clause (A) and clause (B), to expend any money unless the necessary funds are advanced or agreed in writing to be reimbursed by the Party entitled to such Deferred Asset or intended to assume such Deferred Liability. The Party retaining such Deferred Asset or Deferred Liability will use its reasonable efforts to notify the Party entitled to or intended to assume, as applicable, such Deferred Asset or Deferred Liability of the need for such expenditure. In addition, the Party retaining such Deferred Asset or Deferred Liability will, insofar as reasonably practicable and to the extent permitted by applicable Law, (A) treat such Deferred Asset or Deferred Liability in the ordinary course of business consistent with past practice, (B) promptly take such other actions as may be requested by the Party entitled to such Deferred Asset or by the Party intended to assume such Deferred Liability in order to place such Party in the same position as if the Deferred Asset or Deferred Liability had been transferred or assumed, as applicable, as contemplated hereby, and so that all the benefits and burdens relating to such Deferred Asset or Deferred Liability, including possession, use, risk of loss, potential for gain, and control over such Deferred Asset or Deferred Liability, are to inure from and after the Effective Time to such Party entitled to such Deferred Asset or intended to assume such Deferred Liability, and (C) hold itself out to third parties as agent or nominee on behalf of the Party entitled to such Deferred Asset or intended to assume such Deferred Liability.
(iv) In furtherance of the foregoing, the Parties agree that, as of the Effective Time, each Party will be deemed to have acquired beneficial ownership of all of the Assets, together with all rights and privileges incident thereto, and will be deemed to have assumed all of the Liabilities, and all duties, obligations and responsibilities incident thereto, that such Party is entitled to acquire or intended to assume pursuant to the terms of this Agreement or the applicable Ancillary Agreement.
(v) The Parties agree to treat, for all tax purposes, any Asset or Liability that is not transferred or assumed prior to the Effective Time and which is subject to the provisions of this Section 2.1(b), as (A) owned by the Party to which such Asset was intended to be transferred or by the Party which was intended to assume such Liability, as the case may be, from and after the Effective Time, (B) having not been
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owned by the Party retaining such Asset or Liability, as the case may be, at any time from and after the Effective Time, and (C) having been held by the Party retaining such Asset or Liability, as the case may be, only as agent or nominee on behalf of the other Party from and after the Effective Time until the date such Asset or Liability, as the case may be, is transferred to or assumed by such other Party. The Parties will not take any position inconsistent with the foregoing unless otherwise required by applicable Law (in which case, the Parties will provide indemnification for any Taxes attributable to the Asset or Liability during the period beginning at the Effective Time and ending on the date of the actual transfer).
(c) Misallocated Assets; Mail & Other Communications; Payments.
(i) In the event that, at any time from and after the Effective Time, either Party discovers that it or another member of its Group is the owner of, receives or otherwise comes to possess or benefit from any Asset (including the receipt of payments made pursuant to Contracts and proceeds from accounts receivable with respect to such Asset) that should have been allocated to a member of the other Group pursuant to this Agreement or any Ancillary Agreement (except in the case of any deliberate acquisition of Assets from a member of the other Group for value subsequent to the Effective Time), such Party shall, subject to Section 2.1(b), promptly transfer or cause to be transferred such Asset to such member of the other Group, and such member of the other Group shall accept such Asset for no further consideration other than that set forth in this Agreement or such Ancillary Agreement, as applicable (it being understood and agreed that any such transfers shall be made on a monthly basis). Prior to any such transfer, such Asset shall be held in accordance with Section 2.1(b).
(ii) After the Effective Time, each Party (or any member of its Group and any of its or their respective then-Affiliates) may receive mail, packages and other communications properly belonging to another Party (or any member of its Group). Accordingly, at all times after the Effective Time, each Party (or any member of its Group and any of its or their respective then-Affiliates) is hereby authorized to receive and, to the extent reasonably necessary to identify the proper recipient in accordance with this Section 2.1(c)(ii), open all mail, packages and other communications received by such Party (or member of its Group or its or their then-Affiliate) that belongs to such other Party (or member of such other Partys Group), and to the extent that they do not relate to the business of the receiving Party, the receiving Party shall as promptly as reasonably practicable deliver or cause to be delivered such mail, packages or other communications (or, in case the same also relates to the business of the receiving Party or another Party, copies thereof) to such other Party as provided for in Section 13.7 (it being understood and agreed that any such deliveries shall be made on a monthly basis); provided that, if a Party (or any member of its Group and any of its or their respective then-Affiliates) receives any claim or demand against any other Party (or any member of such other Partys Group), or any notice or other communication regarding any Action involving any other Party (or any member of such other Partys Group), such Party shall and shall cause the other members of its Group to, as promptly as practicable (and, in any event, use commercially reasonable efforts to do so within fifteen (15) days after receipt thereof) notify such other Party (including such other Partys legal department) of the
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receipt of such claim, demand, notice or other communication, and shall promptly deliver such claim, demand, notice or other communication (or, in case the same also relates to the business of the receiving Party or another Party, copies thereof) to such other Party; provided, however, that the failure to provide such notice shall not constitute a breach of this Section 2.1(c)(ii) except to the extent that any such Party shall have been actually prejudiced as a result of such failure. The provisions of this Section 2.1(c)(ii) are not intended to, and shall not, be deemed to constitute an authorization by any Party or any other member of any Group (or any of their Affiliates from time to time) to permit the other to accept service of process on its behalf and no Party is or shall be deemed to be the agent of any other Party or any other member of any Group or any of their respective then-Affiliates for service of process purposes.
(iii) After the Effective Time, DevCo and DevCo OP shall, and shall cause the other members of the DevCo Group and its and any of their respective then-Affiliates to, promptly pay or deliver to SpinCo and SpinCo OP (or their designee) any monies or checks that have been received by DevCo or DevCo OP (or another member of the DevCo Group or its or their respective then-Affiliates) after the Effective Time to the extent they are (or represent the proceeds of) a SpinCo Asset (it being understood and agreed that any such amounts shall be paid and delivered on a monthly basis).
(iv) After the Effective Time, SpinCo and SpinCo OP shall, and shall cause the other members of the SpinCo Group and its and any of their respective then-Affiliates to, promptly pay or deliver to DevCo and DevCo OP (or their designee) any monies or checks that have been received by SpinCo or SpinCo OP (or another member of the SpinCo Group or its or their respective then-Affiliates) after the Effective Time to the extent they are (or represent the proceeds of) a DevCo Asset (it being understood and agreed that any such amounts shall be paid and delivered on a monthly basis).
(v) After the Effective Time, if any Party identifies any Asset or Liability that its Group believes was, or was not, as the case may be, allocated pursuant to this Agreement or any Ancillary Agreement in accordance with the intention of the Transactions, the Parties agree to discuss such matter in good faith and, if the Parties mutually agree (in their sole and absolute discretion), then the Parties may determine to transfer such Asset or Liability to the party they mutually agree was the intended recipient in a mutually agreed manner.
(d) Instruments of Transfer and Assumption. The Parties agree that (i) transfers of Assets that may be required by this Agreement or any Ancillary Agreement shall be effected by delivery by the transferor to the transferee, and, to the extent applicable, recordation in the appropriate official records, of (A) with respect to those Assets that constitute stock or other equity interests, certificates endorsed in blank or evidenced or accompanied by stock powers or other instruments of transfer endorsed in blank, against receipt and (B) with respect to all other Assets, such good and sufficient instruments of contribution, conveyance, assignment and transfer, in form and substance reasonably satisfactory to the Parties, as shall be necessary, in each case, to vest in the designated transferee all of the title and ownership interest of the transferor in and to any such Asset, and (ii) the assumptions of Liabilities required by this Agreement or any Ancillary Agreement shall be effected by delivery by the transferee to the
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transferor of such good and sufficient instruments of assumption, in form and substance reasonably satisfactory to the Parties, as shall be necessary, in each case, for the assumption by the transferee of such Liabilities.
(e) Waiver of Bulk-Sale and Bulk-Transfer Laws. Each Party hereto and each member of their respective Group hereby waives compliance by each and every member of the other Partys Group with the requirements and provisions of any bulk-sale or bulk-transfer Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Assets to any member of the SpinCo Group or DevCo Group, as applicable.
(f) Shared Contracts.
(i) Prior to the Closing, DevCo shall, and shall cause its Subsidiaries (including members of the DevCo Group) to, use their respective reasonable best efforts to obtain from, and to cooperate in obtaining from, and shall, and shall cause its Subsidiaries (including members of the DevCo Group) to enter into, with each third party to a Shared Contract, either (A) a separate contract or agreement in a form reasonably acceptable to DevCo and SpinCo (a New SpinCo Contract) that allocates the rights and obligations of DevCo and its Subsidiaries under each Shared Contract as between the DevCo Business, on the one hand, and the SpinCo Business, on the other hand, and which are otherwise substantially similar in all material respects to such Shared Contract or (B) a contract or agreement in a form reasonably acceptable to DevCo and SpinCo effective as of the Effective Time (the Partial Assignments and Releases) that (x) assigns the rights and obligations under such Shared Contract solely to the extent related to the SpinCo Business and arising after the Effective Time to the SpinCo Group and (y) releases the DevCo Group from all liabilities or obligations with respect to the SpinCo Business that arise after the Effective Time. Any New SpinCo Contracts that relate to the SpinCo Business (the SpinCo Business Contracts) shall be entered into by one or more members of the SpinCo Group effective as of the Effective Time and shall allocate to SpinCo or other member of the SpinCo Group all rights and obligations of DevCo and its Subsidiaries (other than members of the SpinCo Group) under the applicable Shared Contract being replaced to the extent such rights and obligations relate to the SpinCo Business and arise after the Effective Time. All purchase commitments under the Shared Contracts shall be allocated under the SpinCo Business Contracts or the Partial Assignments and Releases as between the DevCo Business, on the one hand, and the SpinCo Business, on the other hand, in an equitable manner that is mutually and reasonably agreed to by the DevCo Group and the SpinCo Group. In connection with the entering into of New SpinCo Contracts, the Parties shall use their reasonable best efforts to ensure that members of the DevCo Group are released by the third party with respect to all liabilities and obligations relating to the SpinCo Business and arising after the Effective Time.
(ii) In the event that any third party under a Shared Contract does not agree to enter into a New SpinCo Contract or Partial Assignment and Release consistent with this Section 2.1(f), the Parties shall in good faith seek mutually acceptable alternative arrangements for purposes of allocating rights and liabilities and obligations under such Shared Contract (provided that such arrangements shall not result in a breach
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or violation of such Shared Contract by any member of the DevCo Group). Such alternative arrangements may include a subcontracting, sublicensing or subleasing arrangement under which SpinCo and its Subsidiaries would, in compliance with Law, obtain the benefits under, and, to the extent first arising after the Effective Time, assume the obligations and bear the economic burdens associated with, such Shared Contract solely to the extent related to the SpinCo Business (or applicable portion thereof) or under which members of the DevCo Group would, upon the request of SpinCo, enforce for the benefit (and at the expense) of the SpinCo Group any and all of DevCos and its Subsidiaries rights against such third party under such Shared Contract solely to the extent related to the SpinCo Business (or applicable portion thereof), and the DevCo Group would promptly pay to the SpinCo Group when received all monies received by them (net of any applicable Taxes imposed on the DevCo Group) under such Shared Contract solely to the extent related to the SpinCo Business (or applicable portion thereof).
(iii) With respect to Liabilities pursuant to, under or relating to a given Shared Contract relating to occurrences from and after the Effective Time, such Liabilities shall, unless otherwise allocated pursuant to this Agreement, be allocated between the DevCo Group and the SpinCo Group as follows:
(A) If a Liability is incurred exclusively in respect of the SpinCo Business or exclusively in respect of the DevCo Business, such Liability shall be allocated to SpinCo or its applicable Subsidiary (in respect of the SpinCo Business) or DevCo or its applicable Subsidiary (in respect of the DevCo Business); and
(B) If a Liability cannot be so allocated under clause (A) above, such Liability shall be allocated to the DevCo Group or the SpinCo Group, as the case may be, based on the relative proportions of total benefit received (over the term of the Shared Contract remaining as of the Effective Time, measured as of the date of the allocation) by the DevCo Business or the SpinCo Business under the relevant Shared Contract. Notwithstanding the foregoing, each of the DevCo Group and the SpinCo Group shall be responsible for any or all Liabilities arising from its (or its Subsidiarys) breach of the relevant Shared Contract to which this Section 2.1(f) otherwise pertains.
(iv) If DevCo or any of its Subsidiaries, on the one hand, or SpinCo or any of its Subsidiaries, on the other hand, receives any benefit or payment which under any Shared Contract was intended for the other, DevCo will cause the DevCo Group to use, and SpinCo will cause the SpinCo Group to use, their respective reasonable best efforts to deliver such benefit or payment to the other Party.
(v) From the date hereof until the Effective Time, and during the twelve (12)-month period immediately following the Effective Time, DevCo and SpinCo shall use commercially reasonable efforts to cooperate to obtain the Third-Party Consents. Neither DevCo nor SpinCo shall have any Liability whatsoever for failure to
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obtain any Third-Party Consent, except to the extent that such failure results from a failure to use commercially reasonable efforts as required by this Section 2.1(f)(v).
Section 2.2 DevCo Assets and SpinCo Assets.
(a) For purposes of this Agreement, DevCo Assets shall mean, except as otherwise expressly provided in this Agreement:
(i) all of the equity interests in the DevCo Subsidiaries other than the Specified JO Common Units;
(ii) all DevCo Contracts, including the rights of the members of the DevCo Group party to this Agreement, the Ancillary Agreements and the Surviving Intercompany Agreements;
(iii) all Assets relating to any AIMCO Benefit Arrangements to be retained by, or assigned, transferred, or otherwise conveyed to, any member of the DevCo Group pursuant to the Employee Matters Agreement;
(iv) the Apartment Investment and Management Company name and any and all Apartment Investment and Management Company and AIMCO brands, related Trademarks and related Trademark applications and registrations, including those set forth on Schedule 2.2(a)(iv), and any and all derivations, abbreviations, translations, localizations and other variations of any of the foregoing and any confusingly similar Trademark and Trademark application and registration;
(v) the Assets listed or described in Schedule 2.2(a);
(vi) the DevCo Retained Properties and any Assets located on such properties;
(vii) any and all cash and other current marketable securities in bank and investment accounts of the DevCo Group as of the Effective Time, including any cash and wires in transit to any such account; and
(viii) any and all Assets directly or indirectly owned or held immediately prior to the Effective Time by DevCo or any of its Subsidiaries that are used exclusively in, or that exclusively relate to, the DevCo Business;
provided, however, that the DevCo Assets shall not include the Specified SpinCo Assets.
(b) For the purposes of this Agreement, SpinCo Assets shall mean any and all Assets directly or indirectly owned or held immediately prior to the Effective Time by DevCo or any of its Subsidiaries (including any Asset that is not related to either the DevCo Business or the SpinCo Business (other than in a de minimis respect) (e.g., corporate or enterprise-wide Assets)) other than the DevCo Assets. For the avoidance of doubt, SpinCo Assets includes the Specified SpinCo Assets.
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Section 2.3 SpinCo Liabilities and DevCo Liabilities.
(a) For the purposes of this Agreement, DevCo Liabilities shall mean, (without duplication) any and all Liabilities of DevCo and its Subsidiaries as of the Effective Time other than SpinCo Liabilities, including:
(i) all Liabilities primarily relating to, arising out of or resulting from any Action related to the Transactions;
(ii) all outbound cash and wires in transit as of the Effective Time from any bank or investment account of any member of the DevCo Group;
(iii) all Liabilities to be assumed by, and the obligations of, any member of the DevCo Group pursuant to this Agreement or any Ancillary Agreement;
(iv) all Liabilities arising under any new DevCo Credit Facility;
(v) any and all Liabilities of any member of the DevCo Group relating to any surviving Intercompany Accounts;
(vi) any and all Liabilities of any member of the DevCo Group pursuant to the Specified Promissory Note;
(vii) all Liabilities in respect of the DevCo Property Debt;
(viii) all Assets relating to any AIMCO Benefit Arrangements to be retained by, or assigned, transferred, or otherwise conveyed to, any member of the SpinCo Group pursuant to the Employee Matters Agreement;
(ix) all Environmental Liabilities to the extent related to the DevCo Retained Properties;
(x) those Liabilities set forth in Schedule 2.3(a)(x);
(xi) all Liabilities relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent that such Liabilities are not Specified SpinCo Liabilities; and
(xii) all DevCo Tax Liabilities;
(and Specified DevCo Liabilities shall mean the Liabilities set forth in clauses (i) through (xii) above).
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(b) For the purposes of this Agreement, SpinCo Liabilities shall mean, (without duplication), any and all Liabilities of DevCo and its Subsidiaries as of immediately prior to the Effective Time other than the Specified DevCo Liabilities that are:
(i) Liabilities related to the SpinCo Credit Facility and the credit agreement for the SpinCo Credit Facility and all property-level indebtedness for borrowed money other than the DevCo Property Debt;
(ii) Liabilities to be assumed by, and the obligations of, any member of the SpinCo Group pursuant to this Agreement or any Ancillary Agreement;
(iii) Liabilities in respect of the Specified PM TRS Preferred Stock;
(iv) Liabilities of any member of the SpinCo Group relating to any surviving Intercompany Accounts;
(v) Liabilities allocated to the SpinCo Group pursuant to the Employee Matters Agreement;
(vi) outbound cash and wires in transit as of the Effective Time from any bank or investment account of any member of the SpinCo Group;
(vii) all Environmental Liabilities related to the Initial MLA Real Properties and the Core SpinCo Properties;
(viii) Liabilities set forth in Schedule 2.3(b)(viii); and
(ix) Spinco Tax Liabilities;
(and Specified SpinCo Liabilities shall mean the Liabilities set forth in clauses (ii)-(ix) above).
Section 2.4 Termination of Intercompany Agreements.
(a) Except as set forth in Section 2.4(b), DevCo, on behalf of itself and each of the other members of the DevCo Group, and SpinCo, on behalf of itself and each of the other members of the SpinCo Group, hereby terminate, effective as of the Effective Time, any and all Intercompany Agreements. No such terminated Intercompany Agreement will be of any further force or effect from and after the Effective Time and all Parties shall be released from all Liabilities thereunder other than the Liability to settle any Intercompany Accounts as provided in Section 2.5. Each Party shall take, or cause to be taken, any and all actions as may be reasonably necessary to effect the foregoing.
(b) The provisions of Section 2.4(a) shall not apply to any of the following agreements (which agreements shall continue to be outstanding after the Effective Time and thereafter shall be deemed to be, for each relevant Party (or the member of such Partys Group), an obligation to a third party and shall no longer be an Intercompany Agreement) (collectively, the Surviving Intercompany Agreements):
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(i) this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement);
(ii) the agreements listed on Schedule 2.4(b)(ii); and
(iii) any confidentiality or non-disclosure agreements among any members of either Group.
Section 2.5 Settlement of Intercompany Accounts. Each Intercompany Account representing Indebtedness (for the avoidance of doubt, excluding the Specified Promissory Note, the Specified PM TRS Preferred Stock and the SpinCo Preferred Stock) outstanding immediately prior to the Effective Time, will be satisfied and/or settled in full in cash or otherwise cancelled and terminated or extinguished by the relevant members of the DevCo Group and the SpinCo Group prior to the Effective Time, in each case, in the manner agreed to by the Parties. Each Intercompany Account representing an account payable outstanding immediately prior to the Effective Time, will survive and be paid in accordance with its terms; provided that if such account payable does not have a specified repayment term, such account payable shall be repaid within ninety (90) days of the Effective Time.
Section 2.6 Replacement of Guarantees.
(a) The Parties shall cooperate and use their reasonable best efforts to arrange, effective at or prior to the Effective Time, at SpinCos cost and expense, the replacement of all DevCo Guarantees with alternate arrangements that do not require any credit support from any member of the DevCo Group, and shall use their reasonable best efforts to obtain from the beneficiaries of such DevCo Guarantees written releases indicating that each applicable member of the DevCo Group will, effective as of the Effective Time, have no further Liability with respect to such DevCo Guarantees. If, following the Effective Time, the Parties are unable to replace any DevCo Guarantee, (i) the Parties shall cooperate and continue to use their reasonable best efforts to replace such DevCo Guarantee with alternate arrangements that do not require any credit support from any member of the DevCo Group and (ii) SpinCo OP shall indemnify, defend and hold harmless each member of the DevCo Group against, and reimburse each member of the DevCo Group for, any Losses incurred following the Distribution with respect to such DevCo Guarantee, and SpinCo hereby irrevocably guarantees the due and punctual performance and observance by SpinCo OP of its obligations contained in this Section 2.6(a), subject, in each case, to all of the terms, provisions and conditions herein.
(b) The Parties shall cooperate and use their reasonable best efforts to arrange, effective at or prior to the Effective Time, at DevCos cost and expense, the replacement of all SpinCo Guarantees with alternate arrangements that do not require any credit support from any member of the SpinCo Group, and shall use their reasonable best efforts to obtain from the beneficiaries of such SpinCo Guarantees written releases indicating that each applicable member of the SpinCo Group will, effective as of the Effective Time, have no further Liability with respect to such SpinCo Guarantees. If, following the Effective Time, the Parties are unable to replace any SpinCo Guarantee, (i) the Parties shall cooperate and continue to use their reasonable best efforts to replace such SpinCo Guarantee with alternate arrangements that do not require any
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credit support from any member of the SpinCo Group and (ii) DevCo OP shall indemnify, defend and hold harmless each member of the SpinCo Group against, and reimburse each member of the SpinCo Group for, any Losses incurred following the Distribution with respect to such SpinCo Guarantee, and DevCo hereby irrevocably guarantees the due and punctual performance and observance by DevCo OP of its obligations contained in this Section 2.6(b), subject, in each case, to all of the terms, provisions and conditions herein.
ARTICLE III
CERTAIN ACTIONS PRIOR TO THE DISTRIBUTION
Section 3.1 SEC and Other Securities Filings.
(a) Prior to the date of this Agreement, the Parties caused the Registration Statements to be prepared and filed with the SEC.
(b) The Registration Statements were declared effective by the SEC on November 30, 2020.
(c) As soon as practicable after the date of this Agreement, DevCo shall cause the DevCo OP Information Statement and the SpinCo Information Statement to be mailed to the applicable Record Holders (or, alternatively, DevCo shall make available the DevCo OP Information Statement and the SpinCo Information Statement to the applicable Record Holders and cause to be mailed to the applicable Record Holders a notice of internet availability of the DevCo OP Information Statement and the SpinCo Information Statement and post such notice on its website, in each case in compliance with Rule 14a-16 promulgated by the SEC pursuant to the Exchange Act, as such rule may be amended from time to time).
(d) The Parties shall cooperate in preparing, filing with the SEC and causing to become effective any other registration statements or amendments or supplements thereto that are necessary or appropriate in order to effect the Transactions, or to reflect the establishment of, or amendments to, any employee benefit plans contemplated hereby.
(e) The Parties shall take all such action as may be necessary or appropriate under state and foreign securities or blue sky Laws in connection with the Transactions.
Section 3.2 NYSE Listing Application.
(a) Prior to the date of this Agreement, the Parties caused an application for the listing on the NYSE of SpinCo Common Stock to be issued to the DevCo Record Holders in the Distribution (the NYSE Listing Application) to be prepared and filed.
(b) Prior to the date of this Agreement, the Parties have caused the NYSE Listing Application to be approved, subject to official notice of issuance.
(c) DevCo shall give the NYSE notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.
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Section 3.3 Distribution Agent. At or prior to the Effective Time, DevCo shall, if requested by the Distribution Agent, enter into a distribution agent agreement and/or a paying agent agreement with the Distribution Agent.
Section 3.4 Governmental Approvals and Consents. To the extent that any of the Transactions require any Governmental Approval or Consent which has not been obtained prior to the date of this Agreement, the Parties will use reasonable efforts to obtain, or cause to be obtained, such Governmental Approval or Consent prior to the Effective Time.
Section 3.5 Ancillary Agreements. Prior to the Effective Time, each Party shall execute and deliver, and shall cause each applicable member of its Group to execute and deliver, as applicable, the following agreements (collectively, the Ancillary Agreements): (a) the Plan of Restructuring and all agreements and instruments executed or delivered to effect the transactions described therein, including, without limitation, the Specified Promissory Note, the SpinCo Preferred Stock, the Specified PM TRS Preferred Stock and the Specified JO Common Units, (b) the Employee Matters Agreement, (c) the Commercial Agreements, (d) the Intellectual Property Agreements, (e) the Nashua Transfer Agreement and (f) such other written agreements, documents or instruments as the Parties may agree are reasonably necessary or desirable and which specifically state that they are Ancillary Agreements within the meaning of this Agreement.
Section 3.6 Governance Matters.
(a) Articles of Incorporation and Bylaws. SpinCo has adopted the articles of amendment and restatement and the amended and restated bylaws of SpinCo, each substantially in the form filed by SpinCo with the SEC as an exhibit to the SpinCo Registration Statement, and SpinCo shall not take any action to modify its charter or bylaws prior to the Effective Time.
(b) Officers and Directors. On or prior to the Distribution Date, the Parties shall take all necessary action so that, as of the Distribution Date, (i) the officers and directors of SpinCo will be as set forth in the SpinCo Information Statement and (ii) the officers and directors of DevCo will be as set forth in the DevCo OP Information Statement.
Section 3.7 Partnership Agreements. SpinCo OP shall, in its capacity as a limited partner in DevCo OP, and DevCo OP GP shall, in its capacity as the general partner of DevCo OP, and on behalf of and as attorney in fact for the other limited partners, enter into the amended and restated limited partnership agreement of DevCo OP, effective as of the Effective Time. SpinCo OP GP shall, in its capacity as the general partner of SpinCo OP, and on behalf of and as attorney in fact for the limited partners of SpinCo OP, enter into the Sixth Amended and Restated Limited Partnership Agreement of SpinCo OP, effective as of the Effective Time.
Section 3.8 DevCo OP Distribution and Internal Distribution. Prior to the SpinCo Distribution, in accordance with the Plan of Restructuring, the Parties shall cause the following to occur:
(a) DevCo shall, or shall cause its applicable Subsidiary to, cause SpinCo OP to, and SpinCo OP shall, declare and effectuate the DevCo OP Distribution in accordance with the relevant provisions of Section 4.1;
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(b) SpinCo and SpinCo OP GP shall, declare and effectuate the Internal Distribution in accordance with the relevant terms of Section 4.1;
(c) The applicable member of the DevCo Group, acting in its capacity as the general partner of DevCo OP, shall consent to, and use reasonable efforts to cause, each of the SpinCo OP Record Holders who receives DevCo OP Units in the DevCo OP Distribution (other than SpinCo and SpinCo OP GP) and DevCo to be admitted as partners in DevCo OP, effective as of immediately following the Internal Distribution; and
(d) In accordance with the Plan of Restructuring, SpinCo OP shall or shall cause its applicable Subsidiary to transfer all of the interests in AIMCO Royal Crest Nashua, L.L.C. to DevCo OP immediately following the Internal Distribution for no consideration pursuant to the Nashua Transfer Agreement.
ARTICLE IV
THE DISTRIBUTION
Section 4.1 Distribution.
(a) Subject to the terms and conditions set forth in this Agreement, including Section 4.1(c):
(i) on or prior to the Distribution Date, DevCo shall, or shall cause its applicable Subsidiary to, deliver or otherwise make available to the Distribution Agent, for the benefit of the applicable Record Holders, such number of issued and outstanding shares of SpinCo Common Stock as is necessary to effect the SpinCo Distribution and the appropriate number of DevCo OP Units as is necessary to effect the DevCo OP Distribution and provide to the Distribution Agent all SpinCo Common Stock and DevCo OP Unit certificates (to the extent certificated) or book-entry authorizations (to the extent not certificated) and any information required in order to complete the Distribution;
(ii) on the Distribution Date, DevCo will, or will cause its applicable Subsidiary to, direct the Distribution Agent to distribute, prior to the Effective Time, to each applicable Record Holder, one DevCo OP Unit for every one SpinCo OP Common Unit held by such Record Holder at the close of business on the Record Date. All such DevCo OP Units to be so distributed shall be distributed by way of direct registration in book-entry form. No certificates therefor shall be distributed. The DevCo OP Distribution shall be effective prior to the Effective Time;
(iii) on the Distribution Date, DevCo and SpinCo will, or will cause their applicable Subsidiaries to, distribute prior to the Effective Time all of the DevCo OP Units received by SpinCo and SpinCo OP GP in the DevCo OP Distribution to DevCo. The Internal Distribution shall be effective prior to the Effective Time; and
(iv) on the Distribution Date, DevCo will direct the Distribution Agent to distribute, effective as of the Effective Time, to each applicable Record Holder, (A) one share of SpinCo Common Stock for each share of DevCo Common Stock held
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by such Record Holder at the close of business on the Record Date, rounded down to the nearest whole number and (B) cash, if applicable, in lieu of fractional shares of SpinCo Common Stock, in an amount determined in accordance with Section 4.1(b) hereof. All such shares of SpinCo Common Stock to be so distributed shall be distributed as uncertificated shares registered in book-entry form through the direct registration system. No certificates therefor shall be distributed. Following the Distribution, DevCo shall cause the Distribution Agent to deliver an account statement to each holder of SpinCo Common Stock reflecting such holders ownership thereof. All of the shares of SpinCo Common Stock distributed in the Distribution will be validly issued, fully paid and non-assessable.
(b) Notwithstanding anything herein to the contrary, no fractional shares of SpinCo Common Stock shall be issued in connection with the SpinCo Distribution, and any such fractional share interests to which a Record Holder would otherwise be entitled shall not entitle such Record Holder to vote or to any other rights as a stockholder of SpinCo. In lieu of any such fractional shares, each Record Holder who, but for the provisions of this section, would be entitled to receive a fractional share interest of SpinCo Common Stock pursuant to the SpinCo Distribution, shall be paid cash, without any interest thereon, as hereinafter provided. DevCo will direct the Distribution Agent to determine the number of whole shares and fractional shares of SpinCo Common Stock allocable to each Record Holder, to aggregate all such fractional shares into whole shares, to sell the whole shares obtained thereby in the open market at the then-prevailing prices on behalf of each Record Holder who otherwise would be entitled to receive fractional share interests and to distribute to each such Record Holder his, her or its ratable share of the total proceeds of such sale, after making appropriate deductions of the amounts required for U.S. federal income tax withholding purposes and after deducting any applicable transfer Taxes. The costs and expenses of such sale and distribution, including brokers fees and commissions will be paid by SpinCo. The sales of fractional shares shall occur as soon after the Effective Time as practicable and as determined by the Distribution Agent. None of DevCo, SpinCo or the Distribution Agent shall guarantee any minimum sale price for the fractional shares of DevCo Common Stock. Neither DevCo nor SpinCo shall pay any interest on the proceeds from the sale of fractional shares. The Distribution Agent shall have the sole discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at what price to sell such shares. Neither the Distribution Agent nor the broker-dealers through which the aggregated fractional shares are sold shall be Affiliates of DevCo or SpinCo; and
(c) Notwithstanding any other provision of this Agreement, DevCo, SpinCo OP, the Distribution Agent, or any Person that is a withholding agent under applicable Law shall be entitled to deduct and withhold from any consideration distributable or payable hereunder the amounts required to be deducted and withheld under the Code, or any provision of any U.S. federal, state, local or foreign Tax Law. Any amounts so withheld shall be paid over to the appropriate Taxing Authority in the manner prescribed by Law. To the extent that amounts are so deducted and withheld, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Persons in respect of which such deduction and withholding was made.
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ARTICLE V
CONDITIONS
Section 5.1 Conditions Precedent to Consummation of the Distribution. The Distribution shall not be effected unless and until the following conditions have been satisfied or waived by DevCo, in its sole and absolute discretion, at or before the Effective Time:
(a) (x) the DevCo Board shall have declared the SpinCo Distribution, which declaration may be made or withheld in its sole and absolute discretion, (y) SpinCo OP GP, as general partner of SpinCo OP, shall have declared the DevCo OP Distribution and (z) SpinCo and its applicable Subsidiaries shall have declared the Internal Distribution;
(b) the Registration Statements shall have been declared effective by the SEC, with no stop order in effect with respect thereto, and no proceedings for such purpose shall be pending before, or threatened by, the SEC;
(c) DevCo shall have mailed the DevCo OP Information Statement and the SpinCo Information Statement (and such other information concerning SpinCo, DevCo OP, the Distribution and such other matters as the Parties shall determine and as may otherwise be required by Law) to the applicable Record Holders or shall have caused to be mailed the notice of internet availability of the DevCo OP Information Statement and the SpinCo Information Statement to the applicable Record Holders as contemplated by Section 3.1(c);
(d) DevCo shall have received solvency opinions from an independent financial advisory firm, in form and substance reasonably acceptable to DevCo, substantially to the effect that DevCo, DevCo OP, SpinCo and SpinCo OP are Solvent pro forma for the Restructuring and Distribution;
(e) SpinCo shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, in form and substance reasonably satisfactory to SpinCo, substantially to the effect that commencing with SpinCos taxable year ending December 31, 2020, SpinCo has been organized in conformity with the requirements for qualification as a REIT under the Code, and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT;
(f) DevCo shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, in form and substance reasonably satisfactory to DevCo, substantially to the effect that, commencing with DevCos taxable year ended December 31, 1994, DevCo has been organized in conformity with the requirements for qualification as a REIT under the Code, and its actual method of operation has enabled, and its proposed method of operation will enable, it to meet the requirements for qualification and taxation as a REIT;
(g) the NYSE shall have approved the NYSE Listing Application, subject to official notice of issuance;
(h) DevCo shall have set a Record Date for the SpinCo Distribution and provided notice thereof to the NYSE, as provided in Section 3.2(c) and SpinCo OP GP, as
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general partner of SpinCo OP, shall have set the same Record Date for the DevCo OP Distribution;
(i) the Restructuring shall have been completed in accordance with the Plan of Restructuring;
(j) the Preferred Stock Sale Agreement shall have been executed by the parties thereto;
(k) the applicable members of the SpinCo Group shall have entered into definitive documentation with respect to the SpinCo Credit Facility;
(l) no preliminary or permanent injunction or other order, decree or ruling issued by a Governmental Authority, and no statute (as interpreted through orders or rules of any Governmental Authority duly authorized to effectuate the statute), rule, regulation or executive order promulgated or enacted by any Governmental Authority shall be in effect preventing the consummation of, or materially limiting the benefits of, the Transactions;
(m) no other event or development shall have occurred or failed to occur that, in the judgment of the DevCo Board, in its sole discretion, would make it inadvisable to effect the Distribution;
(n) SpinCo shall have adopted the amended and restated articles of incorporation and amended and restated bylaws, as provided in Section 3.6(a);
(o) the general partner of DevCo OP shall have adopted the amended and restated DevCo OP agreement of limited partnership, as provided in Section 3.7;
(p) the general partner of SpinCo OP shall have adopted the Sixth Amended and Restated Limited Partnership Agreement of SpinCo OP, as provided in Section 3.7;
(q) the Ancillary Agreements shall have been executed and delivered by each of the parties thereto and no party to any of the Ancillary Agreements will be in material breach of any such agreement;
(r) all other actions and filings necessary or appropriate under applicable federal or state securities Laws and state blue sky Laws in connection with the Transactions shall have been taken; and
(s) any material Governmental Approvals and Consents necessary to consummate the Transactions or any portion thereof shall have been obtained and be in full force and effect.
Section 5.2 Right Not to Close. Each of the conditions set forth in Section 5.1 is for the benefit of DevCo, and the DevCo Board may, in its sole and absolute discretion, determine whether to waive any condition, in whole or in part. Any determination made by the DevCo Board concerning the satisfaction or waiver of any or all of the conditions set forth in Section 5.1 will be conclusive and binding on the Parties. The satisfaction of the conditions set forth in
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Section 5.1 will not create any obligation on the part of DevCo to any other Person to effect any of the Transactions or in any way limit DevCos right to terminate this Agreement and the Ancillary Agreements as set forth in Section 12.1 or alter the consequences of any termination from those specified in Section 12.2.
ARTICLE VI
NO REPRESENTATIONS OR WARRANTIES
Section 6.1 Disclaimer of Representations and Warranties. EACH PARTY (ON BEHALF OF ITSELF AND EACH OTHER MEMBER OF ITS GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN ANY ANCILLARY AGREEMENT OR IN ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, NO PARTY IS REPRESENTING OR WARRANTING IN ANY WAY AS TO (A) THE ASSETS, BUSINESSES OR LIABILITIES CONTRIBUTED, TRANSFERRED, DISTRIBUTED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, (B) ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, (C) THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF ANY PARTY, (D) THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY, OR (E) THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, DISTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER OR THEREUNDER TO CONVEY TITLE TO ANY ASSET UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF.
Section 6.2 As Is, Where Is. EACH PARTY (ON BEHALF OF ITSELF AND EACH OTHER MEMBER OF ITS GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS OTHERWISE PROVIDED IN ANY ANCILLARY AGREEMENT, ALL ASSETS TRANSFERRED PURSUANT TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT ARE BEING TRANSFERRED AS IS, WHERE IS.
ARTICLE VII
CERTAIN COVENANTS AND ADDITIONAL AGREEMENTS
Section 7.1 Insurance Policies.
(a)
(i) From and after the Distribution Time, the SpinCo Group and the SpinCo Business shall cease to be insured by the DevCo Groups Insurance Policies. The DevCo Group shall retain all rights to control its Insurance Policies, including the right to exhaust, settle, release, commute, buy back or otherwise resolve disputes with respect to any of its Insurance Policies notwithstanding whether any such Insurance Policies apply
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to any Liabilities of any member of the SpinCo Group. SpinCo and SpinCo OP shall be responsible for securing all Insurance Policies that it considers appropriate for the SpinCo Business and the operation thereof by the SpinCo Group. SpinCo and SpinCo OP agree to arrange for its own Insurance Policies with respect to the SpinCo Business and the SpinCo Group. SpinCo agrees, on behalf of itself and each member of the SpinCo Group, from and after the Distribution Time, not to seek through any means to benefit from and not to assert any right, claim or interest in, to or under, any Insurance Policies of any member of the DevCo Group, except as permitted under Section 7.1(b)(i).
(ii) From and after the Distribution Time, the DevCo Group and the DevCo Business shall cease to be insured by the SpinCo Groups Insurance Policies. The SpinCo Group shall retain all rights to control its Insurance Policies, including the right to exhaust, settle, release, commute, buy back or otherwise resolve disputes with respect to any of its Insurance Policies notwithstanding whether any such Insurance Policies apply to any Liabilities of any member of the DevCo Group. DevCo and DevCo OP shall be responsible for securing all Insurance Policies that it considers appropriate for the DevCo Business and the operation thereof by the DevCo Group. DevCo and DevCo Op agree to arrange for its own Insurance Policies with respect to the DevCo Business and the DevCo Group. DevCo agrees, on behalf of itself and each member of the DevCo Group, from and after the Distribution Time, not to seek through any means to benefit from and not to assert any right, claim or interest in, to or under, any Insurance Policies of any member of the SpinCo Group, except as permitted under Section 7.1(b)(ii).
(b)
(i) For any claim asserted against SpinCo or any SpinCo Subsidiary after the Distribution Time arising out of an occurrence taking place prior to the Distribution Time (SpinCo Post-Closing Claims), SpinCo and each SpinCo Subsidiary may access coverage under any occurrence-based third-party Insurance Policies of DevCo or its Subsidiaries (as applicable) in place prior to the Distribution Date under which SpinCo or any SpinCo Subsidiary is insured (the DevCo Shared Pre-Closing Occurrence-Based Policies), to the extent such insurance coverage exists and provides coverage, without cost to DevCo and its Subsidiaries, for such SpinCo Post-Closing Claim. DevCo and its Subsidiaries (as applicable) shall reasonably cooperate with SpinCo and its Subsidiaries in connection with the tendering of such claims; provided, however, that: (A) SpinCo or the SpinCo and its Subsidiaries shall promptly notify DevCo of all such SpinCo Post-Closing Claims; (B) SpinCo and SpinCo OP shall be responsible for the satisfaction or payment of any applicable retention, deductible or retrospective premium with respect to any SpinCo Post-Closing Claim and shall reimburse to DevCo and its Subsidiaries all reasonable out-of-pocket costs and expenses incurred in connection with such claims. In the event that a SpinCo Post-Closing Claim relates to the same occurrence for which DevCo or its Subsidiaries is seeking coverage under DevCo Shared Pre-Closing Occurrence-Based Policies, and the limits under an applicable DevCo Shared Pre-Closing Occurrence-Based Policy are not sufficient to fund all covered claims of SpinCo or any SpinCo Subsidiary (as applicable) and DevCo or its Subsidiaries (as applicable), amounts due under such a DevCo Shared Pre-Closing
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Occurrence-Based Policy shall be paid to the respective Persons in proportion to the amounts that otherwise would be due were the limits of liability infinite.
(ii) For any claim asserted against DevCo or any DevCo Subsidiary after the Distribution Time arising out of an occurrence taking place prior to the Distribution Time (DevCo Post-Closing Claims), DevCo and each DevCo Subsidiary may access coverage under any occurrence-based third-party Insurance Policies of SpinCo or its Subsidiaries (as applicable) in place prior to the Distribution Date under which DevCo or any DevCo Subsidiary is insured (the SpinCo Shared Pre-Closing Occurrence-Based Policies), to the extent such insurance coverage exists and provides coverage, without cost to SpinCo and its Subsidiaries, for such DevCo Post-Closing Claim. SpinCo and its Subsidiaries (as applicable) shall reasonably cooperate with DevCo and its Subsidiaries in connection with the tendering of such claims; provided, however, that: (A) DevCo or the DevCo Subsidiaries shall promptly notify SpinCo and SpinCo OP of all such DevCo Post-Closing Claims; (B) DevCo and DevCo OP shall be responsible for the satisfaction or payment of any applicable retention, deductible or retrospective premium with respect to any DevCo Post-Closing Claim and shall reimburse to SpinCo and its Subsidiaries all reasonable out-of-pocket costs and expenses incurred in connection with such claims. In the event that a DevCo Post-Closing Claim relates to the same occurrence for which SpinCo or its Subsidiaries is seeking coverage under SpinCo Shared Pre-Closing Occurrence-Based Policies, and the limits under an applicable SpinCo Shared Pre-Closing Occurrence-Based Policy are not sufficient to fund all covered claims of DevCo or any DevCo Subsidiary (as applicable) and SpinCo or its Subsidiaries (as applicable), amounts due under such a SpinCo Shared Pre-Closing Occurrence-Based Policy shall be paid to the respective Persons in proportion to the amounts that otherwise would be due were the limits of liability infinite.
(c) In no event will a Party have any Liability whatsoever to any member of the other Partys Group because any Insurance Policy is terminated or otherwise ceases to be in effect for any reason, is unavailable or inadequate to cover any Liability of any member of either Partys Group for any reason whatsoever or is not renewed or extended. Furthermore, each Party, on behalf of its Group, releases each member of the other Partys Group with respect to any Liabilities whatsoever as a result of the Insurance Policies and insurance practices of the other Partys Group as in effect at any time prior to the Distribution Time, including as a result of (A) the level or scope of any insurance, (B) the creditworthiness of any insurance carrier, (C) the terms and conditions of any Insurance Policy or (D) the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim.
(d) This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the DevCo Group or the SpinCo Group in respect of any insurance policy or any other contract or policy of insurance.
(e) The treatment of workers compensation claims asserted against (A) SpinCo or any SpinCo Subsidiary with respect to the DevCo Groups Insurance Policies and (B) DevCo or any DevCo Subsidiary with respect to the SpinCo Groups insurance policies shall be governed by this Section 7.1.
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Section 7.2 No Restrictions on Post-Distribution Competitive Activities; Corporate Opportunities.
(a) Each of the Parties agrees that this Agreement shall not include any non-competition or other similar restrictive arrangements with respect to the range of business activities that may be conducted, or investments that may be made, by the Groups. Accordingly, each of the Parties acknowledges and agrees that nothing set forth in this Agreement shall be construed to create any explicit or implied restriction or other limitation on the ability of any Group to engage in any business or other activity that overlaps or competes with the business of the other Group, including investing in, owning, managing, redeveloping and developing apartment communities. Except as expressly provided herein, or in the Ancillary Agreements, each Group shall have the right to, and shall have no duty to abstain from exercising such right to, (i) engage or invest, directly or indirectly, in the same, similar or related business activities or lines of business as the other Group, (ii) make investments in the same or similar types of investments as the other Group, (iii) do business with any client, customer, vendor or lessor of any of the other Group or (iv) employ or otherwise engage any officer, director or employee of the other Group. No Party or Group, nor any officer or director thereof, shall be liable to another Party or the other Group or its stockholders for breach of any fiduciary duty by reason of any such activities of such Party or Group or of any such Persons participation therein.
(b) Except as DevCo and each other member of the DevCo Group, on the one hand, and SpinCo and each other member of the SpinCo Group, on the other hand, may otherwise agree in writing, including the Ancillary Agreements, the Parties hereby acknowledge and agree that if any Person that is a member of a Group, including any officer or director thereof, acquires knowledge of a potential transaction or matter that may be a corporate opportunity for either or both Groups, neither the other Group nor its stockholders shall have an interest in, or expectation that, such corporate opportunity be offered to it or that it be offered an opportunity to participate therein, and any such interest, expectation, offer or opportunity to participate, and any other interest or expectation otherwise due to such Group with respect to such corporate opportunity, is hereby renounced by such Group on its behalf and on behalf of its stockholders. Accordingly, subject to Section 7.2(c) below, (i) neither Group nor any officer or director thereof will be under any obligation to present, communicate or offer any such corporate opportunity to the other Group and (ii) each Group has the right to hold any such corporate opportunity for its own account, or to direct, recommend, sell, assign or otherwise transfer such corporate opportunity to any Person or Persons other than the other Group, and, to the fullest extent permitted by Law, neither Group nor the officers or directors thereof shall have or be under any fiduciary duty, duty of loyalty or duty to act in good faith or in the best interests of the other Group and its stockholders and shall not be liable to the other Group and its stockholders for any breach or alleged breach thereof or for any derivation of personal economic gain by reason of the fact that such Group or any of its officers or directors pursues or acquires the corporate opportunity for itself, or directs, recommends, sells, assigns or otherwise transfers the corporate opportunity to another Person, or such Group and its officers or directors does not present, offer or communicate information regarding the corporate opportunity to the other Group.
(c) Except as DevCo and each other member of the DevCo Group, on the one hand, and SpinCo and each other member of the SpinCo Group, on the other hand, may
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otherwise agree in writing, including the Ancillary Agreements, the Parties hereby acknowledge and agree that in the event that a director or officer of either Group who is also a director or officer of the other Group acquires knowledge of a potential transaction or matter that may be a corporate opportunity or is offered a corporate opportunity, if (i) such Person acts in good faith and (ii) such knowledge of such potential transaction or matter was not obtained solely in connection with, or such corporate opportunity was not offered to such Person solely in, such Persons capacity as director or officer of either Group, then (A) such director or officer, to the fullest extent permitted by Law, (1) shall be deemed to have fully satisfied and fulfilled such Persons fiduciary duty to each Group and their stockholders with respect to such corporate opportunity, (2) shall not have or be under any fiduciary duty to either Group or their stockholders and shall not be liable to either Group or their stockholders for any breach or alleged breach thereof by reason of the fact that the other Group pursues or acquires the corporate opportunity for itself, or directs, recommends, sells, assigns or otherwise transfers the corporate opportunity to another Person, or either Group or such director or officer does not present, offer or communicate information regarding the corporate opportunity to the other Group, (3) shall be deemed to have acted in good faith and in a manner such Person reasonably believes to be in, and not opposed to, the best interests of each Group and its stockholders and (4) shall not have any duty of loyalty to the other Group and its stockholders or any duty not to derive any personal benefit therefrom and shall not be liable to the other Group or its stockholders for any breach or alleged breach thereof and (B) such potential transaction or matter that may be a corporate opportunity, or the corporate opportunity, shall belong to the applicable Group (and not to the other Group).
For the purposes of this Section 7.2, corporate opportunities of a Group shall include business opportunities that members of such Group are financially able to undertake, that are, by their nature, in a line of business of such Group, are of practical advantage to it and are ones in which any member of the Group has an interest or a reasonable expectancy, and in which, by embracing the opportunities, the self-interest of a Person or any of its officers or directors will be brought into conflict with that of such Group.
Section 7.3 Legal Names and Other Parties Trademarks.
(a) Except as otherwise specifically provided in any Ancillary Agreement, as soon as reasonably practicable after the Distribution Date, but in any event within twelve (12) months thereafter, SpinCo shall change (and shall cause all of the other members of the SpinCo Group to change) its name and cause its certificate of incorporation (or equivalent organization documents) and any d/b/a, as applicable, to be amended to remove any reference to AIMCO and Apartment Investment and Management Company. Except as otherwise specifically provided in any Ancillary Agreement, as soon as reasonably practicable after the Distribution Date, but in any event within twelve (12) months thereafter, each Party shall cease (and shall cause all of the other members of its Group to cease): (i) making any use of any Trademarks that include (A) any of the Trademarks of the other Party or such other Partys Affiliates, including, with respect to the SpinCo Groups cessation of the use of Trademarks, AIMCO, Apartment Investment and Management Company or any other Trademark comprising or containing AIMCO and Apartment Investment and Management Company (B) any Trademarks confusingly similar thereto or dilutive thereof (with respect to each Party, such Trademarks of the other Party or any of such other Partys Affiliates, the Other Party Marks), and (ii) holding
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themselves out as having any affiliation with the other Party or such other Partys Affiliates; provided, however, that the foregoing shall not prohibit any Party or any member of a Partys Group from (1) in the case of any member of the SpinCo Group, making factual and accurate reference in a non-prominent manner that it was formerly affiliated with DevCo or in the case of any member of the DevCo Group, making factual and accurate reference in a non-prominent manner that it was formerly affiliated with SpinCo, (2) making use of any Other Party Mark in a manner that would constitute fair use under applicable Law if any unaffiliated third party made such use or would otherwise be legally permissible for any unaffiliated third party without the consent of the Party owning such Other Party Mark, and (3) making references in internal historical and tax records. In furtherance of the foregoing, as soon as practicable, but in no event later than twelve (12) months following the Distribution Date, each Party shall (and cause all of the other members of its Group to) remove, strike over or otherwise obliterate all Other Party Marks from all of such Partys and its Affiliates assets and other materials, including any vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, websites, email, computer software and other materials and systems, to the extent publicly distributed or observable. Each Party hereby grants the other Party a non-exclusive, non-sublicensable, non-transferable license under its Trademarks to use such Trademarks solely as and for so long as permitted pursuant to the foregoing in this Section 7.3; provided that any use by any Party or any of such Partys Affiliates of any of the Other Party Marks as permitted in this Section 7.3 is subject to their compliance with all quality control standards and related requirements and guidelines in effect for such Other Party Marks as of the Effective Time. Neither Partys Group shall use the Other Party Marks in a manner that may reflect negatively on such Trademarks or on the other Party or its Group.
(b) Notwithstanding the foregoing requirements of Section 7.3(a), if any Party or any member of such Partys Group used reasonable efforts to comply with Section 7.3(a) but is unable, due to regulatory or other circumstance beyond its control, to effect a legal name change in compliance with applicable Law such that an Other Party Mark remains in such Partys or its Group members legal name, then such Party or its relevant Group member will not be deemed to be in breach hereof as long as it continues to use reasonable efforts to effectuate such name change and does effectuate such name change within twelve (12) months after the Distribution Date, and, in such circumstances, such Party or Group member may continue to use such Other Party Mark that is in such Partys or Group members legal name, but only to the extent necessary to identify such Party or Group member and only until such Partys or Group members legal name can be changed to remove and eliminate such references.
(c) Notwithstanding the foregoing requirements of Section 7.3(a), SpinCo and SpinCo OP shall not be required to change any name including the word AIMCO in any third-party contract or license, or in property records with respect to real or personal property, if an effort to change the name is commercially unreasonable; provided, however, that (i) SpinCo and SpinCo OP on a prospective basis from and after the Distribution Date shall change the name in any new or amended third-party contract or license or property record and (ii) SpinCo shall not advertise or make public any continued use of the AIMCO name permitted by this Section 7.3(c).
Section 7.4 Preferred Stock Sale. Immediately after the Effective Time and in accordance with the terms of the Preferred Stock Sale Agreement, the applicable members of the
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SpinCo Group and the DevCo Group shall cooperate and take any and all actions necessary to effect the Preferred Stock Sale.
ARTICLE VIII
ACCESS TO INFORMATION; CONFIDENTIALITY; PRIVILEGE
Section 8.1 Agreement for Exchange of Information.
(a) Subject to Section 8.1(b) and Section 8.8(f), for a period of seven (7) years (the Access Period) following the Distribution Date, as soon as reasonably practicable after written request (and using reasonable efforts to do so within five (5) Business Days): (i) DevCo and DevCop OP shall afford to any member of the SpinCo Group and their authorized accountants, counsel and other designated representatives reasonable access during normal business hours to, or, at the SpinCo Groups expense, provide copies of, all books, records, Contracts, instruments, data, documents and other information in the possession or under the control of any member of the DevCo Group immediately following the Distribution Date that relates to any member of the SpinCo Group or the SpinCo Business, and (ii) SpinCo shall afford to any member of the DevCo Group and their authorized accountants, counsel and other designated representatives reasonable access during normal business hours to, or, at the DevCo Groups expense, provide copies of, all books, records, Contracts, instruments, data, documents and other information in the possession or under the control of any member of the SpinCo Group immediately following the Distribution Date that relates to any member of the DevCo Group or the DevCo Business; provided, however, that in the event that SpinCo or SpinCo OP, or DevCo or DevCo OP, as applicable, determine that any such provision of or access to any information in response to a request under this Section 8.1(a) would be commercially detrimental in any material respect, violate any Law or agreement or waive any attorney-client privilege, the work product doctrine or other applicable privilege, the Parties shall take all reasonable measures to permit compliance with such request in a manner that avoids any such harm or consequence; provided, further, that, in the event that the responding Person, in its sole discretion, determines that complying with such request or the provision of any such information would violate any Law or agreement or waive any attorney-client privilege, the work product doctrine or other applicable privilege, the responding Person shall not be obligated to provide such information; provided, further, that to the extent specific information-sharing or knowledge-sharing provisions are contained in any of the Ancillary Agreements, such other provisions (and not this Section 8.1(a)) shall govern; provided, further, that the Access Period shall be extended with respect to requests (including requests for information subject to a legal hold) related to any third-party litigation or other dispute filed prior to the end of the Access Period until such litigation or dispute is finally resolved.
(b) A request for information under Section 8.1(a) may be made: (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities Laws) by a Governmental Authority having jurisdiction over such requesting party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims defense, regulatory filings, litigation, arbitration or other similar requirements (other than in connection with any action, suit or proceeding in which any member of a Group is adverse to any member of the other Group),
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(iii) for use in compensation, benefit or welfare plan administration or other bona fide business purposes, or (iv) to comply with any obligations under this Agreement or any Ancillary Agreement.
(c) Without limiting the generality of Section 8.1(a), until the end of the first full fiscal year following the Distribution Date (and for a reasonable period of time thereafter as required for any party to prepare consolidated financial statements or complete a financial statement audit for the fiscal year during which the Distribution Date occurs), SpinCo and SpinCo OP shall use its reasonable efforts to cooperate with any requests from any member of the DevCo Group pursuant to Section 8.1(a), and DevCo and DevCo OP shall use its reasonable efforts to cooperate with any requests from any member of the SpinCo Group pursuant to Section 8.1(a), in each case, to enable the requesting party to meet its timetable for dissemination of its earnings releases and financial statements and to enable such requesting partys auditors to timely complete their audit of the annual financial statements and review of the quarterly financial statements.
Section 8.2 Ownership of Information. Any information owned by any Person that is provided pursuant to Section 8.1(a) shall be deemed to remain the property of the providing Person. Unless specifically set forth herein, nothing contained in this Agreement shall be construed to grant or confer rights of license or otherwise to the requesting Person with respect to any such information.
Section 8.3 Compensation for Preserving, Gathering or Providing Information. A Person requesting information pursuant to Section 8.1(a) agrees to reimburse the providing Person for the reasonable expenses, if any, of gathering and copying such information, or of preserving such information beyond the Access Period for reasons related to a legal hold or any third-party litigation or other dispute filed before the end of the Access Period, to the extent that such expenses are incurred for the benefit of the requesting Person.
Section 8.4 Retention of Records. To facilitate the exchange of information pursuant to this Article VIII after the Distribution Date, for a period of seven (7) years (or such longer period as may be applicable for particular categories of information under the policies and procedures of DevCo as in effect on the Distribution Date (as if the members of each Group were treated as Affiliates)) following the Distribution Date, except as otherwise required (whether pursuant to Law, court order, legal hold or otherwise) or agreed in writing, the Parties agree to use reasonable efforts to retain, or cause to be retained, all information in the possession or control of them or any member of their Group on the Distribution Date in accordance with the policies and procedures of DevCo as in effect on the Distribution Date.
Section 8.5 Limitation of Liability. No Person required to provide information under this Article VIII shall have any Liability (a) if any historical information provided pursuant to this Article VIII is found to be inaccurate, in the absence of gross negligence or willful misconduct by such Person, or (b) if any information is lost or destroyed despite using reasonable efforts to comply with the provisions of Section 8.4.
Section 8.6 Production of Witnesses. At all times from and after the Distribution Date, upon reasonable request:
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(a) Each of SpinCo and SpinCo OP shall use reasonable efforts to make available, or cause to be made available, to any member of the DevCo Group, the directors, officers, employees, managers, trustees, and agents of any member of the SpinCo Group as witnesses to the extent that the same may reasonably be required by the requesting party (giving consideration to business demands of such directors, officers, employees, managers, trustees, and agents) in connection with any legal, administrative or other proceeding in which the requesting party may from time to time be involved, except in the case of any action, suit or proceeding in which any member of the SpinCo Group is adverse to any member of the DevCo Group; and
(b) Each of DevCo and DevCo OP shall use reasonable efforts to make available, or cause to be made available, to any member of the SpinCo Group, the directors, officers, employees, managers, trustees, and agents of any member of the DevCo Group as witnesses to the extent that the same may reasonably be required by the requesting party (giving consideration to business demands of such directors, officers, employees, managers, trustees, and agents) in connection with any legal, administrative or other proceeding in which the requesting party may from time to time be involved, except in the case of any action, suit or proceeding in which any member of the DevCo Group is adverse to any member of the SpinCo Group.
(c) The requesting Party shall bear all reasonable costs and expenses therewith.
Section 8.7 Confidentiality.
(a) SpinCo (on behalf of itself and each other member of its Group), SpinCo OP, DevCo (on behalf of itself and each other member of its Group), and DevCo OP shall hold, and shall cause each of their respective Affiliates to hold, and each of the foregoing shall cause their respective directors, officers, employees, agents, consultants, managers, trustees, and advisors (Representatives) to hold, in strict confidence, and not disclose or release or use, without the prior written consent of such member of the other Group, for any purpose other than as expressly permitted pursuant to this Agreement or the Ancillary Agreements, any and all Confidential Information concerning any member of the other Group; provided that each Party and the members of its Group may disclose, or may permit disclosure of, such Confidential Information (i) to other members of their Group and their respective Representatives, auditors, attorneys, financial advisors, and bankers who have a need to know such information for purposes of performing services for a member of such Group and who are informed of their obligation to hold such information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, such Party will be responsible, (ii) if it or any of its Affiliates are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule, or (iii) as necessary in order to permit such Party to prepare and disclose its financial statements, and in connection with any other disclosures required by Law or such applicable stock exchange. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to the foregoing clause (ii) above, the Party requested to disclose Confidential Information concerning a member of the other Group shall promptly notify such member of the other Group of the existence of such request or demand and, to the extent commercially practicable, shall provide such member of the other Group thirty (30) days (or such lesser period as is commercially practicable) to seek an
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appropriate protective order or other remedy, which the Parties will cooperate in obtaining. In the event that such appropriate protective order or other remedy is not obtained, the Party that is required to disclose Confidential Information about a member of the other Group shall furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall use reasonable efforts to ensure that confidential treatment is accorded such information.
(b) Notwithstanding anything to the contrary set forth herein, the Parties shall be deemed to have satisfied their obligations hereunder with respect to Confidential Information of any member of the other Group if they exercise the same degree of care (but no less than a reasonable degree of care) as they exercise to preserve confidentiality for their own similar Confidential Information.
(c) Upon the written request of a Party or a member of its Group, the other Party shall take, and shall cause the applicable members of such other Partys Group to take, reasonable steps to promptly destroy any copies of such Confidential Information (including any extracts therefrom), unless such delivery or destruction would violate any Law; provided that (i) the other Party shall not be obligated to destroy Confidential Information that is required by or relates to such other Partys business or the business of any member of such other Partys Group, (ii) such other Partys legal department and/or outside counsel, or both, may keep one copy of the Confidential Information (in electronic or paper form) and (iii) with respect to such other Partys Representatives who are accounting firms, brokers, securities firms or financial institutions, such firms may keep a copy or copies of the Confidential Information if required by policies and procedures implemented by such accounting firms, brokers, securities firms or financial institutions in order to comply with applicable Law, professional standards or bona fide document retention policy. In addition, the other Party and its Representatives may retain Confidential Information to the extent it is backed-up on its or their (as the case may be) electronic information management and communications systems or servers, so long as it is not available to an end user without the use of procedures for which end users are not typically trained, and cannot be expunged without considerable effort. Upon the written request of the requesting Person, the other Party shall, or shall cause another member of its Group to cause, one of its duly authorized officers to certify in writing to the requesting Person that the requirements of the preceding sentence have been satisfied in full.
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Section 8.8 Privileged Matters.
(a) Pre-Distribution Services. The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the DevCo Group and the SpinCo Group, and that each of the members of the DevCo Group and the SpinCo Group should be deemed to be the client with respect to such pre-Distribution services for the purposes of asserting all privileges that may be asserted under applicable Law. The Parties agree that such privileged information shall not be used by or against any member of the SpinCo Group or DevCo Group in any action, suit or proceeding in which any member of a Group is adverse to any member of the other Group. The Parties also agree to take, and cause the other members of their respective Groups to take, all reasonable steps to preserve shared privileges after the Effective Time.
(b) Post-Distribution Services. The Parties recognize that legal and other professional services will be provided following the Effective Time that will be rendered solely for the benefit of the SpinCo Group or the DevCo Group, as the case may be. With respect to such post-Distribution services, the Parties agree as follows:
(i) DevCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the DevCo Business, whether or not the privileged information is in the possession of or under the control of DevCo or SpinCo. DevCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting DevCo Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated by or against any member of the DevCo Group, whether or not the privileged information is in the possession of or under the control of DevCo or SpinCo; and
(ii) SpinCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the SpinCo Business, whether or not the privileged information is in the possession of or under the control of DevCo or SpinCo. SpinCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting SpinCo Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated by or against any member of the SpinCo Group, whether or not the privileged information is in the possession of or under the control of DevCo or SpinCo.
(c) The Parties agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 8.8, with respect to all privileges not allocated pursuant to the terms of Section 8.8(b). Except as provided in Section 8.8(d), SpinCo and SpinCo OP may not waive, and shall cause each other member of the SpinCo Group not to waive, any privilege that could be asserted by a member of the DevCo Group under any applicable Law, and in which a member of the DevCo Group has a shared privilege, without the consent of DevCo, which consent shall not be withheld, conditioned or delayed except to protect DevCos own legitimate interests or the legitimate interests of any other member of the DevCo
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Group. Except as provided in Section 8.8(d), DevCo and DevCo OP may not waive, and shall cause each other member of the DevCo Group not to waive, any privilege that could be asserted by a member of the SpinCo Group under any applicable Law, and in which a member of the SpinCo Group has a shared privilege, without the consent of SpinCo, which consent shall not be withheld, conditioned or delayed except to protect SpinCos own legitimate interests or the legitimate interests of any other member of the SpinCo Group. If a dispute arises between or among SpinCo and DevCo, or any members of their respective Groups, regarding whether a privilege should be waived to protect or advance the interest of a Party, each Party agrees that it shall endeavor to minimize any prejudice to the rights of such other Party and shall not unreasonably withhold consent to any request for waiver by such Party. Each Party agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests or the legitimate interests of any other member of its Group. Each Party will determine its own legitimate interests or the legitimate interests of any other member of its Group in good faith.
(d) Notwithstanding any of the other provisions of this Section 8.8, to the fullest extent permitted by Law, in the event of any litigation or dispute between or among the Parties and/or any members of their respective Groups, any Party or any members of the Partys respective Group may waive a privilege which it shares with another Party or any member of the other Group, without obtaining the consent from the other Party or the other member(s) of a Partys Group which shares the privilege; provided that such waiver of a shared privilege shall be effective only as to the use of information by the relevant Parties and/or the applicable members of their respective Groups in such litigation or dispute, and shall not operate as a waiver of the shared privilege with respect to any proceedings, disputes, or other matters involving third parties or with respect to any other actions. In the event of any such waiver, the Parties and the members of their respective Groups shall take all reasonable measures to ensure the confidentiality of the privileged information that is the subject of such waiver, including, as necessary, making any applications to an arbitral tribunal or court of law, as applicable, to preserve the confidentiality of such information; and any such privileged information shall otherwise be held confidential by the Parties and the members of their respective Groups and shall not be publicly disclosed. For the avoidance of doubt, this Section 8.8(d) provides the only circumstances, and the only conditions, under which a Party or a member of its respective Group may unilaterally waive any shared applicable legal privilege.
(e) Upon receipt by either Party, or by any member of its Group, of any subpoena, discovery or other request which requires the production or disclosure of information which such Party knows is subject to a shared privilege or as to which a member of the other Group has the sole right hereunder to assert or waive a privilege, or if either Party obtains knowledge that any of its or any other member of its Groups current or former directors, officers, agents, managers, trustees, or employees have received any subpoena, discovery or other requests which requires the production or disclosure of such privileged information, such Party shall promptly notify the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the information and to assert any rights it or they may have under this Section 8.8 or otherwise to prevent the production or disclosure of such privileged information.
(f) The access to information being granted pursuant to Section 8.1, the agreement to provide witnesses and individuals pursuant to Section 8.6 hereof, and the transfer
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of privileged information between and among the Parties and the members of their respective Groups pursuant to this Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement, any of the Ancillary Agreements or otherwise.
Section 8.9 Financial Information Certifications. The Parties agree to cooperate with each other in such manner as is necessary to enable the principal executive officer or officers, principal financial officer or officers and controller or controllers of each of the Parties to make the certifications required of them under Sections 302, 404 and 906 of the Sarbanes-Oxley Act of 2002.
ARTICLE IX
MUTUAL RELEASES; INDEMNIFICATION
Section 9.1 Release of Pre-Distribution Claims.
(a) Except as provided in Section 9.1(d), effective as of the Effective Time, SpinCo does hereby, for itself and each other member of the SpinCo Group, release and forever discharge each DevCo Indemnitee, from any and all Liabilities whatsoever to any member of the SpinCo Group, whether at law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed at or before the Effective Time, including in connection with the Transactions.
(b) Except as provided in Section 9.1(d), effective as of the Effective Time, DevCo does hereby, for itself and each other member of the DevCo Group, release and forever discharge each SpinCo Indemnitee from any and all Liabilities whatsoever to any member of the DevCo Group, whether at law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed at or before the Effective Time, including in connection with the Transactions.
(c) Each Party is deemed expressly to, and each Party hereby expressly acknowledges and agrees that it does, understand provisions and principles of law such as Section 1542 of the Civil Code of the State of California (as well as any and all provisions, rights and benefits conferred by any Law of any state or territory of the United States, or principle of common law, which is similar or comparable to Section 1542), which Section provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. The releases in Section 9.1(a) and Section 9.1(b) include a release of any rights and benefits with respect to such Liabilities that each Party and each member of such Partys Group, and its successors and assigns, now has or in the future may have conferred upon them by virtue of any statute or common law principle which provides that a general release does not extend to
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claims which a Party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have affected such Partys settlement with the obligor. Each Party hereby expressly understands and acknowledges that it is aware that factual matters now unknown to it may have given or may hereafter give rise to Liabilities that are presently unknown, unanticipated and unsuspected and that present losses may have been underestimated in amount, severity, or both, and further expressly agrees that this release has been negotiated and agreed upon in light of that understanding and awareness and each such Party nevertheless hereby intends to release the Persons described in Section 9.1(a) and Section 9.1(b) from the Liabilities described in Section 9.1(a) and Section 9.1(b), respectively.
(d) Nothing contained in Section 9.1(a) or Section 9.1(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in, or contemplated to continue pursuant to, this Agreement or any Ancillary Agreement. Without limiting the foregoing, nothing contained in Section 9.1(a) or Section 9.1(b) shall release any Person from:
(i) any Liability, contingent or otherwise, assumed by, or allocated to, such Person in accordance with this Agreement or any Ancillary Agreement;
(ii) any Liability that such Person may have with respect to indemnification or contribution pursuant to this Agreement or any Ancillary Agreement for claims brought by third Persons, which Liability shall be governed by the provisions of this Article IX and, if applicable, the appropriate provisions of the Ancillary Agreements;
(iii) any unpaid accounts payable or receivable arising from or relating to the sale, provision, or receipt of goods, payment for goods, property or services purchased, obtained or used in the ordinary course of business by any member of the DevCo Group from any member of the SpinCo Group, or by any member of the SpinCo Group from any member of the DevCo Group from and after the Effective Time; or
(iv) any Liability the release of which would result in the release of any Person other than an Indemnitee; provided that the Parties agree not to bring suit, or permit any other member of their respective Group to bring suit, against any Indemnitee with respect to such Liability.
(e) SpinCo shall not make, and shall not permit any other member of the SpinCo Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or indemnification, against any DevCo Indemnitee with respect to any Liabilities released pursuant to Section 9.1(a). DevCo shall not make, and shall not permit any member of the DevCo Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against any SpinCo Indemnitee with respect to any Liabilities released pursuant to Section 9.1(b).
Section 9.2 Indemnification by SpinCo. Except as provided in Section 9.4 and Section 9.5, SpinCo OP shall, and, in the case of Section 9.2(a) or Section 9.2(b), shall in
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addition cause each Appropriate Member of the SpinCo Group to, indemnify, defend and hold harmless, the DevCo Indemnitees from and against any and all Losses of the DevCo Indemnitees relating to, arising out of or resulting from any of the following (without duplication):
(a) any SpinCo Liability (other than any SpinCo Tax Liability, which are addressed in Article XI), including the failure of any member of the SpinCo Group or any other Person to pay, perform or otherwise promptly discharge any SpinCo Liabilities (other than any SpinCo Tax Liability, which Liabilities are addressed in Article XI) in accordance with their respective terms, whether prior to, at or after the Effective Time;
(b) any breach by any member of the SpinCo Group of any provision of this Agreement or of any of the Ancillary Agreements (other than the Commercial Agreements), subject to any limitations of liability provisions and other provisions applicable to any such breach set forth therein; and
(c) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to information contained or incorporated by reference in the Registration Statements, the DevCo OP Information Statement and the SpinCo Information Statement that relates solely to the SpinCo Business;
in each case, without regard to when or where the loss, claim, accident, occurrence, event or happening giving rise to the Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported and regardless of whether such loss, claim, accident, occurrence, event or happening giving rise to the Loss existed prior to, on or after the Effective Time or relates to, arises out of or results from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, on or after the Effective Time. As used in this Section 9.2, Appropriate Member of the SpinCo Group means the member or members of the SpinCo Group, if any, whose acts, conduct or omissions or failures to act caused, gave rise to or resulted in the Loss from and against which indemnity is provided.
Section 9.3 Indemnification by DevCo. Except as provided in Section 9.4 and Section 9.5, DevCo OP shall, and, in the case of Section 9.3(a) or Section 9.3(b), shall in addition cause each Appropriate Member of the DevCo Group to, indemnify, defend and hold harmless the SpinCo Indemnitees from and against any and all Losses of the SpinCo Indemnitees relating to, arising out of or resulting from any of the following (without duplication):
(a) any DevCo Liability (other than any DevCo Tax Liability, which are addressed in Article XI), including the failure of any member of the DevCo Group or any other Person to pay, perform or otherwise promptly discharge any DevCo Liabilities(other than any SpinCo Tax Liability, which are addressed in Article XI) in accordance with their respective terms, whether prior to, at or after the Effective Time;
(b) any breach by any member of the DevCo Group of any provision of this Agreement or of any of the Ancillary Agreements (other than the Commercial Agreements),
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subject to any limitations of liability provisions and other provisions applicable to any such breach set forth therein; and
(c) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained or incorporated by reference in the Registration Statements, the DevCo OP Information Statement and the SpinCo Information Statement, other than information that relates solely to the DevCo Business;
in each case, without regard to when or where the loss, claim, accident, occurrence, event or happening giving rise to the Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported and regardless of whether such loss, claim, accident, occurrence, event or happening giving rise to the Loss existed prior to, on or after the Effective Time or relates to, arises out of or results from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, on or after the Effective Time. As used in this Section 9.3, Appropriate Member of the DevCo Group means the member or members of the DevCo Group, if any, whose acts, conduct or omissions or failures to act caused, gave rise to or resulted in the Loss from and against which indemnity is provided.
Section 9.4 Procedures for Indemnification.
(a) An Indemnitee shall give notice of any matter that such Indemnitee has determined has given or would reasonably be expected to give rise to a right of indemnification under this Agreement or any Ancillary Agreement (other than the Commercial Agreements) (other than a Third-Party Claim which shall be governed by Section 9.4(b)) to any Party that is or may be required pursuant to this Agreement or any Ancillary Agreement to make such indemnification (the Indemnifying Party) promptly (and in any event within fifteen (15) days) after making such a determination. Such notice shall state the amount of the Loss claimed, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement or the applicable Ancillary Agreement in respect of which such right of indemnification is claimed by such Indemnitee; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been materially prejudiced as a result of such failure.
(b) If a claim or demand is made against an Indemnitee by any Person who is not a Party to this Agreement or an Affiliate of a Party (a Third-Party Claim) as to which such Indemnitee is or reasonably expects to be entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the Indemnifying Party in writing, and in reasonable detail, of the Third-Party Claim promptly (and in any event within thirty (30) days) after receipt by such Indemnitee of written notice of the Third-Party Claim; provided, however, that the failure to provide notice of any such Third-Party Claim pursuant to this sentence shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been materially prejudiced as a result of such failure (except that the Indemnifying Party or Parties shall not be liable for any expenses incurred by the Indemnitee in
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defending such Third-Party Claim during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within ten (10) days) after the Indemnitees receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim.
(c) An Indemnifying Party shall be entitled (but shall not be required) to assume, control the defense of, and settle any Third-Party Claim, at such Indemnifying Partys own cost and expense and by such Indemnifying Partys own counsel, which counsel must be reasonably acceptable to the Indemnitee, if it gives written notice of its intention to do so (including a statement that the Indemnitee is entitled to indemnification under this Article IX) to the applicable Indemnitees within thirty (30) days of the receipt of notice from such Indemnitees of the Third-Party Claim (failure of the Indemnifying Party to respond within such thirty (30) day period shall be deemed to be an election by the Indemnifying Party not to assume the defense for such Third-Party Claim). After a notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise or settlement thereof, at the Indemnitees own expense and, in any event, shall reasonably cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party all witnesses and information in such Indemnitees possession or under such Indemnitees control relating thereto as are reasonably required by the Indemnifying Party; provided, however, that such access shall not require the Indemnitee to disclose any information the disclosure of which would, in the good faith judgment of the Indemnitee, result in the loss of any existing privilege with respect to such information or violate any applicable Law.
(d) Notwithstanding anything to the contrary in this Section 9.4, in the event that (i) an Indemnifying Party elects not to assume the defense of a Third-Party Claim, (ii) there exists a conflict of interest or potential conflict of interest between the Indemnifying Party and the Indemnitee, (iii) any Third-Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee, (iv) the Indemnitees exposure to Liability in connection with such Third-Party Claim is reasonably expected to exceed the Indemnifying Partys exposure in respect of such Third-Party Claim taking into account the indemnification obligations hereunder, or (v) the Person making such Third-Party Claim is a Governmental Authority with regulatory authority over the Indemnitee or any of its material Assets, such Indemnitee shall be entitled to control the defense of such Third-Party Claim, at the Indemnifying Partys expense, with counsel of such Indemnitees choosing (such counsel to be reasonably acceptable to the Indemnifying Party). If the Indemnitee is conducting the defense against any such Third-Party Claim, the Indemnifying Party shall reasonably cooperate with the Indemnitee in such defense and make available to the Indemnitee all witnesses and information in such Indemnifying Partys possession or under such Indemnifying Partys control relating thereto as are reasonably required by the Indemnitee; provided, however, that such access shall not require the Indemnifying Party to disclose any information the disclosure of which would, in the good faith judgment of the Indemnifying Party, result in the loss of any existing privilege with respect to such information or violate any applicable Law. The Indemnifying Party shall timely and regularly pay or reimburse the Indemnitees expenses incurred in defense of such Third-party Claim, including all attorneys fees and litigation costs, as such expenses are incurred by Indemnitee.
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(e) Unless the Indemnifying Party has failed to assume the defense of the Third-Party Claim in accordance with the terms of this Agreement, no Indemnitee may settle or compromise any Third-Party Claim without the consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed). If an Indemnifying Party has failed to assume the defense of the Third-Party Claim, it shall not be a defense to any obligation to pay any amount in respect of such Third-Party Claim that the Indemnifying Party was not consulted in the defense thereof, that such Indemnifying Partys views or opinions as to the conduct of such defense were not accepted or adopted, that such Indemnifying Party does not approve of the quality or manner of the defense thereof or that such Third-Party Claim was incurred by reason of a settlement rather than by a judgment or other determination of liability.
(f) In the case of a Third-Party Claim, no Indemnifying Party shall consent to entry of any judgment or enter into any settlement of the Third-Party Claim without the consent (not to be unreasonably withheld, conditioned or delayed) of the Indemnitee if the effect thereof is to permit any injunction, declaratory judgment, consent decree, other order or other non-monetary relief to be entered, directly or indirectly, against any Indemnitee, does not release the Indemnitee from all liabilities and obligations with respect to such Third-Party Claim or includes an admission of guilt or liability on behalf of the Indemnitee.
(g) Absent fraud or intentional misconduct by an Indemnifying Party, the indemnification provisions of this Article IX shall be the sole and exclusive remedy of an Indemnitee for any monetary or compensatory damages or Losses resulting from any breach of this Agreement or any Ancillary Agreement, and each Indemnitee expressly waives and relinquishes any and all rights, claims or remedies such Person may have with respect to the foregoing other than under this Article IX against any Indemnifying Party.
(h) Certain Tax Consequences.
(i) Notwithstanding anything to the contrary in this Agreement, in the event that counsel or independent accountants for a Protected REIT determine that there exists a material risk that any indemnification payments due under this Agreement or under any Ancillary Agreement would be treated as Nonqualifying Income upon the payment of such amounts to the relevant Indemnitee, the amount paid to the Indemnitee pursuant to this Agreement in any tax year shall not exceed the maximum amount that can be paid to the Indemnitee in such year without causing the Protected REIT to fail to meet the REIT Requirements for any tax year, determined as if the payment of such amount were Nonqualifying Income as determined by such counsel or independent accountants to the Protected REIT and taking into account any other payments to the Indemnitee (and any other relevant entity, including the Protected REIT) during such tax year that do not constitute Qualifying Income, which determination shall be (i) made by independent accountants to the Indemnitee and (ii) submitted to and approved by the Indemnitees outside tax counsel.
(ii) If the amount that an Indemnifying Party would otherwise be obligated to pay to the relevant Indemnitee for any tax year pursuant to this Agreement exceeds the amount payable for such tax year to such Indemnitee pursuant to the preceding sentence (such excess, the Expense Amount), then:
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(A) The Indemnifying Party shall place the Expense Amount into an escrow account (the Escrow Account) using an escrow agent and agreement reasonably acceptable to the Indemnitee and shall not release any portion thereof to the Indemnitee, and the Indemnitee shall not be entitled to any such amount, unless and until the Indemnitee delivers to the Indemnifying Party, at the sole option of the relevant Protected REIT, (i) an opinion (an Expense Amount Tax Opinion) of the Protected REITs tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income, (ii) a letter (an Expense Amount Accountants Letter) from the Protected REITs independent accountants indicating the maximum amount that can be paid at that time to the Indemnitee without causing the Protected REIT to fail to meet the REIT Requirements for any relevant taxable year, or (iii) a private letter ruling issued by the IRS to the Protected REIT indicating that the receipt of any Expense Amount hereunder will not cause the Protected REIT to fail to satisfy the REIT Requirements (a REIT Qualification Ruling and, collectively with an Expense Amount Tax Opinion and an Expense Amount Accountants Letter, a Release Document). The escrow agreement shall also provide that (x) the amount in the Escrow Account shall be treated as the property of the Indemnifying Party or the applicable Affiliate of the Indemnifying Party, unless it is released from such Escrow Account to the Indemnitee, (y) all income earned upon the amount in the Escrow Account shall be treated as the property of the Indemnifying Party or the applicable Affiliate of the Indemnifying Party and reported, as and to the extent required by applicable Law, by the escrow agent to the IRS, or any other taxing authority, on IRS Form 1099 or 1042S (or other appropriate form) as income earned by the Indemnifying Party or the applicable Affiliate of the Indemnifying Party whether or not said income has been distributed during such tax year, and (z) the amount in the Escrow Account shall be invested only as determined by the Indemnifying Party in its sole discretion;
(B) Pending the delivery of a Release Document by the Indemnitee to the Indemnifying Party, the Indemnitee shall have the right, but not the obligation, to borrow the Expense Amount from the Escrow Account pursuant to a loan agreement reasonably acceptable to the Indemnitee that (i) requires the Indemnifying Party to lend the Indemnitee immediately available cash proceeds in an amount equal to the Expense Amount, and (ii) provides for (A) a reasonable interest rate and reasonable covenants, taking into account the credit standing and profile of the Indemnitee or any guarantor of the Indemnitee, including the Protected REIT, at the time of such loan, and (B) a fifteen (15) year maturity with no periodic amortization;
(C) Any amount held in escrow pursuant to this Section 9.4 for five (5) years shall be released from such escrow to be used as determined by the Indemnifying Party in its sole and absolute discretion;
(D) The Indemnitee shall bear all costs and expenses with respect to the escrow; and
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(E) The Indemnifying Party shall cooperate in good faith with the Indemnitee (including amending this Section 9.4(h) at the reasonable request of the Indemnitee) in order to (i) maximize the portion of the payments that may be made to the Indemnitee hereunder without causing the Protected REIT to fail to meet the REIT Requirements, (ii) improve the Indemnitees chances of securing a favorable REIT Qualification Ruling, or (iii) assist the Indemnitee in obtaining a favorable Expense Amount Tax Opinion or a favorable Expense Amount Accountants Letter. Such cooperation shall include, for example, agreeing to make payments hereunder to a taxable REIT subsidiary of the Indemnitee or an affiliate or designee of the Indemnitee. The Indemnitee shall reimburse the Indemnifying Party for all reasonable costs and expenses of such cooperation.
Section 9.5 Indemnification Obligations Net of Insurance Proceeds. The Parties intend that any Loss subject to indemnification or reimbursement pursuant to this Article IX (an Indemnifiable Loss) will be net of Insurance Proceeds that actually reduce the amount of the Loss. Accordingly, the amount which an Indemnifying Party is required to pay to any Indemnitee will be reduced by any Insurance Proceeds actually recovered by or on behalf of the Indemnitee in reduction of the related Loss. If an Indemnitee receives a payment (an Indemnity Payment) required by this Agreement from an Indemnifying Party in respect of any Loss and subsequently receives Insurance Proceeds, the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payments received over the amount of the Indemnity Payments that would have been due if the Insurance Proceeds recovery had been received, realized or recovered before the Indemnity Payments were made. The Indemnitee shall use and cause its Affiliates to use reasonable efforts to recover any Insurance Proceeds to which the Indemnitee is entitled with respect to any Indemnifiable Loss. The existence of a claim by an Indemnitee for insurance or against a third party in respect of any Indemnifiable Loss shall not, however, delay any payment pursuant to the indemnification provisions contained in this Article IX and otherwise determined to be due and owing by an Indemnifying Party; rather, the Indemnifying Party shall make payment in full of such amount so determined to be due and owing by it against a concurrent written assignment by the Indemnitee to the Indemnifying Party of the portion of the claim of the Indemnitee for such insurance or against such third party equal to the amount of such payment. The Indemnitee shall use and cause its Affiliates to use reasonable efforts to assist the Indemnifying Party in recovering or to recover on behalf of the Indemnifying Party, any Insurance Proceeds to which the Indemnifying Party is entitled with respect to any Indemnifiable Loss as a result of such assignment. The Indemnitee shall make available to the Indemnifying Party and its counsel all employees, books and records, communications, documents, items or matters within its knowledge, possession or control that are necessary, appropriate or reasonably deemed relevant by the Indemnifying Party with respect to the recovery of such Insurance Proceeds; provided, however, that nothing in this sentence shall be deemed to require a Party to make available books and records, communications, documents or items which (i) in such Partys good faith judgment could result in a waiver of any privilege even if the Parties cooperated to protect such privilege as contemplated by this Agreement or (ii) such Party is not permitted to make available because of any Law or any confidentiality obligation to a third party, in which case such Party shall use reasonable efforts to seek a waiver of or other relief from such confidentiality restriction. Unless the Indemnifying Party has made payment in full of any Indemnifiable Loss, such Indemnifying Party shall use and cause its Affiliates to use reasonable
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efforts to recover any Insurance Proceeds to which it or such Affiliate is entitled with respect to any Indemnifiable Loss.
Section 9.6 Indemnification Obligations Net of Taxes. The Parties intend that any Indemnifiable Loss will be net of Taxes. Accordingly, the amount which an Indemnifying Party is required to pay to an Indemnitee will be adjusted to reflect any tax benefit to the Indemnitee from the underlying Loss and to reflect any Taxes imposed upon the Indemnitee as a result of the receipt of such payment. Such an adjustment will first be made at the time that the Indemnity Payment is made and will further be made, as appropriate, to take into account any change in the liability of the Indemnitee for Taxes that occurs in connection with the final resolution of an audit by a Taxing Authority. For purposes of this Section 9.6, the value of any tax benefit to the Indemnitee from the underlying Loss shall be an amount equal to the product of (a) the amount of any present or future deduction allowed or allowable to the Indemnitee by the Code, or other applicable Law, as a result of such Loss and (b) the highest statutory rate applicable under Section 11 of the Code, or other applicable Law. For all Tax purposes, DevCo and SpinCo agree to treat (i) any payment required by this Agreement (other than payments with respect to interest accruing after the Effective Time or payments required under any of the Commercial Agreements) as either a contribution by DevCo to SpinCo or a distribution by SpinCo to DevCo, as the case may be, occurring immediately prior to the Effective Time or as a payment of an assumed or retained Liability, and (ii) any payment of interest as taxable or deductible, as the case may be, to the party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise required by applicable Law.
Section 9.7 Contribution. If the indemnification provided for in this Article IX is unavailable to an Indemnitee in respect of any Indemnifiable Loss, then the Indemnifying Party, in lieu of indemnifying such Indemnitee, shall contribute to the Losses paid or payable by such Indemnitee as a result of such Indemnifiable Loss in such proportion as is appropriate to reflect the relative fault of SpinCo and each other member of the SpinCo Group, on the one hand, and DevCo and each other member of the DevCo Group, on the other hand, in connection with the circumstances which resulted in such Indemnifiable Loss.
Section 9.8 Remedies Cumulative. The remedies provided in this Article IX shall be cumulative and, subject to the provisions of Article X, shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.
Section 9.9 Survival of Indemnities. The rights and obligations of each of the Parties and their respective Indemnitees under this Article IX shall survive the Effective Time indefinitely, unless a specific survival or other applicable period is expressly set forth herein, and shall survive the sale or other transfer by any Party or any of its Subsidiaries of any Assets or businesses or the assignment by it of any Liabilities.
Section 9.10 Limitation of Liability. EXCEPT TO THE EXTENT SPECIFICALLY PROVIDED IN ANY ANCILLARY AGREEMENT, NEITHER DEVCO OR ANY MEMBER OF THE DEVCO GROUP, ON THE ONE HAND, NOR SPINCO OR ANY MEMBER OF THE SPINCO GROUP, ON THE OTHER HAND, SHALL BE LIABLE TO THE OTHER,
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WHETHER IN CONTRACT, IN TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST REVENUES OR PROFITS) (OTHER THAN CONSEQUENTIAL DAMAGES THAT ARE REASONABLY FORESEEABLE), PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE, SPECIAL, OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER ARISING IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM).
ARTICLE X
DISPUTE RESOLUTION
Section 10.1 Appointed Representative. On or before the Distribution Date, each Party shall appoint a representative who shall be responsible for administering the dispute resolution provisions in Section 10.2 (each, an Appointed Representative). Each Appointed Representative shall have the authority to resolve any Disputes on behalf of the Party appointing such representative.
Section 10.2 Negotiation and Dispute Resolution.
(a) Any dispute, controversy or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, enforceability, validity, termination or breach of this Agreement or any Ancillary Agreement (other than the Commercial Agreements) or any of the Transactions, whether arising in contract or tort, between or among the Parties or any members of their respective Groups (each, a Dispute and, collectively, Disputes) shall first be referred by either Party or any of the members of their respective Groups for amicable negotiations by the Appointed Representatives by providing written notice of such Dispute in the manner provided by Section 13.7 below (Dispute Notice). All documents, communications and information disclosed in the course of such negotiations that are not otherwise independently discoverable shall not be offered or received as evidence in any hearing or judicial proceeding or used for impeachment or for any other purpose, but shall be considered as to have been disclosed for settlement purposes.
(i) If, for any reason, a Dispute is not resolved in writing by the Appointed Representatives within thirty (30) days of the date of delivery of the Dispute Notice, or if a party fails to appoint an Appointed Representative within the periods specified herein, such Dispute shall be submitted to final and binding arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules in effect at the time (the AAA Rules), except as modified herein:
(ii) The seat of the arbitration shall be Denver, Colorado.
(iii) The arbitration shall be conducted by three arbitrators. The claimant and respondent shall each appoint one arbitrator within thirty (30) days of receipt by respondent of the demand for arbitration. The two arbitrators so appointed shall appoint the third and presiding arbitrator (the Chairperson) within thirty (30) days
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of the appointment of the second arbitrator. If any Party fails to appoint an arbitrator, or if the two party-appointed arbitrators fail to appoint the Chairperson, within the time periods specified herein, then any such arbitrator shall, upon any partys request, be appointed by the AAA in accordance with the AAA Rules.
(iv) By electing to proceed under the AAA Rules, the parties to the Dispute confirm that any dispute, claim or controversy concerning the arbitrability of a Dispute or the jurisdiction of the arbitral tribunal, including whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the existence, scope, validity, interpretation or enforceability of the parties agreement to arbitrate, shall be determined by the arbitration tribunal.
(v) Each party shall submit its claims according to the timetable established by the arbitral tribunal. With respect to each claim for monetary relief advanced in the arbitration and/or any claim under the indemnification provisions of Article IX, each sides submissions shall specify the proposed monetary relief that it contends that the arbitral tribunal should award (in each case, the Proposed Damages Award), which Proposed Damages Award may be expressed as zero. Each sides Proposed Damages Award shall also state whether pre- or post-award interest should be awarded, and if so, at what interest rate, and the date from which such interest (if any) should be calculated. If a Person recovers a damages aware, that Person shall be entitled to recover pre-award and post-award interest as allowed and calculated under Delaware Law.
(vi) As to each claim for monetary relief and/or any claim under the indemnification provisions of Article IX, there shall be only two Proposed Damages Awards (one for each side of the claim). Where there are more than two parties to the arbitration, the arbitral tribunal shall have power to make appropriate directions as to which parties shall comprise each side for purposes of submitting Proposed Damages Awards, in every instance to ensure a proper alignment of parties with respect to each such claim.
(vii) In rendering its award, insofar as monetary relief and/or relief under the indemnification provisions of Article IX is claimed, the arbitral tribunal shall be limited to choosing, without modification, the Proposed Damages Award of one of the sides, according to its determination of which Proposed Damages Award most comports with its assessment of the case. The arbitral tribunal shall not award any monetary relief of any kind except as set forth in this paragraph, provided that this will not limit the power of the arbitral tribunal: (A) to award relief per paragraph (viii) hereof; (B) to apply any statute of limitation that it determines is applicable to any claim; (C) to dismiss or exclude any claim that it determines is: (1) precluded by any part of this Agreement, including without limitation the provisions of Articles VI and IX hereof or of any part of any Ancillary Agreement, and/or (2) beyond the scope of this Section 10.2; (D) to receive and determine dispositive motions in accordance with the AAA Rules; and/or (E) to apportion fees and costs per paragraph (ix) hereof.
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(viii) In addition to monetary relief, the arbitral tribunal shall be empowered to award equitable relief, including, but not limited to, an injunction and specific performance of any obligation under this Agreement; provided that a claim under the indemnification provisions of Article IX shall at all times be governed by the procedures set forth in paragraphs (v) through (vii) above.
(ix) The arbitral tribunal shall award the prevailing party its attorneys fees and costs reasonably incurred in the arbitration, including the prevailing partys share of the arbitrators fees and AAA administrative costs.
(x) The Parties intend that this agreement to arbitrate shall be valid, enforceable and irrevocable, and any award rendered by the arbitration tribunal shall be final and binding on all the parties to the Dispute. The parties to the Dispute agree to comply with any award made in any such arbitration proceedings. Judgment upon any award may be entered in any court of competent jurisdiction, including any court having jurisdiction over any party or any of its assets.
(xi) By agreeing to arbitration, the parties to the Dispute do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment, or other order in aid of arbitration proceedings and the enforcement of any award. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any party to respect the arbitral tribunals orders to that effect. In any such action brought in court for such provisional remedies or enforcement of any award, each of the parties to the Dispute irrevocably and unconditionally (A) consents and submits to the non-exclusive jurisdiction and venue of the Courts of the State of Colorado and the Federal Courts of the United States of America located within the State of Colorado (the Colorado Courts); (B) waives, to the fullest extent it may effectively do so, any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens or any right of objection to jurisdiction on account of its place of incorporation or domicile, which it may now or hereafter have to the bringing of any such action or proceeding in any Colorado Court; (C) consents to service of process in the manner provided by Section 13.7 below or in any other manner permitted by Law; and (D) WAIVES ANY RIGHT TO TRIAL BY JURY.
(xii) This arbitration, and all prior, subsequent or concurrent judicial proceedings related thereto and permitted herein, shall be conducted pursuant to the Federal Arbitration Act, found at Title 9 of the U.S. Code. The parties to the Dispute intend that the arbitration tribunal shall apply the substantive Laws of the State of Delaware to any Dispute hereunder, without regard to any choice of law principles thereof that would mandate the application of the Laws of another jurisdiction.
(xiii) In order to facilitate the comprehensive resolution of related disputes, all claims between any of the parties to the Dispute that arise under or in connection with this Agreement and the Ancillary Agreements may be brought in a single
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arbitration. Upon the request of any party to an arbitration proceeding constituted under this Agreement or the Ancillary Agreement(s), the arbitral tribunal shall consolidate such arbitration proceeding with any other arbitration proceeding relating to this Agreement and/or the Ancillary Agreement(s), if the arbitral tribunal determines that (i) there are issues of fact or law common to the proceedings so that a consolidated proceeding would be more efficient than separate proceedings, and (ii) no party to the Dispute would be unduly prejudiced as a result of such consolidation through undue delay or otherwise. In the event of different rulings on this question by the arbitral tribunal constituted hereunder and another arbitral tribunal constituted under this Agreement or the Ancillary Agreement(s), the ruling of the arbitral tribunal constituted first in time shall control, and such arbitral tribunal shall serve as the tribunal for any consolidated arbitration.
(xiv) In the event of a Dispute, each party to the Dispute shall continue to perform its obligations under this Agreement or any Ancillary Agreement in good faith during the resolution of such Dispute as if such Dispute had not arisen, unless and until this Agreement or such Ancillary Agreement is terminated in accordance with the provisions hereof.
(xv) Any arbitration hereunder shall be confidential, and the Parties and their agents agree not to disclose to any third party (i) the existence or status of the arbitration, (ii) all information made known and documents produced in the arbitration not otherwise in the public domain, and (iii) all awards arising from the arbitration, except and to the extent that disclosure is required by applicable Law or is required to protect or pursue a legal right, and in any such case, the party making such disclosure shall produce only those materials and information that are necessary and shall take reasonable steps to safeguard the confidentiality of the materials and information.
(b) The Parties agree that the provisions of this Section 10.2 bind themselves and any of the members of their respective Groups, and further agree to take all measures to lawfully cause the members of their respective Groups to abide and be bound by the terms of this Section 10.2.
ARTICLE XI
TAX MATTERS
Section 11.1 Tax Returns and Payments.
(a) Liability for Taxes.
(i) Except as otherwise provided in the Employee Matters Agreement and in Section 11.1(a)(iii), DevCo OP and its Subsidiaries shall assume all liability for any and all Taxes attributable to DevCo and each member of the DevCo Group, without regard to when such Taxes were accrued and including, for the avoidance of doubt, all Property Taxes with respect to DevCo Group Assets and all entity-level Taxes with respect to DevCo Group entities and all Property Taxes with respect to the DevCo Group Assets (the DevCo Tax Liabilities).
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(ii) Except as otherwise provided in the Employee Matters Agreement and in Section 11.1(a)(iii), SpinCo OP and its Subsidiaries shall assume all liability for any and all Taxes attributable to SpinCo and each member of the SpinCo Group, without regard to when such Taxes were accrued and including, for the avoidance of doubt, all Property Taxes and Transfer Taxes with respect to SpinCo Group Assets and all entity-level Taxes with respect to Spin Group entities.
(iii) Notwithstanding the above,
(A) SpinCo OP and its Subsidiaries shall assume (x) all Taxes of any member of the DevCo Group resulting from challenges to the intended Tax treatment of the Transactions set forth in Section 11.2(a)(i) and (y) all Transfer Taxes arising from the DevCo Retained Properties and any Assets located on such properties pursuant to the Transactions (the Tax Liabilities described in this Section 11.1(a)(iii), together with the Tax liabilities described in Section 11.1(a)(ii), the SpinCo Tax Liabilities).
(b) Refunds. DevCo Group shall be entitled to any refund of or credit for Taxes for which DevCo or its Subsidiaries are responsible under this Agreement, and SpinCo Group shall be entitled to any refund of or credit for Taxes for which SpinCo or its Subsidiaries are responsible under this Agreement. Refunds for any Straddle Period shall be equitably apportioned between DevCo OP and SpinCo OP in accordance with the provisions of this Agreement governing the Taxes with respect to such periods. A Party receiving a refund to which the other Party is entitled pursuant to this Agreement shall pay the amount to which such other Party is entitled within thirty (30) calendar days after the receipt of the refund.
(c) Transfer Taxes and Property Tax Returns.
(i) SpinCo OP will prepare and file all Tax Returns and other documentation with respect to all Transfer Taxes described in Section 11.1(a)(iii).
(ii) DevCo OP will prepare and file all Tax Returns for Property Taxes due on or after the Distribution Date for DevCo Retained Properties. SpinCo OP will prepare and file all Tax Returns for Property Taxes due on or after the Distribution Date for Assets held by a member of the SpinCo Group after the Distribution Date.
(d) Filing of Other Tax Returns.
(i) DevCo OP will have the sole and exclusive responsibility for the preparation and filing of all Tax Returns that any member of the DevCo Group is obligated to prepare and file.
(ii) SpinCo OP shall have the sole and exclusive responsibility for the preparation and filing of all Tax Returns that any member of the SpinCo Group is obligated to file.
(e) Amended Returns. Without the prior written consent of DevCo OP, which consent shall not be unreasonably withheld, conditioned, or delayed, SpinCo OP shall not, and
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shall not permit any member of the SpinCo Group to, file any amended Pre-Closing Period Tax Return or Straddle Period Tax Return that includes a SpinCo REIT Subsidiary.
(f) Dispute Resolution. Subject to the final sentence of this Section 11.1(f), the Parties shall attempt in good faith to resolve any disagreement arising with respect to this Article XI, including any dispute in connection with a claim by a third party (a Tax Dispute). Either Party may give the other Party written notice of any Tax Dispute not resolved in the normal course of business. Subject to the final sentence of this Section 11.1(f), if the Parties cannot agree within thirty (30) Business Days following the date on which one Party gives such notice, then the Tax Dispute shall be referred to a Tax Advisor acceptable to each of the Parties to act as an arbitrator in order to resolve the Tax Dispute. If the Parties are unable to agree upon a Tax Advisor within fifteen (15) calendar days, the Tax Advisor selected by DevCo and the Tax Advisor selected by SpinCo shall jointly select a Tax Advisor that will resolve the Tax Dispute. Such Tax Advisor shall be empowered to resolve the Tax Dispute, including by engaging nationally recognized accountants and other experts. The Tax Advisor chosen to resolve the Tax Dispute shall furnish written notice to the Parties of its resolution of such Tax Dispute as soon as practicable, but in no event later than forty-five (45) Business Days after its acceptance of the matter for resolution. Any such resolution by the Tax Advisor will be conclusive and binding on the Parties. Each of DevCo OP and SpinCo OP shall bear fifty percent (50%) of the aggregate expenses of the Tax Advisor chosen to resolve the Tax Dispute.
Section 11.2 Tax Covenants.
(a) Covenants of DevCo and SpinCo.
(i) The Parties agree that: (A) all transaction steps comprising the Restructuring shall, for all Tax purposes in all respects, be treated as specified in the Plan of Restructuring, (B) the DevCo OP Distribution will be treated as a partnership division under Treasury Regulations Section 1.708-1(d), (C) the SpinCo Distribution will be treated as a taxable distribution under Section 301 of the Code and (D) the Parties and their respective Subsidiaries shall report the Restructuring, the DevCo OP Distribution, and the SpinCo Distribution for all Tax purposes in all respects consistently with such treatment, and shall not take any position on any Tax Return that is inconsistent with such treatment.
(ii) Each Party shall report the value of the SpinCo Common Stock and SpinCo Assets on the Distribution Date as determined by DevCo for all Tax purposes in all respects, and shall not take any position on any Tax Return that is inconsistent with such value.
(b) Covenants of DevCo.
(i) DevCo and DevCo OP shall use their commercially reasonable efforts to cooperate with SpinCo and each SpinCo REIT Subsidiary, as necessary, to enable SpinCo and each SpinCo REIT Subsidiary to each qualify for taxation as a REIT and receive customary legal opinions on or after the Distribution Date concerning SpinCos qualification and taxation as a REIT, including by providing information and
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representations to SpinCo or any of the SpinCo REIT Subsidiaries and their respective tax counsel with respect to the composition of DevCos income and assets, composition of the holders of stock of DevCo and DevCos organization, operation, and qualification as a REIT.
(ii) DevCo and DevCo OP shall use reasonable best efforts to maintain DevCos REIT status for each of its taxable years ending on or before December 31, 2021, unless DevCo obtains an opinion from a nationally recognized tax counsel or a private letter ruling from the IRS, on which SpinCo and the SpinCo REIT Subsidiaries can rely, substantially to the effect that DevCos failure to maintain its REIT status will not prevent SpinCo or any SpinCo REIT Subsidiary from making a valid REIT election for any taxable year, or otherwise cause SpinCo or any SpinCo REIT Subsidiary to fail to qualify for taxation as a REIT for any taxable year, pursuant to Section 856(g)(3) of the Code.
(iii) DevCo shall not liquidate, merge, combine or otherwise restructure or elect to be treated as other than a corporation for U.S. federal income tax purposes, without SpinCos consent, prior to the second (2nd) anniversary of the Distribution Date; provided, however, that DevCo may, at any point after December 31, 2020, combine or merge with or into any Person that (immediately before such merger or combination) is not a member of the DevCo Group.
(c) Covenants of SpinCo.
(i) SpinCo and each SpinCo REIT Subsidiary shall take all actions, and refrain from taking all actions, as are necessary to ensure that SpinCo and each SpinCo REIT Subsidiary will qualify for taxation as a REIT for U.S. federal income tax purposes for any and all Straddle Periods.
(ii) SpinCo and each SpinCo REIT Subsidiary shall accommodate all reasonable requests of DevCo with respect to maintenance of the REIT status of DevCo, any Subsidiary of DevCo that has or will elect to be treated as a REIT for U.S. federal income tax purposes, SpinCo, or a SpinCo REIT Subsidiary for any and all Straddle Periods.
(iii) Members of the SpinCo Group shall not sell or otherwise dispose of any SpinCo Asset on or prior to December 31, 2020, if such disposition would cause any member of the DevCo Group to incur Tax attributable to a prohibited transaction under Section 857(b)(6) of the Code.
(iv) Neither SpinCo nor any of the SpinCo REIT Subsidiaries shall liquidate, merge, combine or otherwise restructure or elect to be treated as other than a corporation for U.S. federal income tax purposes, without DevCos consent, prior to the second (2nd) anniversary of the Distribution Date; provided, however, that SpinCo or any of the SpinCo REIT Subsidiaries may, at any point after December 31, 2020, combine or merge with or into any Person that (immediately before such merger or combination) is not a member of the SpinCo Group.
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Section 11.3 Tax Indemnification.
(a) SpinCo OP shall pay or cause to be paid, shall be responsible for, and shall indemnify and hold harmless all members of the DevCo Group from and against:
(i) all Taxes of any member of the DevCo Group attributable to a breach of any covenant in Section 11.2(a) or Section 11.2(c);
(ii) all Taxes of any member of the DevCo Group assumed by SpinCo pursuant to Section 11.1(a).
(iii) any accounting, legal, and other professional fees and court costs incurred in connection with, evaluating, or defending against any claims that result in any member of the DevCo Group becoming entitled to indemnification under this Section 11.3(a); and
(iv) any Taxes incurred by the DevCo Group resulting from indemnification payments made pursuant to this Section 11.3(a).
(b) DevCo OP shall pay or cause to be paid, shall be responsible for, and shall indemnify and hold harmless all members of the SpinCo Group from and against:
(i) all Taxes of any member of the SpinCo Group attributable to a breach of any covenant in Section 11.2(a) or Section 11.2(b);
(ii) all Taxes of any member of the SpinCo Group assumed by DevCo pursuant to Section 11.1(a);
(iii) any accounting, legal, and other professional fees and court costs incurred in connection with, evaluating, or defending against any claims that result in any member of the SpinCo Group becoming entitled to indemnification under this Section 11.3(b); and
(iv) any Taxes incurred by the SpinCo Group resulting from indemnification payments made pursuant to this 11.3(b).
Furthermore, indemnification under this Section 11.3 shall follow the procedures described in Section 9.4, except to the extent such procedures conflict with anything described herein.
Section 11.4 Tax Contests.
(a) Notice of Tax Contests. SpinCo and SpinCo OP shall promptly notify DevCo in writing upon receipt by SpinCo or any member of the SpinCo Group of a written communication from any Taxing Authority with respect to any Tax Contest concerning any Tax Return or otherwise concerning Taxes for which DevCo or DevCo OP may be liable under this Agreement or that impacts any portion of a Straddle Period or Pre-Closing Period. DevCo and DevCo OP shall promptly notify SpinCo in writing upon receipt by DevCo or any member of the DevCo Group of a written communication from any Taxing Authority with respect to any Tax
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Contest concerning any Tax Return or otherwise concerning Taxes for which SpinCo or SpinCo OP may be liable under this Agreement or that impacts any portion of a Post-Closing Period.
(b) Control of Contest by DevCo. DevCo and DevCo OP shall have the sole responsibility and control over the handling of any Tax Contest, including the exclusive right to communicate with agents of the Taxing Authority, involving (A) any Pre-Closing Period Tax Return of SpinCo or any member of the SpinCo Group or otherwise relating to the SpinCo Assets or SpinCo Liabilities for a Pre-Closing Period or (B) any Straddle Period Tax Return of SpinCo or any member of the SpinCo Group or otherwise relating to the SpinCo Assets or SpinCo Liabilities for a Straddle Period. Upon SpinCos or SpinCo OPs request, SpinCo and SpinCo OP shall be allowed to participate in, but not to control, at SpinCos or SpinCo OPs expense, the handling of any such Tax Contest with respect to any item that may affect SpinCos or SpinCo OPs liability for Taxes pursuant to this Agreement. DevCo or DevCo OP shall not settle or concede any such Tax Contest with respect to any item in excess of $50,000 for which SpinCo or SpinCo OP is liable hereunder without the prior written consent of SpinCo or SpinCo OP, as applicable, which consent shall not be unreasonably withheld, delayed, or conditioned.
Section 11.5 Cooperation. Each Party shall, and shall cause all of such Partys Subsidiaries and, to the extent capable of so doing, Affiliates to, fully cooperate with the other Party in connection with the preparation and filing of any Tax Return, the conduct of any Tax Contest (including, where appropriate or necessary, providing a power of attorney) concerning any issues or any other matter contemplated under this Article XI, and use commercially reasonable efforts to mitigate the net economic impact of any Tax Contest. Each Party shall make its employees and facilities available on a mutually convenient basis to facilitate such cooperation.
Section 11.6 Retention of Records; Access.
(a) In General. The Parties shall and shall cause the other members of their Group to (i) retain records, documents, accounting data, and other information (including computer data) necessary for the preparation and filing of all Tax Returns in respect of Taxes of either the DevCo Group or the SpinCo Group for any taxable period, or for any Tax Contests relating to such Tax Returns and (ii) using commercially reasonable efforts to do so within five (5) Business Days, give to the other Party reasonable access to such records, documents, accounting data, and other information (including computer data) and to its personnel (insuring their cooperation) and premises, for the purpose of the review or audit of such Tax Returns to the extent relevant to an obligation or liability of a Party under this Agreement or for purposes of the preparation or filing of any such Tax Return, the conduct of any Tax Contest or any other matter reasonably and in good faith related to the Tax affairs of the requesting Party. The requesting party shall bear all reasonable out-of-pocket costs and expenses in connection therewith. At any time after the Distribution Date that DevCo or any member of the DevCo Group proposes to destroy such material or information, DevCo and DevCo OP shall first notify SpinCo and SpinCo OP in writing and SpinCo and SpinCo OP shall be entitled to receive such materials or information proposed to be destroyed. At any time after the Distribution Date that SpinCo or any member of the SpinCo Group proposes to destroy such material or information, SpinCo and SpinCo OP shall first notify DevCo and DevCo OP in writing and DevCo and DevCo OP shall be entitled to receive such materials or information proposed to be destroyed.
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(b) Continuation of Retention of Information, Access Obligations. The obligations set forth above in Section 11.6(a) shall continue until the longer of (i) the time of a Final Determination or (ii) expiration of all applicable statutes of limitations to which the records and information relate. For purposes of the preceding sentence, each Party shall assume that no applicable statute of limitations has expired unless such Party has received notification or otherwise has actual knowledge that such statute of limitations has expired.
ARTICLE XII
TERMINATION
Section 12.1 Termination. Upon written notice, this Agreement and each of the Ancillary Agreements may be terminated at any time prior to the Effective Time by and in the sole discretion of DevCo without the approval of SpinCo or any other party thereto.
Section 12.2 Effect of Termination. In the event of termination pursuant to Section 12.1, neither Party shall have any Liability of any kind to the other Party as a result of such termination.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Further Assurances. Subject to the limitations or other provisions of this Agreement, (a) each Party shall, and shall cause the other members of its Group to, use reasonable efforts (subject to, and in accordance with applicable Law) to take promptly, or cause to be taken promptly, all actions, and to do promptly, or cause to be done promptly, and to assist and cooperate with the other Party in doing, all things reasonably necessary, proper or advisable to consummate and make effective the Transactions and to carry out the intent and purposes of this Agreement, including using reasonable efforts to obtain satisfaction of the conditions precedent in Article V within its reasonable control and to perform all covenants and agreements herein applicable to such Party or any member of its Group, and (b) neither Party will, nor will either Party allow any other member of its Group to, without the prior written consent of the other Party, take any action which would reasonably be expected to prevent or materially impede, interfere with or delay any of the Transactions. Without limiting the generality of the foregoing, where the cooperation of third parties, such as insurers or trustees, would be necessary in order for a Party to completely fulfill its obligations under this Agreement, such Party shall use reasonable efforts to cause such third parties to provide such cooperation.
Section 13.2 Payment of Expenses. All costs and expenses incurred prior to the Distribution and directly related to the Transactions (other than in respect of Taxes, which shall be governed by Article XI) shall be paid by DevCo OP; notwithstanding the foregoing, the costs and expenses set forth on Schedule 13.2 shall be paid by SpinCo OP.
Section 13.3 Amendments and Waivers.
(a) Subject to Section 12.1, this Agreement may not be amended except by an agreement in writing signed by both Parties.
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(b) Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party entitled to the benefit thereof and any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized representative of such Party. No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that either Party would otherwise have.
Section 13.4 Entire Agreement. This Agreement, the Ancillary Agreements and the Exhibits and Schedules referenced herein and therein and attached hereto or thereto, constitute the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersede all prior negotiations, agreements, commitments, writings, courses of dealing and understandings with respect to the subject matter hereof.
Section 13.5 Survival of Agreements. Except as otherwise expressly contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.
Section 13.6 Third-Party Beneficiaries. Except (a) as provided in Article IX relating to Indemnitees and for the release of any Person provided under Section 9.1, (b) as provided in Section 7.1 relating to insured persons and (c) as provided in Section 8.1(a), this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.
Section 13.7 Notices. All notices, requests, permissions, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) five (5) Business Days following sending by registered or certified mail, postage prepaid, (b) when sent, if sent by facsimile or email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, (c) when delivered, if delivered personally to the intended recipient, and (d) one (1) Business Day following sending by overnight delivery via a national courier service and, in each case, addressed to a Party at the following address for such Party (as updated from time to time by notice in writing to the other Party):
(a) If to DevCo or DevCo OP:
c/o Apartment Investment and Management Company 4582 S. Ulster St. Suite 1450 Denver, CO 80237 Attention: General Counsel; Chief Financial Officer Email: Facsimile: |
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(b) If to SpinCo or SpinCo OP:
c/o Apartment Income REIT Corp. 4582 S. Ulster St. Suite 1700 Denver, CO 80237 Attention: General Counsel; Chief Financial Officer Email: Facsimile: |
Section 13.8 Counterparts; Electronic Delivery. This Agreement may be executed in multiple counterparts, each of which when executed shall be deemed to be an original, but all of which together shall constitute one and the same agreement. Execution and delivery of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic means shall be deemed to be, and shall have the same legal effect as, execution by an original signature and delivery in person.
Section 13.9 Severability. If any term or other provision of this Agreement or the Exhibits and Schedules attached hereto is determined by a nonappealable decision by a court, administrative agency or arbitration tribunal to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the court, administrative agency or arbitration tribunal shall interpret this Agreement so as to affect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the fullest extent possible. If any sentence in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.
Section 13.10 Assignability; Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns; provided, however, that the rights and obligations of each Party under this Agreement shall not be assignable, in whole or in part, directly or indirectly, whether by operation of law or otherwise, by such Party without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed) and any attempt to assign any rights or obligations under this Agreement without such consent shall be null and void. Notwithstanding the foregoing, either Party may assign its rights and obligations under this Agreement to any of their respective Affiliates; provided that no such assignment shall release such assigning Party from any liability or obligation under this Agreement.
Section 13.11 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive Laws of the State of Delaware, without regard to any conflicts of law provisions thereof that would result in the application of the Laws of any other jurisdiction.
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Section 13.12 Construction. This Agreement shall be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation shall be applied against either Party. The Parties represent that this Agreement is entered into with full consideration of any and all rights which the Parties may have. The Parties have relied upon their own knowledge and judgment. The Parties have had access to independent legal advice, have conducted such investigations they thought appropriate, and have consulted with such other independent advisors as they deemed appropriate regarding this Agreement and their rights and asserted rights in connection therewith. The Parties are not relying upon any representations or statements made by the other Party, or such other Partys employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement. The Parties are not relying upon a legal duty, if one exists, on the part of the other Party (or such other Partys employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or their preparation, it being expressly understood that neither Party shall ever assert any failure to disclose information on the part of the other Party as a ground for challenging this Agreement.
Section 13.13 Performance. Each Party shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party.
Section 13.14 Title and Headings. Titles and headings to Sections and Articles are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
Section 13.15 Exhibits and Schedules. The Exhibits and Schedules attached hereto are incorporated herein by reference and shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective officers as of the date first set forth above.
APARTMENT INVESTMENT AND MANAGEMENT COMPANY | ||
By: | /s/ H. Lynn C. Stanfield | |
Name: H. Lynn C. Stanfield | ||
Title: Authorized Person | ||
AIMCO OP L.P. | ||
By: | /s/ H. Lynn C. Stanfield | |
Name: H. Lynn C. Stanfield | ||
Title: Authorized Person | ||
APARTMENT INCOME REIT CORP. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person | ||
AIMCO PROPERTIES, L.P. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person |
[Signature Page to Separation and Distribution Agreement]
Exhibit 3.1
APARTMENT INCOME REIT CORP.
ARTICLES OF AMENDMENT AND RESTATEMENT
Apartment Income REIT Corp., a Maryland corporation, having its principal office in Baltimore City, Maryland (hereinafter referred to as the Corporation or AIR), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation desires to and does hereby amend and restate its Charter as currently in effect.
SECOND: The Charter of the Corporation as amended and restated in its entirety is as follows:
* * * * * *
ARTICLE I
NAME
The name of the corporation (the Corporation) is Apartment Income REIT Corp.
ARTICLE II
PURPOSE
Section 1. Purpose. The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland authorizing the formation of corporations as now or hereafter in force (including, without limitation or obligation, engaging in business as a REIT (as hereinafter defined) under the Internal Revenue Code of 1986, as amended, or any successor statute (the Code)).
Section 2. REIT Qualification. The Board of Directors, without any action by the shareholders of the Corporation, shall have the authority to cause the Corporation to elect to be taxed as a REIT for U.S. federal income tax purposes. Following any such election, if the Board of Directors determines that it is no longer in the best interests of the Corporation to continue to be taxed as a REIT for U.S. federal income tax purposes, the Board of Directors, without any action by the shareholders of the Corporation, may revoke or otherwise terminate the Corporations REIT election pursuant to Section 856(g) of the Code. In addition, the Board of Directors, without any action by the shareholders of the Corporation, shall have and may exercise, on behalf of the Corporation, without limitation, the power to determine that compliance with any restriction or limitation on stock ownership and transfers set forth in Article IV is not required in order for the Corporation to qualify as a REIT.
ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. The name and address of the resident agent of the Corporation in the State of Maryland is CSC-Lawyers
Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. The resident agent is a Maryland corporation located in the State of Maryland.
ARTICLE IV
STOCK
Section 1. Authorized Shares
1.1 Class and Number of Shares. The total number of shares of stock that the Corporation from time to time shall have authority to issue is 1,022,175,000 shares of Capital Stock having a par value of $0.01 per share, amounting to an aggregate par value of $10,221,750, consisting of 1,021,175,000 shares currently classified as Class A Common Stock, par value $0.01 per share (the Class A Common Stock) (the Class A Common Stock and all other classes or series of common stock hereafter classified being referred to collectively herein as the Common Stock), and 1,000,000 shares currently classified as Preferred Stock, par value $0.01 per share (all other classes or series of preferred stock hereafter classified being referred to collectively herein as the Preferred Stock). A majority of the entire Board of Directors, without action by the stockholders, may amend the Charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class that the Corporation has authority to issue.
1.2 Changes in Classification and Preferences. The Board of Directors by resolution or resolutions from time to time may classify and reclassify any unissued shares of Capital Stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of Capital Stock, including, but not limited to, ownership restrictions consistent with the Ownership Restrictions with respect to each such class or subclass of Capital Stock, and the number of shares constituting each such class or subclass, and to increase or decrease the number of shares of any such class or subclass.
Section 2. No Preemptive Rights. No holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of the stock of the Corporation or any other security of the Corporation that it may issue or sell.
Section 3. Common Stock.
3.1 Dividend Rights. The holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors of the Corporation out of funds legally available therefor.
3.2 Rights Upon Liquidation. Subject to the preferential rights of Preferred Stock, if any, as may be determined by the Board of Directors pursuant to Section 1 of this Article IV, in the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of the Corporation, each holder of shares of Common Stock shall be entitled to receive, ratably with each other holder of Common Stock, that portion of the assets of the Corporation available for distribution to its shareholders as the number of shares of the Common Stock held by such holder bears to the total number of shares of Common Stock then outstanding.
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3.3 Voting Rights. The holders of shares of Common Stock shall be entitled to vote on all matters (on which a holder of shares of Common Stock shall be entitled to vote) at the meetings of the shareholders of the Corporation, and shall be entitled to one vote for each share of Common Stock entitled to vote at such meeting.
3.4 Restriction on Ownership and Transfers. The Beneficial Ownership and Transfer of Capital Stock shall be subject to the restrictions set forth in this Section 3.4 of this Article IV.
3.4.1 Restrictions.
(A) Limitation on Beneficial Ownership. Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date, (i) no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Capital Stock in excess of the Aggregate Stock Ownership Limit, (ii) no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own Common Stock in excess of the Common Stock Ownership Limit, (iii) the Initial Holder shall not Beneficially Own shares of Capital Stock in excess of the Initial Holder Limits, (iv) no Look-Through Entity shall Beneficially Own shares of Capital Stock in excess of the Look-Through Ownership Limits, and (v) no Excepted Holder shall Beneficially Own shares of Capital Stock in excess of the Excepted Holder Limit for such Excepted Holder.
(B) Transfers in Excess of the Aggregate Stock Ownership Limit. Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Person (other than a Look-Through Entity) Beneficially Owning shares of Capital Stock in excess of the Aggregate Ownership Limit shall be void ab initio as to the Transfer of such shares of Capital Stock that would be otherwise Beneficially Owned by such Person in excess of the Aggregate Stock Ownership Limit, and the intended transferee shall acquire no rights in such shares of Capital Stock.
(C) Transfers in Excess of Common Stock Ownership Limit. Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Common Stock in excess of the Common Stock Ownership Limit shall be void ab initio as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by such Person in excess of the Common Stock Ownership Limit, and the intended transferee shall acquire no rights in such shares of Common Stock.
(D) Transfers in Excess of Look-Through Ownership Limits. Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Look-Through Entity
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Beneficially Owning shares of Capital Stock in excess of the Look-Through Ownership Limits shall be void ab initio as to the Transfer of such shares of Capital Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limits, and such Look-Through Entity shall acquire no rights in such shares of Capital Stock.
(E) Transfers in Excess of Excepted Holder Limits. Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Excepted Holder Beneficially Owning shares of Capital Stock in excess of any Excepted Holder Limit applicable to such Excepted Holder shall be void ab initio as to the Transfer of such shares of Capital Stock that would be other-wise Beneficially Owned by such Excepted Holder in excess of the applicable Excepted Holder Limit and such Excepted Holder shall acquire no rights in such shares of Capital Stock.
(F) Transfers Resulting in Ownership by Fewer than 100 Persons. Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Capital Stock being Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio as to the Transfer of such shares of Capital Stock that would be otherwise Beneficially Owned by the transferee, and the intended transferee shall acquire no rights in such shares of Capital Stock.
(G) Transfers Resulting in Closely Held Status or Related Party Rent. From and after the Spin-Off Date, any Transfer that, if effective, would result in the Corporation being closely held within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void ab initio as to the Transfer of shares of Capital Stock that would cause the Corporation (i) to be closely held within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Capital Stock.
(H) REIT Status. Except as provided in Section 3.4.8 of this Article IV, no Person shall Beneficially Own shares of Capital Stock to the extent that such Beneficial Ownership would otherwise cause the Corporation to fail to qualify as a REIT, including, but not limited to, as a result of any eligible independent contractor (as defined in Section 856(d)(9)(A) of the Code) that operates a qualified health care property (as defined in Section 856(e)(6)(D)(i) of the Code) or a qualified lodging facility (as defined in Section 856(d)(9)(D) of the Code), on behalf of a TRS failing to qualify as such. Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would
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cause the Corporation to fail to qualify as a REIT shall be void ab initio as to the Transfer of such shares of Capital Stock that would be otherwise Beneficially Owned by the transferee, and the intended transferee shall acquire no rights in such shares of Capital Stock.
(I) Domestically Controlled Status. Except as provided in Section 3.4.8 of this Article IV, no Person shall Beneficially Own shares of Capital Stock to the extent that such Beneficial Ownership of Capital Stock could result in the Corporation failing to qualify as a domestically controlled qualified investment entity within the meaning of Section 897(h)(4)(B) of the Code (Domestically Controlled Entity). Except as provided in Section 3.4.8 of this Article IV, from and after the Spin-Off Date (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Corporation failing to qualify as a Domestically Controlled Entity shall be void ab initio as to the Transfer of such shares of Capital Stock that would be otherwise Beneficially Owned by the transferee, and the intended transferee shall acquire no rights in such shares of Capital Stock.
(J) Transfers in Excess of Initial Holder Limits. Any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Capital Stock in excess of the Initial Holder Limits shall be void ab initio as to the Transfer of such shares of Capital Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder Limits, and the Initial Holder shall acquire no rights in such shares of Capital Stock.
(K) Severability on Void Transactions. A Transfer of a share of Capital Stock that is null and void under Sections 3.4.1(B) through (J) of this Article IV because it would, if effective, result in (i) the ownership of Capital Stock in excess of the Initial Holder Limits, the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit or the Look-Through Ownership Limits, (ii) the Capital Stock being Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution), (iii) the Corporation being closely held within the meaning of Section 856(h) of the Code or (iv) the Corporation otherwise failing to qualify as a REIT or Domestically Controlled Entity, shall not adversely affect the validity of the Transfer of any other share of Capital Stock in the same or any other related transaction.
3.4.2 Remedies for Breach. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 3.4.1 of this Article IV or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Capital Stock in violation of Section 3.4.1 of this Article IV (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of long-term indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Capital Stock acquired in violation of Section 3.4.1 of this Article IV or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted
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Transfer; provided, however, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 3.4.1 of this Article IV, regardless of any action (or non-action) by the Board of Directors or such committee, (a) shall be void ab initio or (b) shall automatically result in the transfer described in Section 3.4.3 of this Article IV; provided, further, that the provisions of this Section 3.4.2 shall be subject to the provisions of Section 3.4.12 of this Article IV.
3.4.3 Transfer in Trust.
(A) Establishment of Trust. If, notwithstanding the other provisions contained in this Article IV, at any time after the Spin-Off Date there is a purported Transfer (an Excess Transfer) (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own (i) shares of Capital Stock in excess of the Aggregate Stock Ownership Limit or (ii) shares of Common Stock in excess of the Common Stock Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Capital Stock in excess of the Initial Holder Limits, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Capital Stock in excess of the Look-Through Ownership Limits (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Capital Stock in excess of the applicable Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, the Initial Holder Limits or the Look-Through Entity Limit is referred to as a Prohibited Transferee), then, except as otherwise provided in Section 3.4.8 of this Article IV, such shares of Capital Stock in excess of the Aggregate Ownership Limit, the Common Stock Ownership Limit, the Initial Holder Limits or the Look-Through Ownership Limits, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the date of the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limits or the Look-Through Entity Ownership Limits.
(B) Appointment of Trustee. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business.
(C) Status of Shares Held by the Trustee. Shares of Capital Stock held by the Trustee shall be issued and outstanding shares of Capital Stock of the Corporation. Except to the extent provided in Section 3.4.3(E), the Prohibited Transferee shall have no rights in the Capital Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares of Capital Stock held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust.
(D) Dividend and Voting Rights. The Trustee shall have all voting rights and rights to dividends with respect to shares of Capital Stock held in the Trust, which rights shall be
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exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Capital Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void ab initio with respect to such shares of Capital Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Capital Stock have been transferred to the Trustee will be rescinded as void ab initio and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, Initial Holder Limits or Look-Through Entity Ownership Limits shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Capital Stock for the benefit of the Charitable Beneficiary.
(E) Restrictions on Transfer. Within 20 days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Trust, the Trustee of the Trust must transfer the shares held in the Trust to a Person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a transfer is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 3.4.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 3.4.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Capital Stock as to which such restrictions would, by their terms, apply, and to hold such Capital Stock on behalf of the Corporation.
(F) Purchase Right in Stock transferred to the Trustee. Shares of Capital Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred.
(G) Designation of Charitable Beneficiaries. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Capital Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in
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Sections 170(b)(1)(A), 170(c) (2) and 501(c)(3) of the Code. Neither the failure of the Corporation to make such designation nor the failure of the Corporation to appoint the Trustee before the automatic transfer provided for in Section 3.4.3 shall make such transfer ineffective, provided that the Corporation thereafter makes such designation and appointment.
3.4.4 Notice of Restricted Transfer. Any Person that acquires or attempts to acquire shares of Capital Stock in violation of Section 3.4.1 of this Article IV, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 3.4.3 of this Article IV, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporations status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way.
3.4.5 Owners Required to Provide Information. From and after the Spin-Off Date, certain record and Beneficial Owners and transferees of shares of Capital Stock will be required to provide certain information as set out below.
(A) Annual Disclosure. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code and excluding, solely for this purpose, constructive ownership described in clause (ii)(y) of the definition of Beneficial Ownership) in number or value of Outstanding shares of Capital Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such owner, the number of shares of Capital Stock Beneficially Owned (excluding, solely for this purpose, constructive ownership described in clause (ii)(y) of the definition of Beneficial Ownership) and a full description of how such shares are held. Each such owner of Capital Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Capital Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT or Domestically Controlled Entity and (ii) ensure compliance with the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, the Initial Holder Limits or the Look-Through Ownership Limits, as applicable. Each shareholder of record, including without limitation any Person that holds shares of Capital Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 3.4.5 from the Beneficial Owner.
(B) Disclosure at the Request of the Corporation. Any Person that is a Beneficial Owner of shares of Capital Stock and any Person (including the shareholder of record) that is holding shares of Capital Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporations status as a REIT and Domestically Controlled Entity, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, the Initial Holder Limits and the Look-Through Ownership Limits, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Capital Stock already Beneficially Owned by such shareholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose.
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3.4.6 Remedies Not Limited. Nothing contained in this Article IV shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 3.4.12 of this Article IV) (i) to protect the Corporation and the interests of its shareholders in the preservation of the Corporations status as a REIT and Domestically Controlled Entity and (ii) to insure compliance with the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, the Initial Holder Limits and the Look-Through Ownership Limits.
3.4.7 Ambiguity. In the case of an ambiguity in the application of any of the provisions of Section 3.4 of this Article IV, or in the case of an ambiguity in any definition contained in Section 4 of this Article IV, the Board of Directors shall have the power to determine the application of the provisions of this Article IV with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. Absent a decision to the contrary by the Board of Directors (which the Board of Directors may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Section 3.4) acquired Beneficial Ownership of Capital Stock in violation of Section 3.4.1, such remedies (as applicable) shall apply first to the shares of Capital Stock which, but for such remedies, would have been actually owned by such Person, and second to shares of Capital Stock which, but for such remedies, would have been Beneficially Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such shares of Capital Stock based upon the relative number of the shares of Capital Stock held by each such Person.
3.4.8 Exceptions. The following exceptions shall apply or may be established with respect to the limitations of Section 3.4.1 of this Article IV.
(A) Waiver of Ownership Limit or Transfer Restriction. The Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the restrictions contained in Sections 3.4.1(A) through 3.4.1(I) (other than the Initial Holder Limits) and as the case may be, and may establish or increase an Excepted Holder Limit for such Person if the Board of Directors obtains such representations, covenants and undertakings as the Board of Directors may deem appropriate in order to conclude that granting the exemption and/or establishing or increasing the Excepted Holder Limit, as the case may be, will not cause the Corporation to lose its status as a REIT or Domestically Controlled Entity. Prior to granting any exception pursuant to this Section 3.4.8(A), the Board of Directors may require a ruling from the Internal Revenue Service or an opinion of counsel, if and to the extent it deems any such ruling or opinion necessary or advisable in order to determine or ensure that granting the exception will not cause the Corporation to lose its status as a REIT or Domestically Controlled Entity. The Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with granting such exception. Furthermore, subject to Sections 3.4.1(A) through 3.4.1(I), an underwriter, placement agent or initial purchaser that participates in a public offering, a private placement or other private offering of Capital Stock (or securities convertible into or exchangeable for Capital Stock) may Beneficially Own shares of Capital Stock (or securities convertible into or exchangeable for Capital Stock) in excess of the Aggregate Stock Ownership Limit, Common Stock Ownership Limit, the Look-Through Ownership Limits, or both such limits, but only to the extent necessary to facilitate such public offering, private placement or immediate resale of such Capital Stock, and provided that the restrictions contained in Section 3.4.1 will not be violated following the distribution by such underwriter, placement agent or initial purchaser of such shares of Capital Stock.
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(B) Change in Ownership Limit, Look-Through Ownership Limits and Excepted Holder Limits. The Board of Directors may from time to time increase or decrease the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit and/or Look-Through Ownership Limits; provided, however, that a decreased Aggregate Stock Ownership Limit, Common Stock Ownership Limit and/or Look-Through Ownership Limits will not be effective for any Person whose percentage ownership of Capital Stock at the time of such Board action is in excess of such decreased Aggregate Stock Ownership Limit, Common Stock Ownership Limit and/or Look-Through Ownership Limits until such time as such Persons percentage of Capital Stock equals or falls below the decreased Aggregate Stock Ownership Limit, Common Stock Ownership Limit and/or Look-Through Ownership Limits, but until such time as such Persons percentage of Capital Stock falls below such decreased Aggregate Stock Ownership Limit, Common Stock Ownership Limit, and/or Look-Through Ownership Limits, any further acquisition of Capital Stock will be in violation of the Aggregate Stock Ownership Limit, Common Stock Ownership Limit and/or Look-Through Ownership Limits and, provided further, that the new Aggregate Stock Ownership Limit, Common Stock Ownership Limit, and/or Look-Through Ownership Limits would not allow five or fewer individuals (taking into account all Excepted Holders) to Beneficially Own more than 49.9% in value of the outstanding Capital Stock. The Board of Directors may only reduce the Excepted Holder Limit for an Excepted Holder: (i) with the written consent of such Excepted Holder at any time, or (ii) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage that is less than the then-existing Aggregate Stock Ownership Limit, Common Stock Ownership Limit or Look-Through Ownership Limits, as applicable.
(C) Pledge by Initial Holder. Notwithstanding any other provision of this Article IV, the pledge by the Initial Holder of all or any portion of the Capital Stock directly owned at any time or from time to time shall not constitute a violation of Section 3.4.1 of this Article IV and the pledgee shall not be subject to the Aggregate Stock Ownership Limit with respect to the Capital Stock so pledged to it either as a result of the pledge or upon foreclosure.
(D) Underwriters. For a period of 270 days following the purchase of Capital Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Capital Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Capital Stock purchased by it as a part of or in connection with such offering and with respect to any Capital Stock purchased in connection with market making activities.
3.4.9 Legend. Each certificate for Capital Stock shall bear the following legend:
The shares of Capital Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Capital Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter. Any Person that attempts to Beneficially Own shares of Capital Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter, as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated, (i) the transfer of shares of Capital
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Stock represented hereby will be void in accordance with the Charter or (ii) the shares of Capital Stock represented hereby automatically be will transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries.
3.4.10 Severability. If any provision of this Article IV or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.
3.4.11 Board of Directors Discretion. Anything in this Article IV to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT or Domestically Controlled Entity, including, but not limited to, reducing the Aggregate Ownership Limit, the Common Stock Ownership Limit, the Initial Holder Limits and the Look-Through Ownership Limits in the event of a change in law.
3.4.12 Settlement. Nothing in this Section 3.4 of this Article IV shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system.
Section 4. Definitions. The terms set forth below shall have the meanings specified below when used in this Article IV or in Article V of the Charter.
4.1 Aggregate Stock Ownership Limit. The term Aggregate Stock Ownership Limit shall mean, for any Person other than the Initial Holder or a Look-Through Entity, 8.7% in value of the aggregate of the outstanding shares of Capital Stock, or such other percentage determined by the Board of Directors in accordance with Section 3.4.8. The value of the outstanding shares of Capital Stock shall be determined by the Board of Directors, which determination shall be final and conclusive for all purposes hereof. For the purposes of determining the percentage ownership of Capital Stock by any Person, shares of Capital Stock that may be acquired upon conversion, exchange or exercise of any securities of the Corporation directly or constructively held by such Person, but not shares of Capital Stock issuable with respect to the conversion, exchange or exercise of securities of the Corporation held by other Persons, shall be deemed to be outstanding prior to conversion, exchange or exercise.
4.2 Beneficial Ownership. The term Beneficial Ownership shall mean (i) ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned (x) through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code and (y) through the application of Section 318(a) of the Code (as modified by Section 856(d)(5) of the Code) and/or (ii) ownership of the number and value of shares of Capital Stock that such Person is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange Act; provided that when applying this definition of Beneficial Ownership to the Initial Holder, clause (ii) of this definition and clause (b) of the definition of Person shall be disregarded. The terms Beneficial Owner, Beneficially Owns and Beneficially Owned shall have the correlative meanings.
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4.3 Capital Stock. The term Capital Stock shall mean all classes or series of capital stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.
4.4 Charitable Beneficiary. The term Charitable Beneficiary shall mean one or more beneficiaries of the Trust as determined pursuant to Section 3.4.3 of this Article IV, each of which shall be an organization (i) described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code and (ii) to which contributions are eligible for deduction under each of Sections 170(b)(1) (A), 2055 and 2522 of the Code.
4.5 Code. The term Code shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time.
4.6 Common Stock. The term Common Stock shall mean all shares now or hereafter authorized of any class of Common Stock of the Corporation and any other Capital Stock of the Corporation, however designated, authorized after the Issue Date, that has the right (subject always to prior rights of any class of Preferred Stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount.
4.7 Common Stock Ownership Limit. The term Common Stock Ownership Limit shall mean, for any Person other than the Initial Holder or a Look-Through Entity, 8.7% (in value or in number, whichever is more restrictive) of the Outstanding shares of Common Stock of the Corporation, or such other percentage determined by the Board of Directors in accordance with Section 3.4.8. The number and value of the outstanding shares of Common Stock of the Corporation shall be determined by the Board of Directors, which determination shall be final and conclusive for all purposes hereof. For purposes of determining the percentage ownership of Common Stock by any Person, shares of Common Stock that may be acquired upon conversion, exchange or exercise of any securities of the Corporation directly or constructively held by such Person, but not shares of Common Stock issuable with respect to the conversion, exchange or exercise of securities of the Corporation held by other Persons, shall be deemed to be outstanding prior to conversion, exchange or exercise.
4.8 Excepted Holder. The term Excepted Holder shall mean a Person for whom an Excepted Holder Limit is created by these Articles of Incorporation or by the Board of Directors pursuant to Section 3.4.8(A).
4.9 Excepted Holder Limit. The term Excepted Holder Limit shall mean, provided that the affected Excepted Holder agrees to comply with the requirements established by these Articles of Incorporation or by the Board of Directors pursuant to Section 3.4.8(A) and subject to adjustment pursuant to Section 3.4.8(B), the percentage limit established for an Excepted Holder by these Articles of Incorporation or by the Board of Directors pursuant to Section 3.4.8(A).
4.10 Excess Transfer. The term Excess Transfer has the meaning set forth in Section 3.4.3(A) of this Article IV.
4.11 Exchange Act. The term Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
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4.12 Initial Holder. The term Initial Holder shall mean Terry Considine.
4.13 Initial Holder Limits. The term Initial Holder Limits shall mean 15% (in value or in number, whichever is more restrictive) of Outstanding shares of Common Stock applied, in the aggregate, to the Initial Holder and 15% (in value or in number, whichever is more restrictive) of Outstanding shares of Capital Stock. From the Spin-Off Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limits applicable to the Initial Holder.
4.14 Look-Through Entity. The term Look-Through Entity shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940.
4.15 Look-Through Ownership Limit. The term Look-Through Ownership Limits shall mean 15% (in value or in number, whichever is more restrictive) of Outstanding shares of Capital Stock and 15% (in value or in number, whichever is more restrictive) of Outstanding shares of Common Stock.
4.16 Market Price. The term Market Price on any date shall mean the Closing Price on the Trading Day immediately preceding such date. The term Closing Price on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Common Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. The term Trading Day shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
4.17 NYSE. The term NYSE shall mean the New York Stock Exchange, Inc.
4.18 Outstanding. The term Outstanding shall mean issued and outstanding shares of Capital Stock of the Corporation, provided that for purposes of the application of the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, the Look-Through Ownership Limits, the Initial Holder Limits or an Excepted Holder Limit to any Person, the term Outstanding shall be deemed to include the number of shares of Capital Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities.
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4.19 Ownership Restrictions. The term Ownership Restrictions shall mean collectively the Aggregate Stock Ownership Limit and the Common Stock Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limits as applied to the Initial Holder, the Look-Through Ownership Limits as applied to Look-Through Entities, and the Excepted Holder Limit as applied to Excepted Holders.
4.20 Person. The term Person shall mean (A) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (B) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and a group to which an Excepted Holder Limit applies.
4.21 Prohibited Transferee. The term Prohibited Transferee has the meaning set forth in Section 3.4.3(A) of this Article IV.
4.22 REIT. The term REIT shall mean a real estate investment trust as defined in Section 856 through 860 of the Code.
4.23 Spin-Off Date. The term Spin-Off Date shall mean December 15, 2020.
4.24 Transfer. The term Transfer shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Capital Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Capital Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Capital Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Capital Stock). The term Transfers and Transferred shall have correlative meanings.
4.25 TRS4.26 . The term TRS shall mean any taxable REIT subsidiary (as defined in Section 856(l) of the Code) of the Corporation.
4.27 Trust. The term Trust shall mean the trust created pursuant to Section 3.4.3 of this Article IV.
4.28 Trustee. The term Trustee shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust.
ARTICLE V
GENERAL REIT PROVISIONS
Section 1. Termination of REIT Status. The Board of Directors shall take no action to terminate the Corporations status as a REIT until such time as (i) the Board of Directors adopts a resolution recommending that the Corporation terminate its status as a REIT, (ii) the Board of Directors presents the resolution at an annual or special meeting of the shareholders and (iii) such resolution is approved by the vote of a majority of the shares entitled to be cast on the resolution.
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Section 2. Exchange or Market Transactions. Nothing in Article IV or this Article V shall preclude the settlement of any transaction entered into through the facilities of the NYSE or other national securities exchange or an automated inter-dealer quotation system. The fact that the settlement of any transaction is permitted shall not negate the effect of any other provision of this Article V or any provision of Article IV, and the transferee, including but not limited to any Prohibited Transferee, in such a transaction shall remain subject to all the provisions and limitations of Article IV and this Article V.
Section 3. Severability. If any provision of Article IV or this Article V or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.
Section 4. Waiver. The Corporation shall have authority at any time to waive the requirement that the Corporation redeem shares of Preferred Stock if, in the sole discretion of the Board of Directors, any such redemption would jeopardize the status of the Corporation as a REIT for federal income tax purposes.
ARTICLE VI
BOARD OF DIRECTORS
Section 1. Management. The business and the affairs of the Corporation shall managed under the direction of its Board of Directors.
Section 2. Number. The number of directors that will constitute the entire Board of Directors shall be fixed by, or in the manner provided in, the Bylaws but shall in no event be less than three. Any increases or decreases in the size of the board shall be apportioned equally among the classes of directors to prevent stacking in any one class of directors. Effective as of the Spin-Off Date, there are initially nine directors in office whose names are as follows: (I) Robert A. Miller, Kathleen M. Nelson and Michael A. Stein (Class I), (II) Thomas L. Keltner, John D. Rayis and Ann Sperling (Class II) and (III) Terry Considine, Devin I. Murphy and Nina A. Tran (Class III).
Section 3. Classified Board. The Board of Directors shall be classified initially into three classes: Class I; Class II; and Class III. Each class shall consist, as nearly as possible, of one-third of the total number of Directors constituting the entire Board of Directors and the allocation (including the initial allocation) of Directors among the three classes shall be determined by the Board of Directors. The initial Class I Directors shall serve for a term expiring at the 2021 annual meeting of stockholders, at which meeting they shall be elected to a term expiring at the 2022 annual meeting of stockholders, and the initial Class II and Class III Directors shall serve for a term expiring at the 2022 annual meeting of stockholders. Each Director in each class shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. If the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible. From and including the 2022 annual meeting of stockholders, the Board of Directors shall no longer be classified, and each Director shall be elected to serve a term expiring at the annual meeting of stockholders next following the Directors election. Notwithstanding the expiration of the term of a Director, the Director shall continue to hold office until a successor shall be elected and qualified or until his or her earlier death, resignation or removal.
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Section 4. Vacancies. Subject to the rights of the holders of any class or series of stock separately entitled to elect one or more directors, newly created directorships resulting from any increase in the number of directors shall be filled by the majority vote of the Board of Directors, and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board of Directors, or, if applicable, by a sole remaining director. A director elected by the Board of Directors to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy has occurred and until his or her successor is elected and qualifies.
Section 5. Removal. Except as otherwise provided in the Charter, any director may be removed from office only for cause and only by the affirmative vote of two-thirds of the aggregate number of votes then entitled to be cast generally in the election of directors. For purposes of this Section 5, cause shall mean the willful and continuous failure of a director to substantially perform the duties to the Corporation of such director (other than any such failure resulting from temporary incapacity due to physical or mental illness) or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation.
Section 6. Bylaws. The Board of Directors shall have power to adopt, amend, alter, change and repeal any Bylaws of the Corporation by vote of the majority of the Board of Directors then in office. Any adoption, amendment, alteration, change or repeal of any Bylaws by the shareholders of the Corporation shall require the affirmative vote of a majority of the aggregate number of votes then entitled to be cast generally in the election of directors. Notwithstanding anything in this Section 6 to the contrary, no amendment, alteration, change or repeal of any provision of the Bylaws by the shareholders of the Corporation relating to the removal of directors, the size of the Board of Directors or the filling of vacancies on the Board of Directors, or repeal of the Bylaws by the shareholders of the Corporation, shall be effected without the vote of two-thirds of the aggregate number of votes entitled be cast generally in the election of Directors.
Section 7. Powers. The enumeration and definition of particular powers of the Board of Directors included elsewhere in the Charter shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of the Charter, or construed as excluding or limiting, or deemed by inference or otherwise in any manner to exclude or limit, the powers conferred upon the Board of Directors under the Maryland General Corporation Law (MGCL) as now or hereafter in force.
ARTICLE VII
LIMITATION OF LIABILITY
No director or officer of the Corporation shall be liable to the Corporation or its shareholders for money damages to the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers. Neither the amendment nor repeal of this Article VII, nor the adoption or amendment of any other provision of the charter or Bylaws of the Corporation inconsistent with this Article VII, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption.
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ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by Maryland law, as applicable from time to time, all persons who at any time were or are directors or officers of the Corporation for any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) relating to any action alleged to have been taken or omitted in such capacity as a director or an officer. The Corporation shall pay or reimburse all reasonable expenses incurred by a present or former director or officer of the Corporation in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) in which the present or former director or officer is a party, in advance of the final disposition of the proceeding, to the fullest extent permitted by, and in accordance with the applicable requirements of, Maryland law, as applicable from time to time. The Corporation may indemnify any other persons permitted but not required to be indemnified by Maryland law, as applicable from time to time, if and to extent indemnification is authorized and determined to be appropriate, in each case in accordance with applicable law, by the Board of Directors, the majority of the shareholders of the Corporation entitled to vote thereon or special legal counsel appointed by the Board of Directors. No amendment of the Charter of the Corporation or repeal of any of its provisions shall limit or eliminate any of the benefits provided to directors and officers under this Article VIII in respect of any act or omission that occurred prior to such amendment or repeal.
ARTICLE IX
WRITTEN CONSENT OF SHAREHOLDERS
Any corporate action upon which a vote of shareholders is required or permitted may be taken without a meeting or vote of shareholders with the unanimous written consent of shareholders entitled to vote thereon.
ARTICLE X
AMENDMENT
The Corporation reserves the right to amend, alter or repeal any provision contained in this charter upon (i) adoption by the Board of Directors of a resolution recommending such amendment, alteration, or repeal, (ii) presentation by the Board of Directors to the shareholders of a resolution at an annual or special meeting of the shareholders and (iii) approval of such resolution by the affirmative vote of the holders of a majority (or, as applicable, a two-thirds vote) of the aggregate number of votes entitled to be case generally in the election of directors. All rights conferred upon shareholders herein are subject to this reservation.
ARTICLE XI
EXISTENCE
The Corporation is to have a perpetual existence.
* * * * * *
THIRD: The Board of Directors of the Corporation at a meeting or by a unanimous consent in writing in lieu of a meeting under § 2-408 of the Maryland General Corporation Law, and the sole stockholder of the Corporation by a unanimous consent in writing in lieu of a meeting under § 2-505 of
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the Maryland General Corporation Law, each adopted a resolution that set forth and approved the foregoing amendment and restatement of the Charter.
FOURTH: The foregoing amendment and restatement of the Charter of the Corporation does not increase the authorized Capital Stock of the Corporation. The foregoing amendment and restatement of the Charter of the Corporation (a) increases the number of shares of Capital Stock classified as Preferred Stock from no shares before this amendment and restatement to 1,000,000 shares after this amendment and restatement and (b) decreases the number of shares of Capital Stock classified as Common Stock from 1,022,175,000 shares before this amendment and restatement to 1,021,175,000 shares after this amendment and restatement.
FIFTH: The current address of the principal office of the Corporation is 4582 South Ulster Street, Suite 1700, Denver, Colorado 80237. The current address of the principal office of the Corporation in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202.
SIXTH: The name and address of the Corporations resident agent in the State of Maryland is CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202.
SEVENTH: These Articles of Amendment and Restatement shall become effective at 11:55 p.m., Eastern Time, on December 14, 2020.
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IN WITNESS WHEREOF, Apartment Income REIT Corp. has caused these presents to be signed in its name and on its behalf by its Executive Vice President, Chief Financial Officer and witnessed by its Executive Vice President, General Counsel and Secretary on December 14, 2020.
WITNESS: | APARTMENT INCOME REIT CORP. | |||||
/s/ Lisa R. Cohn |
By: | /s/ Paul Beldin | ||||
Lisa R. Cohn | Paul Beldin | |||||
Executive Vice President, General Counsel and Secretary | Executive Vice President, Chief Financial Officer |
THE UNDERSIGNED, Executive Vice President and Chief Financial Officer of Apartment Income REIT Corp., who executed on behalf of the Corporation the foregoing Articles of Amendment and Restatement of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Amendment and Restatement to be the corporate act of said Corporation and hereby certifies that to the best of his knowledge, information, and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury.
/s/ Paul Beldin |
Paul Beldin |
Executive Vice President, Chief Financial Officer |
[Signature Page to Articles of Amendment and Restatement for Apartment Income REIT Corp.]
Exhibit 3.2
APARTMENT INCOME REIT CORP.
ARTICLES SUPPLEMENTARY
Class A Preferred Stock
(Par Value $0.01 Per Share)
Apartment Income REIT Corp., a Maryland corporation (hereinafter called the Corporation) hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1 of Article IV of the charter of the Corporation, as amended to date (the Charter), the Board of Directors has duly adopted resolutions classifying and designating twenty (20) shares of the authorized but unissued preferred stock of the Corporation, par value $0.01 per share (Preferred Stock), as a separate class of Preferred Stock to be known as the Class A Preferred Stock and authorizing the issuance of shares of such Class A Preferred Stock.
SECOND: The classification increases the number of shares of preferred stock classified as Class A Preferred Stock, from no shares immediately prior to the classification to twenty (20) shares immediately after the classification. The number of shares of Preferred Stock classified as Class A Preferred Stock may be decreased upon redemption or reacquisition thereof in any manner, or by retirement thereof, by the Corporation.
THIRD: The terms of the Class A Preferred Stock (including the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows:
1. | Number of Shares and Designation. |
This class of Preferred Stock shall be designated as Class A Preferred Stock (the Class A Preferred Stock) and twenty (20) shall be the authorized number of shares of Class A Preferred Stock constituting such class.
2. | Definitions. |
For purposes of the Class A Preferred Stock, the following terms shall have the meanings indicated:
Affiliate of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. For purposes of this definition, control, as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
Annual Dividend Rate shall have the meaning set forth in Section 3 of this Article.
Board of Directors shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class A Preferred Stock.
Business Day shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.
Change of Control shall mean the occurrence of one or more of the following events: (a) any sale, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation and its subsidiaries, taken as a whole, to any person or group (as such terms are defined in Sections 13(d) and 14(d)(2) of the Exchange Act), (other than to the Corporation or its subsidiaries); (b) a person or group (as such terms are defined in Sections 13(d) and 14(d)(2) of the Exchange Act), becomes the ultimate beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of more than 50% of the total voting power of the Voting Stock of the Corporation on a fully diluted basis; or (c) a change of control or similar event occurs under the terms of any other series of capital stock of the Corporation.
Notwithstanding the foregoing: (i) any holding company, all or substantially all of the assets of which are comprised of the Corporation or any 100% direct or indirect parent company of the Corporation, shall not itself be considered a person or group; (ii) the transfer of assets between or among the Corporations subsidiaries and the Corporation shall not itself constitute a Change of Control; (iii) the term Change of Control shall not include a merger or consolidation of the Corporation with or the sale, assignment, conveyance, transfer or other disposition of all or substantially all of the Corporations assets to, an Affiliate incorporated or organized solely for the purpose of reincorporating or reorganizing the Corporation in another jurisdiction and/or into another type or form or entity and/or for the sole purpose of forming or collapsing a holding company structure; (iv) a person or group shall not be deemed to have beneficial ownership of securities subject to a stock or asset purchase agreement, merger agreement or similar agreement (or voting or option or similar agreement related thereto) until the consummation of the transactions contemplated by such agreement; and (v) the Spin-Off and any transactions related thereto, including any and all restructuring steps undertaken in connection therewith, shall not constitute a Change of Control.
Class A Preferred Stock shall have the meaning set forth in Section 1 of this Article.
Code shall mean the Internal Revenue Code of 1986, as amended, or any successor statute thereto.
Common Stock shall mean the Class A Common Stock, par value $.01 per share, of the Corporation, and such other shares of the Corporations capital stock into which outstanding shares of Common Stock shall be reclassified.
Dividend Payment Date shall mean February 28, May 29, August 29, and November 29 of each year; provided, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such date to such Dividend Payment Date.
Dividend Periods shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including February 28, May 29, August 29, and November 29 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class A Preferred Stock shall be redeemed pursuant to Section 6 of this Article, which shall end on and include the Redemption Date with respect to the Class A Preferred Stock being redeemed.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Initial Dividend Period shall mean the period commencing on and including the Issue Date and ending on and including February 28, 2021.
Issue Date shall mean December 15, 2020.
Junior Stock shall have the meaning set forth in Section 5(c) of this Article.
Liquidation Preference shall mean one-hundred thousand dollars ($100,000) per share of Class A Preferred Stock.
Parity Stock shall have the meaning set forth in Section 5(b) of this Article.
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Person shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Record Date shall have the meaning set forth in Section 3(a) of this Article.
Redemption Date shall mean, in the case of any redemption of any shares of Class A Preferred Stock, the date fixed for redemption of such shares.
Redemption Price shall mean, with respect to any share of Class A Preferred Stock to be redeemed, 100% of the Liquidation Preference thereof, plus (except as provided in Section 6(c) of this Article) all accumulated, accrued and unpaid dividends thereon, if any, to, but excluding, the Redemption Date.
REIT shall mean a real estate investment trust, as defined in Section 856 of the Code.
Senior Stock shall have the meaning set forth in Section 5(a) of this Article.
set apart for payment shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then set apart for payment with respect to the Class A Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.
Spin-Off shall mean the distribution by Apartment Investment and Management Company to the holders of Apartment Investment and Management Companys common stock on a pro rata basis of substantially all of the outstanding shares of the Corporations common stock.
Transfer Agent means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class A Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class A Preferred Stock.
Voting Stock shall mean capital stock of any class or kind ordinarily having the power to vote for the election of directors of the Corporation.
3. | Dividends. |
(a) The holders of Class A Preferred Stock shall be entitled to receive, if, when and as authorized and declared by the Board of Directors, out of funds legally available for that purpose, cash dividends on the Class A Preferred Stock in an amount per share equal to $8,500 per annum (the Annual Dividend Rate) (equivalent to a rate of 8.5% per annum of the Liquidation Preference), and no more; provided that the Annual Dividend Rate shall increase to (1) $9,000 per annum (equivalent to a rate of 9.0% per annum of the Liquidation Preference) beginning at the start of the 5th year after the date hereof, (2) $9,500 per annum (equivalent to a rate of 9.5% per annum of the Liquidation Preference) beginning at the start of the 6th year after the date hereof , (3) $10,000 per annum (equivalent to a rate of 10.0% per annum of the Liquidation Preference) beginning at the start of the 7th year after the date hereof, and (4) beginning at the start of the 7th year after the date hereof, and continuing at the start of each year after the date hereof thereafter through the start of the 27th year after the date hereof, an amount equal to the per annum amount in the prior year plus $250 (equivalent to an annual increase of 25 bps) (e.g., at the start of the 8th year after the date hereof the Annual Dividend Rate shall equal $10,250 per annum (equivalent to a rate of 10.25% per annum of the Liquidation Preference, and at the start of the 27th year after the date hereof, the Annual Dividend Rate shall equal $15,000 (equivalent to a rate of 15% per annum of the Liquidation Preference) (and, for the avoidance of doubt, the Annual Dividend Rate shall remain $15,000 per annum thereafter))). Such
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dividends (i) shall accrue and be cumulative from and including the Issue Date, whether or not in any Dividend Period or Periods (x) the Corporation has earnings, (y) such dividends shall be authorized and declared or (z) there shall be funds of the Corporation legally available for the payment of such dividends, and (ii) shall be payable in cash quarterly, if, when and as authorized and declared by the Board of Directors, in arrears on each Dividend Payment Date, commencing on February 28, 2021. Each such dividend shall be payable in arrears to the holders of record of the Class A Preferred Stock, as they appear on the stock records of the Corporation at the close of business on February 15, May 15, August 15 or November 15 (each a Record Date), as the case may be, immediately preceding such Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors.
(b) The amount of dividends payable per share of Class A Preferred Stock for each full Dividend Period shall be computed by dividing the Annual Dividend Rate by four (4). The amount of dividends payable per share of Class A Preferred Stock for the Initial Dividend Period, or any period shorter than a full Dividend Period, shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Class A Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Class A Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class A Preferred Stock that may be in arrears.
(c) So long as any of the shares of Class A Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be authorized and declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be authorized and declared or made, directly or indirectly, by the Corporation with respect to any class or series of Parity Stock for any period unless dividends equal to the full amount of accumulated, accrued and unpaid dividends have been or contemporaneously are authorized and declared and paid, or authorized and declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, on the Class A Preferred Stock for all Dividend Periods terminating on or prior to the date such dividend or distribution is authorized and declared, paid, set apart for payment or made, as the case may be, with respect to such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends authorized and declared upon the Class A Preferred Stock and all dividends authorized and declared upon any other class or series of Parity Stock shall be authorized and declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class A Preferred Stock and accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class A Preferred Stock are outstanding, no dividends (other than dividends or distributions paid solely in shares of Junior Stock, or options, warrants or rights to subscribe for or purchase shares of Junior Stock) shall be authorized and declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be authorized and declared or made, directly or indirectly, by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary or as permitted under Article IV of the Charter) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock) directly or indirectly by the Corporation (except by conversion into or exchange for shares of Junior Stock, or options, warrants or rights to subscribe for or purchase shares of Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless, in each case, dividends equal to the full amount of all accumulated, accrued and unpaid dividends on all outstanding shares of Class A Preferred Stock and any other Parity Stock shall have been authorized and declared and paid, or such dividends have been authorized and declared and a sum sufficient for the payment thereof has been set apart for such payment, on all outstanding shares of Class A Preferred Stock and any other Parity Stock for all past Dividend Periods with respect to the Class A Preferred Stock and all past dividend periods with respect to such Parity Stock ending on or prior to the date such dividend or distribution is authorized and declared, paid, set apart for payment or made with respect to such shares of Junior Stock, or the date such shares of Junior Stock are redeemed, purchased or otherwise acquired or monies paid to or made available for any sinking fund for such redemption, or the date any
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such cash or other property is paid or distributed to or for the benefit of any holders of Junior Stock in respect thereof, as the case may be.
Notwithstanding the provisions of this Section 3, the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (ii) redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Corporation as a REIT under Section 856 of the Code.
4. | Liquidation Preference. |
(a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by the Corporation (whether of capital, surplus or otherwise) shall be made to or set apart for the holders of any shares of Junior Stock, the holders of shares of Class A Preferred Stock shall be entitled to receive, for each share of Class A Preferred Stock, the Liquidation Preference thereof, plus all accumulated, accrued and unpaid dividends thereon, if any, to, but excluding, the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class A Preferred Stock have been paid the Liquidation Preference in full, plus all accumulated, accrued and unpaid dividends thereon, if any, to, but excluding, the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, legally available for distribution among the holders of Class A Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class A Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class A 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 entities, (ii) a sale or transfer of all or substantially all of the Corporations assets, and (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation.
(b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class A Preferred Stock and any Parity Stock, as provided in Section 4(a), any series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class A Preferred Stock and any Parity Stock shall not be entitled to share therein.
(c) In determining whether a distribution (other than upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation) by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise is permitted under the Maryland General Corporation Law, no effect shall be given to amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of shares of stock of the Corporation whose preferential rights upon dissolution are superior or prior to those receiving the distribution.
5. | Ranking. |
Any class or series of capital stock of the Corporation shall be deemed to rank:
(a) prior or senior to the Class A Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class A Preferred Stock (the capital stock referred to in this paragraph being hereinafter referred to, collectively, as Senior Stock);
(b) on a parity with the Class A 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
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payment dates or redemption or liquidation prices per share thereof be different from those of the Class A Preferred Stock, if the holders of such class of stock or series and the Class A 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 accumulated, accrued and unpaid dividends per share or liquidation preferences, without preference or priority of one over the other (the capital stock referred to in this paragraph being hereinafter referred to, collectively, as Parity Stock); and
(c) junior to the Class A Preferred Stock, as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such capital stock or series shall be Common Stock or (ii) the holders of Class A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series, and such class or series shall not, in either case, rank prior to the Class A Preferred Stock (the capital stock referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Stock).
6. | Redemption. |
(a) Optional Redemption. The Corporation may, at its option, redeem shares of Class A Preferred Stock at any time on or after the fifth anniversary of the Issue Date (but not prior to such date), in whole, or from time to time in part, at a redemption price payable in cash equal to the Redemption Price applicable thereto.
(b) Mandatory Redemption. Substantially concurrently with the occurrence of a Change of Control, the Corporation shall redeem all outstanding shares of Class A Preferred Stock at a redemption price payable in cash equal to the Redemption Price.
(c) Anything herein to the contrary notwithstanding, and except as otherwise required by law, the Persons who are holders of record of shares of Class A Preferred Stock at the close of business on a Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the redemption of those shares after such Record Date and on or prior to such Dividend Payment Date or the default by the Corporation in the payment of the dividend due on that Dividend Payment Date, in which case the Redemption Price payable upon redemption of such shares of Class A Preferred Stock will not include such dividend, and the full amount of the dividend payable for the applicable Dividend Period shall instead be paid on such Dividend Payment Date to the holders of record at the close of business on such Record Date as aforesaid.
(d) The Redemption Date shall be selected by the Corporation, and shall be specified in a notice of redemption which will be given not less than three (3) days nor more than sixty (60) days prior to the Redemption Date, to the holders of record of the Class A Preferred Stock to be redeemed at their addresses as they appear on the stock records of the Corporation. No failure to give such notice or any defect therein or in the giving thereof shall affect the validity of the proceedings for the redemption of any shares of Class A Preferred Stock except as to, and to the extent adversely affecting, any such holder to whom notice was defective or not given. Any notice given in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed or otherwise sent or given whether or not the holder receives the notice. Each notice shall state: (i) the Redemption Date; (ii) the number of shares of Class A Preferred Stock to be redeemed; (iii) the Redemption Price and whether or not accumulated, accrued and unpaid dividends will be payable as part of the Redemption Price, or payable on the next Dividend Payment Date to the Persons who were holders of record at the close of business on the relevant Record Date; (iv) the procedures that the holders of Class A Preferred Stock must follow to receive payment of the Redemption Price; (v) that dividends on the shares to be redeemed will cease to accumulate on such Redemption Date unless the Corporation fails to make available the funds necessary for such redemption; and (vi) whether such redemption is being made pursuant to Section 6(a) or Section 6(b). If fewer than all of the shares of Class A Preferred Stock held by any holder are to be redeemed, the notice given to such holder shall also specify the number of shares of Class A Preferred Stock to be redeemed from such holder.
(e) If notice of redemption of any shares of Class A Preferred Stock has been given (unless the Corporation fails to make available the funds necessary for such redemption), then from and after the Redemption Date, dividends will cease to accumulate on such shares of Class A Preferred Stock, such shares of Class A Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will
6
terminate, except the right to receive the Redemption Price payable upon redemption (and any dividend payable pursuant to Section 6(c)). The Corporations obligation to make available the funds necessary to effect a redemption in accordance with the preceding sentence shall be deemed fulfilled if, on or before the applicable Redemption Date, the Corporation shall irrevocably deposit in trust with a bank or trust company (which may not be an Affiliate of the Corporation) that has, or is an Affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption plus, if such Redemption Date occurs after any Record Date and on or prior to the related Dividend Payment Date, such amount of cash as is necessary to pay the dividend payable on such Dividend Payment Date in respect of such shares of Class A Preferred Stock called for redemption, with irrevocable instructions that such cash be applied to the redemption of the shares of Class A Preferred Stock so called for redemption and, if applicable, the payment of such dividend. No interest shall accrue for the benefit of the holders of shares of Class A Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class A Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. In the event that any Redemption Date shall not be a Business Day, then payment of the Redemption Price payable upon redemption need not be made on such Redemption Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Redemption Date and no interest, additional dividends or other sums shall accrue on the amount so payable for the period from and after such Redemption Date to such next succeeding Business Day. Solely in respect of any optional redemption pursuant to clause (a) above, if less than all of the outstanding shares of Class A Preferred Stock are to be redeemed, the shares of Class A Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by lot.
(f) Upon delivery of any shares of Class A Preferred Stock to be so redeemed, in accordance with the notice of redemption and the procedures of the depositary, such shares of Class A Preferred Stock shall be redeemed by the Corporation at the Redemption Price.
(g) Unless full cumulative dividends for all past Dividend Periods on all outstanding shares of Class A Preferred Stock and for all past dividend periods on any other series or class of Parity Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment, (i) no shares of Class A Preferred Stock or any Parity Stock shall be redeemed unless all outstanding shares of Class A Preferred Stock are simultaneously redeemed, and (ii) the Corporation shall not purchase or otherwise acquire, directly or indirectly, any shares of Class A Preferred Stock or any Parity Stock (except by conversion into or exchange for Junior Stock); provided, however, that the foregoing shall not prevent the purchase or acquisition by the Corporation of shares of Class A Preferred Stock or any Parity Stock pursuant to Section 10 of this Article in order to preserve the qualification of the Corporation as a REIT for federal and/or state income tax purposes or pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding shares of Class A Preferred Stock. Subject to the limitations set forth in the Charter (including these terms of the Class A Preferred Stock), the Corporation shall be entitled at any time and from time to time to repurchase shares of Class A Preferred Stock in open-market transactions, by tender or by private agreement, in each case, as duly authorized by the Board of Directors and effected in compliance with applicable laws.
7. | Status of Reacquired Stock. |
All shares of Class A Preferred Stock that have been issued and reacquired or redeemed in any manner by the Corporation shall be returned to the status of authorized but unissued shares of Class A Preferred Stock.
8. | Voting. |
(a) Holders of the Class A Preferred Stock shall not have any voting rights either general or special, except as set forth in Section 8(b) below.
(b) So long as any shares of Class A Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the affirmative vote of at least 66-2/3% of the votes entitled to be cast by the holders of the Class A Preferred Stock voting as a single class, given in person or by
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proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) any amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, the Charter, including these Articles Supplementary, whether by merger, consolidation or otherwise, that would materially and adversely affect the rights or preferences of the holders of the Class A Preferred Stock; provided, however, that (x) the amendment of the provisions of the Charter so as to authorize or create, or to increase or decrease the authorized amount of, or issue any Junior Stock, Class A Preferred Stock or any shares of any class of Parity Stock, shall not be deemed to materially and adversely affect the rights or preferences of the holders of Class A Preferred Stock; and (y) with respect to any such amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, the Charter, including these Articles Supplementary, whether by merger, consolidation or otherwise, so long as the Class A Preferred Stock remains outstanding with the terms thereof materially unchanged, taking into account that, upon the occurrence of such event, the Corporation may not be the surviving entity and such surviving entity may thereafter be the issuer of the Class A Preferred Stock, the occurrence of any such event shall not be deemed to materially and adversely affect the voting powers, rights, or preferences of the Class A Preferred Stock; or
(ii) the authorization, creation of, increase in the authorized amount of, or issuance of any shares of any class or series of Senior Stock or any security convertible into shares of any class or series of Senior Stock (whether or not such class or series of Senior Stock is currently authorized);
provided, however, that no such vote of the holders of Class A Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such Senior Stock or convertible or exchangeable security is to be made, as the case may be, provision is made for the redemption of all shares of Class A Preferred Stock at the time outstanding.
For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class A Preferred Stock shall have one (1) vote per share. Except as otherwise required by applicable law or as set forth herein or in the Charter, the Class A Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action.
9. | Record Holders. |
The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class A Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary.
10. | Restrictions on Ownership and Transfers. |
The Class A Preferred Stock constitutes Preferred Stock, and Preferred Stock constitutes capital stock of the Corporation. Therefore, the Class A Preferred Stock, being capital stock, is governed by and issued subject to all the limitations, terms and conditions of the Charter applicable to capital stock generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Article IV of the Charter applicable to capital stock. The foregoing sentence shall not be construed to limit the applicability to the Class A Preferred Stock of any other term or provision of the Charter.
11. | Maturity. |
The Class A Preferred Stock shall be perpetual unless redeemed or reacquired by the Corporation in accordance with the Sections in this Article.
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12. | Conversion. |
The shares of Class A Preferred Stock are not convertible into or exchangeable for any other property or securities of the Corporation.
13. | Certificates. |
The shares of Class A Preferred Stock shall be uncertificated, subject to the requirements of the MGCL.
FOURTH: The terms of the Class A Preferred Stock set forth in Article Third hereof shall become a part of Article IV of the Charter.
FIFTH: The Class A Preferred Stock has been classified and designated by the Board of Directors under the authority contained in the Charter.
SIXTH: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.
SEVENTH: These Articles Supplementary shall become effective at 11:56 p.m., Eastern Time, on December 14, 2020.
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IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Executive Vice President, Chief Financial Officer and witnessed by its Secretary on December 14, 2020.
WITNESS: |
APARTMENT INCOME REIT CORP. | |
/s/ Lisa R. Cohn Name: Lisa R. Cohn Title: Secretary |
/s/ Paul Beldin Name: Paul Beldin Title: Executive Vice President, Chief Financial Officer |
THE UNDERSIGNED, Executive Vice President and Chief Financial Officer of Apartment Income REIT Corp., who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and, as to all matters or facts required to be verified under oath, the undersigned Executive Vice President and Chief Financial Officer, acknowledges that, to the best of his knowledge, information and belief, those matters and facts are true in all material respects and that this statement is made under penalties of perjury.
/s/ Paul Beldin Name: Paul Beldin Title: Executive Vice President, Chief Financial Officer |
[Signature Page to Articles Supplementary]
Exhibit 3.3
ARTICLES SUPPLEMENTARY
APARTMENT INCOME REIT CORP.
APARTMENT INCOME REIT CORP., a Maryland corporation (the Corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 3-802(c) of the Maryland General Corporation Law (the MGCL), the Board of Directors of the Corporation (the Board), by resolution duly adopted, prohibited the Corporation from electing to be subject to the provisions of Section 3-803, Section 3-804(a)-(c) and Section 3-805 of the MGCL, unless a proposal to repeal such resolution, in whole or in part, is first approved by the stockholders of the Corporation by the affirmative vote of at least a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors.
SECOND: The foregoing election is made by resolution of the Board of the Corporation, and stockholder approval is not required for the filing of these Articles Supplementary.
THIRD: These Articles Supplementary shall become effective at 11:56 p.m., Eastern Time, on December 14, 2020.
FOURTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation, and as to all matters or facts required to be verified under oath, the undersigned President of the Corporation acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by its Executive Vice President, Chief Executive Officer and attested to by its Executive Vice President, General Counsel on this 14 day of December, 2020.
APARTMENT INCOME REIT CORP. | ||
By: | /s/ Paul L. Beldin | |
Paul L. Beldin | ||
Executive Vice President, Chief Financial Officer |
Attest: December 14, 2020 |
/s/ Lisa R. Cohn |
Lisa R. Cohn |
Executive Vice President, General Counsel and Secretary |
[Signature Page to Articles Supplementary for Apartment Income REIT Corp.]
Exhibit 3.4
AMENDED AND RESTATED BY-LAWS
OF
APARTMENT INCOME REIT CORP.
TABLE OF CONTENTS
Page | ||||||
ARTICLE I | ||||||
STOCKHOLDERS | ||||||
SECTION 1.01. |
Annual Meeting | 5 | ||||
SECTION 1.02. |
Special Meeting | 5 | ||||
SECTION 1.03. |
Place of Meetings | 5 | ||||
SECTION 1.04. |
Meetings by Remote Communication | 5 | ||||
SECTION 1.05. |
Notice of Meetings; Waiver of Notice | 6 | ||||
SECTION 1.06. |
Quorum; Voting | 6 | ||||
SECTION 1.07. |
Adjournments | 7 | ||||
SECTION 1.08. |
General Right to Vote; Proxies | 7 | ||||
SECTION 1.09. |
List of Stockholders | 7 | ||||
SECTION 1.10. |
Conduct of Voting | 7 | ||||
SECTION 1.11. |
Advance Notice Provisions for Election of Directors | 8 | ||||
SECTION 1.12. |
Advance Notice Provisions for Business to be Transacted at a Meeting | 10 | ||||
SECTION 1.13. |
Proxy Access | 11 | ||||
SECTION 1.14. |
Nominee Representation and Agreement | 18 | ||||
ARTICLE II | ||||||
BOARD OF DIRECTORS | ||||||
SECTION 2.01. |
Function of Directors | 19 | ||||
SECTION 2.02. |
Qualification and Number of Directors | 19 | ||||
SECTION 2.03. |
Election and Tenure of Directors; Resignations | 19 | ||||
SECTION 2.04. |
Removal of Director | 20 | ||||
SECTION 2.05. |
Vacancy on Board of Directors | 20 | ||||
SECTION 2.06. |
Regular Meetings | 20 | ||||
SECTION 2.07. |
Special Meetings | 21 | ||||
SECTION 2.08. |
Notice of Meeting | 21 | ||||
SECTION 2.09. |
Quorum; Action by Director | 21 | ||||
SECTION 2.10. |
Meeting by Conference Telephone | 21 | ||||
SECTION 2.11. |
Compensation | 22 | ||||
SECTION 2.12. |
Presumption of Assent | 22 | ||||
ARTICLE III | ||||||
COMMITTEES | ||||||
SECTION 3.01. |
Committees | 22 | ||||
SECTION 3.02. |
Committee Procedure | 22 |
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ARTICLE IV | ||||||
OFFICERS | ||||||
SECTION 4.01. |
Executive and Other Officers | 23 | ||||
SECTION 4.02. |
Chairman of the Board | 23 | ||||
SECTION 4.03. |
Vice Chairman of the Board | 23 | ||||
SECTION 4.04. |
President | 23 | ||||
SECTION 4.05. |
Vice-Presidents | 24 | ||||
SECTION 4.06. |
Secretary | 24 | ||||
SECTION 4.07. |
Treasurer | 24 | ||||
SECTION 4.08. |
Assistant and Subordinate Officers | 24 | ||||
SECTION 4.09. |
Election, Tenure and Removal of Officers | 24 | ||||
SECTION 4.10. |
Compensation | 25 | ||||
ARTICLE V | ||||||
DIVISIONAL TITLES | ||||||
SECTION 5.01. |
Conferring Divisional Titles | 25 | ||||
SECTION 5.02. |
Effect of Divisional Titles | 25 | ||||
ARTICLE VI | ||||||
STOCK | ||||||
SECTION 6.01. |
Certificates for Stock | 25 | ||||
SECTION 6.02. |
Transfers | 26 | ||||
SECTION 6.03. |
Record Dates or Closing of Transfer Books | 26 | ||||
SECTION 6.04. |
Stock Ledger | 26 | ||||
SECTION 6.05. |
Certification of Beneficial Owners | 26 | ||||
SECTION 6.06. |
Lost Stock Certificates | 27 | ||||
SECTION 6.07. |
Fractional Share Interests or Scrip | 27 | ||||
ARTICLE VII | ||||||
FINANCE | ||||||
SECTION 7.01. |
Checks, Drafts, Etc. | 27 | ||||
SECTION 7.02. |
Annual Statement of Affairs | 28 | ||||
SECTION 7.03. |
Fiscal Year | 28 | ||||
SECTION 7.04. |
Dividends | 28 | ||||
SECTION 7.05. |
Bond | 28 |
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ARTICLE VIII | ||||||
INDEMNIFICATION | ||||||
SECTION 8.01. |
Procedure | 28 | ||||
SECTION 8.02. |
Exclusivity, Etc. | 28 | ||||
SECTION 8.03. |
Insurance | 29 | ||||
SECTION 8.04. |
Severability; Definitions | 29 | ||||
ARTICLE IX | ||||||
SUNDRY PROVISIONS | ||||||
SECTION 9.01. |
Books and Records | 29 | ||||
SECTION 9.02. |
Corporate Seal | 29 | ||||
SECTION 9.03. |
Voting Stock in Other Corporations | 30 | ||||
SECTION 9.04. |
30 | |||||
SECTION 9.05. |
Contracts and Agreements | 30 | ||||
SECTION 9.06. |
Resident Agent; Principal Office | 30 | ||||
SECTION 9.07. |
Amendments | 30 | ||||
SECTION 9.08. |
Reliance | 30 | ||||
SECTION 9.09. |
Elections Regarding Unsolicited Takeover Statute | 31 |
4
AMENDED AND RESTATED BY-LAWS
OF
APARTMENT INCOME REIT CORP.
ARTICLE I
STOCKHOLDERS
SECTION 1.01. Annual Meeting. The Corporation shall hold an annual meeting of its stockholders to elect directors and transact any other business within its powers during each calendar year, at a time and date as shall be set by the Board of Directors. Except as the Charter, these By-Laws or statute provides otherwise, any business may be considered at an annual meeting without the purpose of the meeting having been specified in the notice. Failure to hold an annual meeting does not invalidate the Corporations existence or affect any otherwise valid corporate acts.
SECTION 1.02. Special Meeting. At any time in the interval between annual meetings, a special meeting of the stockholders may be called by the Chairman of the Board, the Vice Chairman of the Board or the President or by a majority of the Board of Directors by vote at a meeting or in writing (addressed to the Secretary of the Corporation) with or without a meeting. Special meetings of the stockholders shall be called by the Secretary at the request of stockholders only on the written request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting. A request for a special meeting shall state the purpose of the meeting and the matters proposed to be acted on at it. The Secretary shall inform the stockholders who make the. request of the reasonably estimated costs of preparing and mailing a notice of the meeting and, on payment of these costs to the Corporation, notify each stockholder entitled to notice of the meeting. The Board of Directors shall have sole power to fix the date and time of the special meeting. Unless requested by stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of stockholders held in the preceding 12 months.
SECTION 1.03. Place of Meetings. Unless the Charter provides otherwise, meetings of stockholders shall be held at such place-as is set from time to time by the Board of Directors or the Board of Directors may determine that the meeting not be held at any place but instead be held by means of remote communication. At the request of a stockholder, the Board of Directors shall provide a place for the meeting or the stockholders.
SECTION 1.04. Meetings by Remote Communication. At the discretion of the Board of Directors and subject to any guidelines and procedures that the Board of Directors may adopt from time to time, stockholders and proxy holders not physically present at a meeting of the stockholders, by means of remote communication may participate in the meeting of the stockholders and may be considered present in person and may vote at the meeting of the stockholders, whether the meeting is held at a designated place or solely by means of remote communication. The Corporation shall implement reasonable measures to verify that each person
5
considered present and authorized to vote at the meeting by means of remote communication is a stockholder or proxy holder, the Corporation shall implement reasonable measures to provide the stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with the proceedings and in the event any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of the vote or other action shall be maintained by the Corporation.
SECTION 1.05. Notice of Meetings; Waiver of Notice. Not less than ten nor more than 90 days before each stockholders meeting, the Secretary shall give notice in writing or by electronic transmission of the meeting to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting. Any notice given by the Corporation to a stockholder is effective if given by a single notice, in writing or by electronic transmission, to all stockholders who share an address if the Corporation gives notice, in writing or by electronic transmission, to the stockholder of its intent to give a single notice and the stockholder consents to receiving a single notice or fails to object in writing within 60 days after the Corporation gives notice to the stockholder of its intent to give a single notice. A stockholder may revoke consent given, whether affirmative or implied, by written notice to the Corporation. The notice shall state the time of the meeting, the place of the meeting, if any, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and may vote at the meeting and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to the stockholder, left at the stockholders residence or usual place of business, mailed to the stockholder at the stockholders address as it appears on the records of the Corporation or transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. If the Corporation has received a request from a stockholder that notice not be sent by electronic transmission, the Corporation may not provide notice to the stockholder by electronic transmission. Notice given by electronic transmission shall be considered ineffective if the Corporation is unable to deliver two consecutive notices and the inability to deliver the notices becomes known to the Secretary, an Assistant Secretary, the transfer agent or other person responsible for giving the notice. The inadvertent failure to deliver any notice by electronic transmission does not invalidate any meeting or other action. An affidavit of the Secretary, an Assistant Secretary, the transfer agent or other agent of the Corporation that notice has been given by a form of electronic transmission, in the absence of actual fraud, shall be prima facie evidence of the facts stated in the affidavit. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if the person before or after the meeting delivers a written waiver or a waiver by electronic transmission which is filed with the records of stockholders meetings, or is present at the meeting in person or by proxy.
SECTION 1.06. Quorum; Voting. Unless any statute or the Charter provides otherwise, at a meeting of stockholders the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting constitutes a quorum, and a majority of all the votes cast at a meeting at which a quorum is present is sufficient to approve any matter which properly comes before the meeting, except that a plurality of all the votes cast at a meeting at which a quorum is present is sufficient to elect a director.
6
SECTION 1.07. Adjournments. Whether or not a quorum is present, a meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice by chairman of the meeting to date not more than 120 days after the. original record date. Any business which might have been transacted at the meeting as originally notified may be deferred and transacted at any such adjourned meeting at which a quorum shall be present.
SECTION 1.08. General Right to Vote; Proxies. Unless the Charter provides for a greater or lesser number of votes per share or limits or denies voting rights, each outstanding share of stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders; however, a share is not entitled to be voted if any installment payable on it is overdue and unpaid. In all elections for directors, each share of stock may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A stockholder may vote the stock the stockholder owns of record either in person or by proxy. A stockholder may sign a writing authorizing another person to act as proxy. Signing may be accomplished by the stockholder or the stockholders authorized agent signing the writing or causing the stockholders signature to be affixed to the writing by any reasonable means, including facsimile signature. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of, an authorization by a telegram, cablegram, datagram, electronic mail or any other electronic or telephonic means to the person authorized to act as proxy or to any other person authorized to receive the proxy authorization on behalf of the person authorized to act as the proxy, including a proxy solicitation firm or proxy support service organization. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for so long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its assets or liabilities.
SECTION 1.09. List of Stockholders. At each meeting of stockholders, a full, true and complete list of all stockholders entitled to vote at such meeting, showing the number and class of shares held by each and certified by the transfer agent for such class or by the Secretary, shall be furnished by the Secretary.
SECTION 1.10. Conduct of Voting. At all meetings of stockholders, unless the voting is conducted by inspectors, the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies, the acceptance or rejection of votes and procedures for the conduct of business not otherwise specified by these By-Laws, the Charter or law, shall be decided or determined by the chairman of the meeting. If demanded by stockholders, present in person or by proxy, entitled to cast 10% in number of votes entitled to be cast, or if ordered by the chairman of the meeting, the vote upon any election or question shall be taken by ballot. Before any meeting of the stockholders, the Board of Directors may, and on the request of stockholders, present in person or by proxy, entitled to cast 10% in number of votes entitled to be cast, shall, appoint persons to act as inspectors of election at the meeting and any adjournment thereof. If no inspectors of election are so appointed, the chairman of the meeting may appoint inspectors of election at the meeting. The number of inspectors shall be either one or three. If inspectors are appointed at a meeting on the request of stockholders, the holders of a majority of shares present in person or by proxy shall determine whether one or three inspectors
7
are to be appointed. No candidate for election as a director at a meeting shall serve as an inspector thereat. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any stockholder shall, appoint a person to fill that vacancy. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receive votes, ballots or consents; hear and determine all challenges and questions in any way arising in connection with the right to vote; count and tabulate all votes or consents; determine when polls shall close; determine the result; and do any other acts that may be proper to conduct the election or vote with fairness to all stockholders. Unless so demanded or ordered, no vote need be by ballot and voting need not be conducted by inspectors.
SECTION 1.11. Advance Notice Provisions for Election of Directors. Only persons who are nominated in accordance with the following procedures or the procedures set forth in Section 1.13 shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Charter with respect to the right of holders of a preferred or special class of stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section. In addition to any other applicable requirements, for a nomination to be made by a stockholder pursuant to this Section 1.11, such stockholder must have given timely notice thereof in proper form to the Secretary of the Corporation. To be timely, a stockholders notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than 90 days nor more than 120 days prior to the first anniversary of the preceding years annual meeting (and, for the avoidance of doubt, the 2020 annual meeting was held on December 14, 2020); provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the preceding years annual meeting, notice by the stockholder must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such annual meeting is first made; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public announcement of the date of the special meeting was made, whichever first occurs. To be in proper form, a stockholders notice to the Secretary must be in writing and set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person that is required to be disclosed in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations promulgated thereunder; (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, (i) the name and address of such person (including, if applicable, the name and address of such person as they appear on the Corporations books); (ii) the following information regarding the ownership interests of such person: (A) the class or series and number of shares of capital stock of the Corporation which are
8
owned beneficially or of record by such person; (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a Derivative Instrument) directly or indirectly owned beneficially by such person and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation; (C) any proxy, contract, agreement, arrangement, understanding, or relationship pursuant to which such person has a right to vote any shares of any security of the Corporation; (D) any short interest in any security of the Corporation (for purposes of this Section 1.11 and Section 1.12, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security); (E) any rights to dividends on the shares of the Corporation owned beneficially by such person that are separated or separable from the underlying shares of the Corporation; (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner; and (G) any performance-related fees (other than an asset-based fee) to which such person is entitled based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including, without limitation, any such interests held by members of such persons immediate family sharing the same household; (iii) a description of all arrangements or understandings between such person and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by or on behalf of such person; and (iv) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (c) a representation that the stockholder giving the notice (or a representative thereof) intends to appear at the meeting to nominate the persons named in its notice. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected and each proposed nominees written representation and agreement required by Section 1.14. In addition to the information required pursuant to this paragraph or any other provision of these By-Laws, the Corporation may require any proposed nominee to furnish any other information (a) that may reasonably be requested by the Corporation to determine whether the proposed nominee would be independent under the rules and listing standards of the principal United States securities exchanges upon which the common stock of the Corporation is listed or traded, any applicable rule of the U.S. Securities and Exchange Commission or any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the Corporations directors (collectively, the Independence Standards), (b) that could be material to a reasonable stockholders understanding of the independence, or lack thereof, of such nominee or (c) that may reasonably be requested by the Corporation to determine the eligibility of such nominee to serve as a director of the Corporation. Any person providing any information to the Corporation pursuant to this Section 1.11 shall further update and supplement such information, if necessary, so that all such information shall be true and correct as of the record date for the determination of stockholders entitled to vote at the annual
9
meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five business days after the later of the record date for the determination of stockholders entitled to vote at the annual meeting and the date the record date is first publicly disclosed. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section or in Section 1.13. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. No adjournment or postponement of a meeting of stockholders shall commence a new period for the giving of notice of a stockholder nomination hereunder.
SECTION 1.12. Advance Notice Provisions for Business to be Transacted at a Meeting. No business may be transacted at a special meeting of stockholders, other than business that is specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof). No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is stockholder of record on the date of the giving of the notice provided for in this Section and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper form to the Secretary of the Corporation. To be timely, a stockholders notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding years annual meeting (and, for the avoidance of doubt, the 2020 annual meeting was held on December 14, 2020); provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the preceding years annual meeting, notice by the stockholder must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. To be in proper form, a stockholders notice to the Secretary must in writing and set forth (a) as to each matter such stockholder proposes to bring before the annual meeting, a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, (i) the name and address of such person (including, if applicable, the name and address of such person as they appear on the Corporations books). (ii) the following information regarding the ownership interests of such person: (A) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such person; (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any Derivative Instrument directly or indirectly owned beneficially by such person and any other direct or indirect
10
opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation; (C) any proxy, contract, agreement, arrangement, understanding, or relationship pursuant to which such person has a right to vote any shares of any security of the Corporation; (D) any short interest in any security of the Corporation; (E) any rights to dividends on the shares of the Corporation owned beneficially by such person that are separated or separable from the underlying shares of the Corporation; (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner; and (G) any performance-related fees (other than an asset-based fee) to which such person is entitled based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including, without limitation, any such interests held by members of such persons immediate family sharing the same household; (iii) a description of all arrangements or understandings between such person and any other person or persons (including their names) in connection with the proposal of such business by or on behalf of such person and any material interest of such person in such business; and (iv) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the proposal of business pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (c) a representation that the stockholder giving the notice (or a representative thereof) intends to appear at the annual meeting to bring such business before the meeting. Any person providing any information to the Corporation pursuant to this Section 1.12 shall further update and supplement such information, if necessary, so that all such information shall be true and correct as of the record date for the determination of stockholders entitled to vote at the annual meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five business days after the later of the record date for the determination of stockholders entitled to vote at the annual meeting and the date the record date is first publicly disclosed. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section; provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. No adjournment or postponement of a meeting of stockholders shall commence a new period for the giving of notice of a stockholder proposal hereunder. Nothing in this Section 1.12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporations proxy statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 1.13. Proxy Access.
(a) Information to be Included in the Corporations Proxy Materials. Whenever the Board of Directors solicits proxies with respect to the election of directors at an annual meeting of stockholders, subject to the provisions of this Section 1.13, the Corporation shall include in its proxy statement for such annual meeting, in addition to any persons nominated for election by or at the direction of the Board of Directors (or any duly authorized committee thereof), the name, together with the Required Information (as defined below), of any person nominated for election
11
to the Board of Directors pursuant to this Section 1.13 (a Stockholder Nominee) by an Eligible Stockholder (as defined in Section 1.13(d)) who expressly elects at the time of providing the notice required by this Section 1.13 to have such nominee included in the Corporations proxy materials pursuant to this Section 1.13. For purposes of this Section 1.13, the Required Information that the Corporation will include in its proxy statement is (i) the information provided to the Secretary of the Corporation concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Corporations proxy statement pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder, and (ii) if the Eligible Stockholder so elects, a Supporting Statement (as defined in Section 1.13(h)). For the avoidance of doubt, nothing in this Section 1.13 shall limit the Corporations ability to solicit against any Stockholder Nominee or include in its proxy materials the Corporations own statements or other information relating to any Eligible Stockholder or Stockholder Nominee, including any information provided to the Corporation pursuant to this Section 1.13. Subject to the provisions of this Section 1.13, the name of any Stockholder Nominee included in the Corporations proxy statement for an annual meeting of stockholders shall also be set forth on the form of proxy distributed by the Corporation in connection with such annual meeting.
(b) Notice Period. In addition to any other applicable requirements, for a nomination to be made by an Eligible Stockholder pursuant to this Section 1.13, the Eligible Stockholder must have given timely notice of such nomination (the Notice of Proxy Access Nomination) in proper form to the Secretary of the Corporation. To be timely, the Notice of Proxy Access Nomination must be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation with (i) respect to any annual meeting, other than the 2021 annual meeting, not less 120 days nor more than 150 days prior to the first anniversary of the date that the Corporation first distributed its proxy statement to stockholders for the preceding years annual meeting of stockholders and (ii) with respect to the 2021 annual meeting, not earlier than May 28, 2021 nor later than June 27, 2021. No adjournment or postponement of an annual meeting of stockholders shall commence a new period for the giving of a Notice of Proxy Access Nomination pursuant to this Section 1.13.
(c) Permitted Number of Stockholder Nominees. The maximum number of Stockholder Nominees nominated by all Eligible Stockholders that will be included in the Corporations proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (i) two or (ii) 20% of the number of directors in office as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Section 1.13 (the Final Proxy Access Nomination Date) or, if such amount is not a whole number, the closest whole number below 20% (such greater number, as it may be adjusted pursuant to this Section 1.13(c), the Permitted Number). In the event that one or more vacancies for any reason occurs on the Board of Directors after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the Permitted Number shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Corporations proxy materials as nominees recommended by the Board of Directors pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and (ii) the number of directors in office as of the Final
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Proxy Access Nomination Date who were included in the Corporations proxy materials as Stockholder Nominees for any of the three preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to clause (y) of the immediately succeeding sentence) and whom the Board of Directors decides to nominate for re-election to the Board of Directors. For purposes of determining when the Permitted Number has been reached, each of the following Persons shall be counted as one of the Stockholder Nominees: (x) any individual nominated by an Eligible Stockholder for inclusion in the Corporations proxy materials pursuant to this Section 1.13 whose nomination is subsequently withdrawn and (y) any individual nominated by an Eligible Stockholder for inclusion in the Corporations proxy materials pursuant to this Section 1.13 whom the Board of Directors decides to nominate for election to the Board of Directors. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporations proxy materials pursuant to this Section 1.13 shall rank such to Nominees based on the order in which the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporations proxy materials in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 1.13 exceeds the Permitted Number. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 1.13 exceeds the Permitted Number, the highest ranking Stockholder Nominee who meets the requirements of this Section 1.13 from each Eligible Stockholder will be selected for inclusion in the Corporations proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of common stock of the Corporation each Eligible Stockholder disclosed as owned in its Notice of Proxy Access Nomination. If the Permitted Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 1.13 from each Eligible Stockholder has been selected, then the next highest ranking Stockholder Nominee who meets the requirements of this Section 1.13 from each Eligible Stockholder will be selected For inclusion in the Corporations proxy materials, and this process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached. Notwithstanding anything to the contrary contained in this Section 1.13, the Corporation shall not be required to include any Stockholder Nominees in its proxy materials pursuant to this Section 1.13 for any meeting of stockholders for which the Secretary of the Corporation receives notice (whether or not subsequently withdrawn) that the Eligible Stockholder or any other stockholder intends to nominate one or more persons for election to the Board of Directors pursuant to the advance notice requirements for stockholder nominees set Forth in Section 1.11.
(d) Eligible Stockholder. An Eligible Stockholder is a stockholder or a group of no more than 20 stockholders (counting as one stockholder, for this purpose, any two or more funds that are part of the same Qualifying Fund Group (as defined below)) that (i) has owned (as defined in Section 1.13(e)) continuously for at least three years (the Minimum Holding Period) a number of shares of common stock of the Corporation (or, for any portion of the Minimum Holding Period prior to December 15, 2020, shares of common stock of Apartment Investment and Management Company that, if held on the record date for the distribution of shares of the Corporation to holders of shares of Apartment Investment and Management Company (Aimco) pursuant to that certain Separation and Distribution Agreement, effective as of December 15, 2020, 2020, by and among the Corporation, Aimco and the other parties thereto (the Aimco Separation Agreement), would have entitled such Eligible Stockholder to receive such number of shares of common stock of the Corporation pursuant to the terms of the Aimco Separation Agreement) that represents at least three percent of the Corporations outstanding common stock as of the date the
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Notice of Proxy Access Nomination is delivered to or mailed and received by the Secretary of the Corporation in accordance with this Section 1.13 (the Required Shares), (ii) continues to own the Required Shares through the date of the annual meeting and (iii) satisfies all of the other requirements of, and complies with all applicable procedures set forth in, this Section 1.13. A Qualifying Fund Group is any two or more funds that are (A) under common management and investment control, (B) under common management and funded primarily by the same employer or (C) a group of investment companies as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended. Whenever the Eligible Stockholder consists of a group of stockholders (including a group of funds that are part of the same Qualifying Fund Group), (1) each provision in this Section 1.13 that requires the Eligible Stockholder to provide any written statements, representations, undertakings, agreements or other instruments or to meet any other conditions shall be deemed to require each stockholder (including each individual fund within a Qualifying Fund Group) that is a member of such group to provide such statements, representations, undertakings, agreements or other instruments and to meet such other conditions (except that the members of such group may aggregate the shares that each member has owned continuously for the Minimum Holding Period in order to meet the three percent ownership requirement of the Required Shares definition) and (2) a breach of any obligation, agreement or representation under this Section 1.13 by any member of such group shall be deemed a breach by the Eligible Stockholder. No stockholder may be a member of more than one group of stockholders constituting an Eligible Stockholder with respect to any annual meeting.
(e) Definition of Ownership. For purposes of this Section 1.13, a stockholder shall be deemed to own only those outstanding shares of common stock of the Corporation as to which the stockholder possesses both (1) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (A) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed, (B) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell or (C) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such stockholders or its affiliates full right to vote or direct the voting of any such shares and/or (2) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or affiliate. For purposes of this Section 1.13, a stockholder shall own shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholders ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares, provided that the stockholder has the power to recall such loaned shares on five business days notice and includes with its Notice of Proxy Access Nomination an agreement that it (A) will promptly recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Corporations proxy materials and (B) will continue to hold such shares through the date of the annual meeting, or (ii) the stockholder has delegated any voting power by means of a proxy, power
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of attorney or other instrument or arrangement which is revocable at any time by the stockholder. The terms owned, owning and other variations of the word own shall have correlative meanings. Whether outstanding shares of the common stock of the Corporation are owned for these purposes shall be determined by the Board of Directors or any committee thereof. For purposes of this Section 1.13, the term affiliate or affiliates shall have the meaning ascribed thereto under the General Rules and Regulations under the Exchange Act.
(f) Form of Notice. To be in proper form for purposes or this Section 1.13, the Notice of Proxy Access Nomination must be in writing and include or be accompanied by the following:
(i) a written statement by the Eligible Stockholder setting forth and certifying as to the number of shares it owns and has owned continuously for the Minimum Holding Period, and the Eligible Stockholders agreement to provide immediate notice if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting;
(ii) one or more written statements from the record holder of the Rewired Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to or mail and received by the Secretary of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholders agreement to provide, within five business days following the later of the record date for the determination of stockholders entitled to vote at the annual meeting and the date the record date is first publicly disclosed, one or more written statements from the record holder and such intermediaries verifying the Eligible Stockholders continuous ownership of the Required Shares through the record date;
(iii) a copy of the Schedule 14N that has been or is concurrently being filed with the United States Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act;
(iv) the information and representations that would be required to be set forth in a stockholders notice of a nomination pursuant to Section 1.11, together with the written consent of each Stockholder Nominee to be named as a nominee and to serve as a director if elected and each Stockholder Nominees written representation and agreement required by Section 1.14;
(v) a representation that the Eligible Stockholder (A) will continue to hold the Required Shares through the date of the annual meeting, (B) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and does not presently have such intent, (C) has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Stockholder Nominee(s) it is nominating pursuant to this Section 1.13, (D) has not engaged and will not engage in, and has not and will not be a participant in another persons, solicitation within the meaning of Rule 14a-1(1) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (E) has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation, (F) has complied and will comply with all laws and regulations applicable to solicitations and the use. if
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any, of soliciting material in connection with the annual meeting arid (G) has provided and will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects and do not and will not 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;
(vi) a written statement by the Eligible Stockholder indicating whether it intends to continue to own the Required Shares for at least one year following the annual meeting;
(vii) an undertaking that the Eligible Stockholder agrees to (A) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholders communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation, (B) indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 1.13 or any solicitation or other activity in connection therewith and (C) file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Exchange Act;
(viii) in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders, the designation by all group members of one member of the group that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 1.13 (including withdrawal of the nomination); and
(ix) in the case of a nomination by an Eligible Stockholder in which two or more funds that are part of the same Qualifying Fund Group are counted as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group.
(g) Additional Required information. In addition to the information required pursuant to Section 1.13(f) or any other provision of these By-Laws, the Corporation may require (i) any proposed Stockholder Nominee to furnish any other information (A) that may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under the independence Standards, (B) that could be material to a reasonable stockholders understanding of the independence, or lack thereof, of such Stockholder Nominee or (C) that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporations proxy materials pursuant to this Section 1.13 or to serve as a director of the Corporation, and (ii) any Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholders continuous ownership of the Required Shares for the Minimum Holding Period.
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(h) Supporting Statement. The Eligible Stockholder may, at its option, provide to the Secretary of the Corporation, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of the Stockholder Nominee(s) candidacy (a Supporting Statement). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in this Section 1.13, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes would violate any applicable law, rule or regulation.
(i) Required Updates and Supplements. In the event that any information or communications provided by an Eligible Stockholder or a Stockholder Nominee to the Corporation or its stockholders ceases to be True and correct in all material respects or omits to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, such Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Corporation of any such defect in such previously provided information and of the information that is required to correct any such defect; it being understood that providing such notification shall not be deemed to cure any such defect or limit the remedies available to the Corporation relating to any such defect (including the right to omit a Stockholder Nominee from its proxy materials pursuant to this Section 1.13). ln addition, any person providing any information to the Corporation pursuant to this Section 1.13 shall further update and supplement such information, if necessary, so that all such information shall be true and correct as of the record date for the determination of stockholders entitled to vote at the annual meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five business days following the later of the record date for the determination of stockholders entitled to vote at the annual meeting and the date the record date is first publicly disclosed.
(j) Stockholder Nominee Eligibility. Notwithstanding anything to the contrary contained in this Section 1.13, the Corporation shall not be required to include in its proxy materials, pursuant to this Section 1.13, a Stockholder Nominee (i) who would not be an independent director under the Independence Standards, (ii) whose election as a member of the Board of Directors would cause the Corporation to be in violation of these By-Laws, the Charter, the rules and listing standards of the principal United States securities exchanges upon which the common stock of the Corporation is listed or traded, or any applicable law, rule or regulation, (iii) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, (iv) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten years, (v) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act or 1933, as amended, or (vi) who shall have provided any information to the Corporation or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading.
(k) Nominations. Notwithstanding anything to the contrary set forth herein, (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its representations, agreements or undertakings or fails to comply with any of its obligations under
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this Section 1.13 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporations proxy materials pursuant to this Section 1.13 or dies, becomes disabled or otherwise becomes in ineligible for inclusion in the Corporations proxy materials pursuant to this Section 1.13 or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board of Directors, any committee thereof or the chairman of the annual meeting, (A) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (B) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Stockholder or any other Eligible Stockholder and (C) the Board of Directors or the chairman of the annual meeting shall declare such nomination to be invalid and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Corporation. In addition, if the Eligible Stockholder (or a representative thereof) does not appear at the annual meeting to present any nomination pursuant to this Section 1.13, such nomination shall be declared invalid and disregarded as provided in clause (C) above.
(l) Restrictions on Re-Nominations. Any Stockholder Nominee who is included in the Corporations proxy materials for a particular annual meeting of stockholders but either (i) withdraws from or becomes ineligible or unavailable for election at the annual meeting, or (ii) does not receive at least 10% of the votes cast in favor of such Stockholder Nominees election, will be ineligible to be a Stockholder Nominee pursuant to this Section 1.13 for the next two annual meetings of stockholders. For the avoidance of doubt, the immediately preceding sentence shall not prevent any stockholder from nominating any person to the Board of Directors pursuant to and in accordance with Section 1.11
(m) Exclusive Method. This Section 1.13 provides the exclusive method for a stockholder to include nominees for election to the Board of Directors in the Corporations proxy materials.
SECTION 1.14. Nominee Representation and Agreement. In order to be eligible for election or re-election as a director of the Corporation, a person must deliver to the Secretary at the principal executive offices of the Corporation a written representation and agreement that such person (a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a Voting Commitment) that has not been disclosed to the Corporation in such representation and agreement or (ii) any Voting Commitment that could limit or interfere with such persons ability to comply, if elected as a director of the Corporation, with such persons fiduciary duties under applicable law, (b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation in such representation and agreement, (c) will abide by the requirements of Section 2.03, (d) would be in compliance, if elected as a director of the Corporation. and will comply with the Corporations code of business conduct and ethics, corporate governance guidelines, stock ownership and trading policies and guidelines and any
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other policies or guidelines of the Corporation applicable to directors and (e) will make such other acknowledgments, enter into such agreements and provide such information as the Board of Directors requires of all directors, including promptly submitting all completed and signed questionnaires required of the Corporations directors.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. Function of Directors. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. All powers of the Corporation may be exercised by or under authority of the Board of Directors, except as conferred on or reserved to the stockholders by statute or by the Charter or By-Laws.
SECTION 2.02. Qualification and Number of Directors. Each director shall be a natural person at least 18 years of age. The Corporation shall have at least three directors. A majority of the entire Board of Directors may alter the number of directors from time to time by resolution of the Board of Directors, which shall not be less than the minimum number permitted herein, but the action may not affect the tenure of office of any director.1
SECTION 2.03. Election and Tenure of Directors; Resignations. At each annual meeting, the stockholders shall elect directors to hold office as set forth in the Charter for the applicable term set forth in the Charter. Notwithstanding the expiration of a term of a Director, the Director shall continue to hold office until a successor shall be elected and qualified or until his or her earlier death, resignation or removal. In the case of any uncontested election (as defined below), each director shall be elected by a majority of the total votes cast for and against such director nominee at a meeting of stockholders duly called and at which a quorum is present. In the event of a contested election, directors shall be elected by a plurality of votes cast at a meeting of stockholders duly called and at which a quorum is present. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. If, in an uncontested election, a nominee for election as a director receives a greater number of against votes for his or her election than votes for such election (a Majority Against Vote), then such director, as a holdover director under Maryland law, shall promptly tender his or her resignation to the Board of Directors for consideration following certification of such vote. The following shall not be considered votes cast for or against a nominee: (a) a share otherwise present at the meeting but for which there is an abstention and (b) a share otherwise present at the meeting as to which a stockholder gives no direction. The Nominating and Corporate Governance Committee shall promptly consider any resignation offer tendered pursuant to this Section 2.03 and a range of possible responses, based on any facts or circumstances they consider relevant, and make a recommendation to the Board of Directors as to the response to the resignation offer. If each member of the Nominating and Corporate Governance Committee received a Majority Against Vote at the same election, then the directors who did not receive a Majority Against Vote shall appoint a committee amongst themselves to consider the resignation offers and recommend to the Board of Directors a response to the resignation offer. The Board of Directors will take
1 | Under Article VI, Section 6 of the Charter, this section of the By-Laws may not be amended by the stockholders without the approval of 2/3 of the stockholders. |
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action on the Nominating and Corporate Governance Committees recommendation (or committee of directors recommendation) within 90 days following certification of the stockholder vote. The Board of Directors expects that any director whose resignation is under consideration to abstain from participating in any decision regarding that resignation. An election will be deemed to be uncontested if no stockholder provides notice of an intention to nominate one or more candidates to compete with the Board of Directors nominees in a director election in the manner required by these By-Laws, or if any such stockholders have withdrawn all such nominations at least ten days prior to the Corporations filing with the Securities and Exchange Commission of its definitive proxy statement for such meeting of stockholders. Any director may resign at any time by sending notice in writing or by electronic transmission of such resignation to the principal executive office of the Corporation addressed to the Board of Directors, the Chairman of the Board of Directors or the Chief Executive Officer. Such resignation may provide that it becomes effective upon receipt thereof, some future date, the occurrence of a certain future event (including but not limited to the failure to receive the vote specified in the second sentence of this Section 2.03) and/or the acceptance by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.
SECTION 2.04. Removal of Director. Except as otherwise provided in the Charter and subject to the rights of the holders of any class of stock separately entitled to elect one or more directors, any director may be removed from office only for cause and only by the affirmative vote of two-thirds of the aggregate number of votes then entitled to be cast generally in the election of directors. For purposes of this Section 2.04, cause shall mean the willful and continuous failure of a director to substantially perform the duties to the Corporation of such director (other than any such failure resulting from temporary incapacity due to physical or mental illness) or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation.2
SECTION 2.05. Vacancy on Board of Directors. Except as otherwise set forth in the Charter and subject to the rights of the holders of any class or series of stock separately entitled to elect one or more directors, each vacancy on the Board of Directors which results from any cause may be filled only by the affirmative vote of a majority of the remaining directors in office even if the remaining directors do not constitute a quorum. A director elected by the Board of Directors to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy has occurred and until his or her successor is elected and qualifies.3
SECTION 2.06. Regular Meetings. After each meeting of stockholders at which directors shall have been elected, the Board of Directors shall meet as soon thereafter as practicable for the purpose of organization and the transaction of other business. In the event that no other time and place are specified by resolution of the Board of Directors or announced by the president or the Chairman of the Board at such stockholders meeting, the Board of Directors shall meet immediately following the close of and at the place of such stockholders meeting or by means of remote communication. Any other regular meeting of the Board of Directors shall be held on such
2 | Under Article VI, Section 6 of the Charter, this section of the By-Laws may not be amended by the stockholders without the approval of 2/3 of the stockholders. |
3 | Under Article VI, Section 6 of the Charter, this section of the By-Laws may not be amended by the stockholders without the approval of 2/3 of the stockholders. |
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date and time, and at such place or by means of remote communication, as may be designated from time to time by the Board of Directors. No notice of such meeting following a stockholders meeting or any other regular meeting shall be necessary if held as hereinabove provided.
SECTION 2.07. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the president or by a majority of the Board of Directors by vote at a meeting or in writing or delivered by electronic transmission with or without a meeting. A special meeting of the Board of Directors shall be held on such date, at any place or by means of remote communication, as may be designated from time to time by the Board of Directors, In the absence of designation such meeting shall be held at such place or means of remote communication as may be designated in the call.
SECTION 2.08. Notice of Meeting. Except as provided in Section 2.06, the Secretary shall give notice to each director of each regular and special meeting of the Board of Directors. The notice shall state the time of the meeting and place or that the meeting is being held by means of remote communication. Notice is given to a director when it is delivered personally to him or her, left at his or her residence or usual place. of business, or sent by electronic transmission, telegraph, facsimile transmission, or telephone, at least 24 hours before the time of the meeting or, in the alternative by mail to his or her address as it shall appear on the records of the Corporation, at least 72 hours before the time of the meeting. Unless these By-Laws or a resolution of the Board of Directors provides otherwise, the notice need not state the business to be transacted at or the purposes of any regular or special meeting of the Board or Directors. No notice of any meeting of the Board of Directors need be given to any director who attends except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened, or to any director who delivers a written waiver or a waiver by electronic transmission which is filed with the records of the meeting either before or after the holding thereof, waiving such notice. Any meeting of the Board of Directors, regular or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.
SECTION 2.09. Quorum; Action by Director. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business. In the absence of a quorum, the directors present by majority vote and without notice other than by announcement may adjourn the meeting from time to time until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Unless statute or the Charter or By-Laws requires a greater proportion, the action of a majority of the directors present at a meeting at which a quorum is present is action of the Board of Directors. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if a unanimous consent which sets forth the action is given in writing or by electronic transmission by each member of the Board of Directors and filed in paper or electronic form with the minutes of proceedings of the Board of Directors.
SECTION 2.10. Meeting by Conference Telephone. Members of the Board of Directors may participate in a meeting by means of a conference telephone or other
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communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at a meeting.
SECTION 2.11. Compensation. By resolution of the Board of Directors a fixed sum and expenses, if any, for attendance at each regular or special meeting of the Board of Directors or of committees thereof, and other compensation for their services as such or on committees of the Board of Directors, may be paid to Directors. Directors who are full-time employees of the Corporation need not be paid for attendance at meetings of the Board of Directors or committees thereof for which fees are paid to other directors. A director who serves the Corporation in any other capacity also may receive compensation for such other services, pursuant to a resolution of the directors.
SECTION 2.12. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who votes in favor of such action or fails to make his dissent known at the meeting.
ARTICLE III
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of one or more directors and delegate to these committees any of the powers of the Board of Directors, except the power to authorize dividends on stock, elect directors, issue stock other than as provided in the next sentence, recommend to the stockholders any action which requires stockholder approval, amend these By-Laws, or approve any merger or share exchange which does not require stockholder approval. If the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, a committee of the Board of Directors, in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors, may authorize or fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors.
SECTION 3.02. Committee Procedure. Each committee may fix rules of procedure for its business. A majority of the members of a committee shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of the committee. The members of a committee present at any meeting, whether or not they constitute a quorum, may appoint a director to act in the place of an absent member. Any action required or permitted to be taken at a meeting of a committee may be taken without a meeting if a unanimous consent which sets forth the action is given in writing or by electronic transmission by each member of the committee and filed in paper or electronic form
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with the minutes of the committee. The members of a committee may conduct any meeting thereof by conference telephone or other means of communication in accordance with the provisions of Section 2.10.
ARTICLE IV
OFFICERS
SECTION 4.01. Executive and Other Officers. The Corporation shall have a President, a Secretary, and a Treasurer. It may also have a Chairman of the Board and a Vice Chairman of the Board. The Board of Directors shall designate who shall serve as chief executive officer, who shall have general supervision of the business and affairs of the Corporation, and may designate a chief operating officer, who shall have supervision of the operations of the Corporation. In the absence of any designation the Chairman of the Board, if there be one, shall serve as chief executive officer, and the President shall serve as chief operating officer. In the absence of the Chairman of the Board, or if there be none, the President shall be the chief executive officer. The same person may hold both offices. The Corporation may also have one or more Vice-Presidents, assistant officers, and subordinate officers as may be established by the Board of Directors. A person may hold more than one office in the Corporation except that no person may serve concurrently as both President and Vice-President of the Corporation. The Chairman of the Board and the Vice Chairman of the Board shall be directors, and the other officers may be directors.
SECTION 4.02. Chairman of the Board. The Chairman of the Board, if one be elected, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. Unless otherwise specified by the Board of Directors, he or she shall be the chief executive officer of the Corporation. ln general, he or she shall perform such duties as are customarily performed by the chief executive officer of a corporation, may perform any duties of the President and shall perform such other duties and have such other powers as are from time to time assigned to him or her by the Board of Directors.
SECTION 4.03. Vice Chairman of the Board. The Vice Chairman of the Board, if one be elected, in the absence of the Chairman of the Board, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present, unless otherwise provided by resolution of the Board of Directors, and shall perform such other duties and have such other powers as are from time to time assigned to him or her by the Board of Directors.
SECTION 4.04. President. Unless otherwise specified by the Board of Directors, the President shall be the chief operating officer of the Corporation and perform the duties customarily performed by chief operating officers. He or she may execute, in the name of the Corporation, all authorized deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall have been expressly delegated to some other officer or agent of the Corporation. In general, he or she shall perform such other duties customarily performed by a president of a corporation and shall perform such other duties and have such other powers as are from time to time assigned to him or her by the Board of Directors or the chief executive officer of the Corporation.
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SECTION 4.05. Vice-Presidents. The Vice-President or Vice-Presidents, at the request of the chief executive officer or the President, or in the Presidents absence or during his or her inability to act, shall perform the duties and exercise the functions of the President, and when so acting shall have the powers of the President. If there be more than one Vice-President, the Board of Directors may determine which one or more of the Vice-Presidents shall perform any of such duties or exercise any of such functions, or if such determination is not made by the Board of Directors, the chief executive officer, or the President may make such determination; otherwise any of the Vice-Presidents may perform any of such duties or exercise any of such functions. Each Vice-President shall perform such other duties and have such other powers, and have such additional descriptive designations in their titles (if any), as are from time to time assigned to them by the Board of Directors, the chief executive officer, or the President.
SECTION 4.06. Secretary. The Secretary shall keep the minutes of the meetings of the stockholders, of the Board of Directors and of any committees, in books provided for the purpose; he or she shall see that all notices are duly riven in accordance with the provisions of these By-Laws or as required by law; he or she shall be custodian of the records of the Corporation; he or she may witness any document on behalf of the Corporation, the execution of which is duly authorized, see that the corporate seal is affixed where such document is required or desired to be under its seal, and, when so affixed, may attest the same. In general, he or she shall perform such other duties customarily performed by a secretary of a corporation, and shall perform such other duties and have such other powers as are from time to time assigned to him or her by the Board of Directors, the chief executive officer, or the President.
SECTION 4.07. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board of Directors; he or she shall render to the President and to the Board of Directors, whenever requested. an account of the financial condition of the Corporation, in general, he or she shall perform such other duties customarily performed by a treasurer of a corporation, and shall perform such other duties and have such other powers as are from time to time assigned to him or her by the Board of Directors, the chief executive officer, or the President.
SECTION 4.08. Assistant and Subordinate Officers. The assistant and subordinate officers of the Corporation are all officers below the office of Vice-President, Secretary, or Treasurer. The assistant or subordinate officers shall have such duties as are from time to time assigned to them by the Board of Directors, the chief executive officer, or the President.
SECTION 4.09. Election, Tenure and Removal of Officers. The Board of Directors shall elect the officers of the Corporation. The Board of Directors may from time to time authorize any committee or officer to appoint assistant and subordinate officers. Election or appointment of an officer, employee or agent shall not of itself create contract rights. All officers shall be appointed to hold their offices, respectively, during the pleasure of the Board of Director. The Board of Directors (or, as to any assistant or subordinate officer, any committee or officer authorized by the Board of Directors) may remove an officer at any time. The removal of an officer does not prejudice any of his or her contract rights. The Board of Directors (or, as to any assistant
24
or subordinate officer, any committee or officer authorized by the Board of Directors) may fill a vacancy which occurs in any office for the unexpired portion of the term.
SECTION 4.10. Compensation. The Board of Directors shall have power to fix the salaries and other compensation and remuneration, of whatever kind, of all officers of the Corporation. No officer shall be prevented from receiving such salary by reason of the fact that he or she is also a Director of the Corporation. The Board of Directors may authorize any committee or officer, upon whom the power of appointing assistant and subordinate officers may have been conferred, to fix the salaries, compensation and remuneration of such assistant and subordinate officers.
ARTICLE V
DIVISIONAL TITLES
SECTION 5.01. Conferring Divisional Titles. The Board of Directors may from time to time confer upon any employee of a division of the Corporation the title of President, Vice President, Treasurer or Controller of such division or any other title or titles deemed appropriate, or may authorize the Chairman of the Board or the President to do so. Any such titles so conferred may be discontinued and withdrawn at any time by the Board of Directors, or by the Chairman of the Board or the President if so authorized by the Board of Directors. Any employee of a division designated by such a divisional title shall have the powers and duties with respect to such division as shall be prescribed by the Board of Directors, the Chairman of the Board or the President.
SECTION 5.02. Effect of Divisional Titles. The conferring of divisional titles shall not create an office of the Corporation under Article IV unless specifically designated as such by the Board of Directors; but any person who is an officer of the Corporation may also have a divisional title.
ARTICLE VI
STOCK
SECTION 6.01. Certificates for Stock. The Board of Directors may determine to issue certificated or uncertificated shares of capital stock and other securities of the Corporation. For certificated stock, each stockholder is entitled to certificates which represent and certify the shares of stock he or she holds in the Corporation. Each stock certificate shall include on its face the name of the Corporation, the name or the stockholder or other person to whom it is issued, and the class of stock and number of shares it represents. It shall also include on its face or back (a) a statement of any restrictions on transferability and a statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the stock of each class which the Corporation is authorized to issue, of the differences in the relative rights and preferences between the shares of each series of a preferred or special class in series which the Corporation is authorized to issue, to the extent they have been set, and of the authority of the Board of Directors to set the relative rights and preferences of subsequent series of a preferred or special class of stock or (b) a statement which provides in substance that the Corporation will furnish a full statement of such
25
information to any stockholder on request and without charge. Such request may be made to the Secretary or to its transfer agent. Except as provided in the Maryland Uniform Commercial CodeInvestment Securities, the fact that a stock certificate does not contain or refer to a restriction on transferability that is adopted after the date of issuance does not mean that the restriction is invalid or unenforceable. It shall be in such form, not inconsistent with law or with the Charter, as shall be approved by the Board of Directors or any officer or officers designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by the Chairman of the Board, the President, or a Vice-President, and countersigned by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. A certificate may not be issued until the stock represented by it is fully paid.
SECTION 6.02. Transfers. The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of stock; and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar may be combined.
SECTION 6.03. Record Dates or Closing of Transfer Books. The Board of Directors may, and shall have the sole power to, set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to request a special meeting of stockholders, notice of a meeting of stockholders, vote at a meeting of stockholders, receive a dividend, or be allotted other rights. The record date may not be prior to the close of business on the day the record date is fixed nor, subject to Section 1.07, more than 90 days before the date on which the action requiring the determination will be taken; the transfer books may not be closed for a period longer than 20 days; and, in the case of a meeting of stockholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting. Any shares of the Corporations own stock acquired by the Corporation between the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders and the time of the meeting may be voted at the meeting by the holder of record as of the record date and shall be counted in determining the total number of outstanding shares entitled to be voted at the meeting.
SECTION 6.04. Stock Ledger. The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class which the stockholder holds. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kepi at the offices of a transfer agent for the particular class of stock, or, if none, at the principal office in the State of Maryland or the principal executive offices of the Corporation.
SECTION 6.05. Certification of Beneficial Owners. The Board of Directors may adopt by resolution a procedure by which a stockholder of the Corporation may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class
26
of stockholders who may certify; the purpose for which the certification may be made; the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of a certification which complies with the procedure adopted by the Board of Directors in accordance with this Section, the person specified in the certification is, for the purpose set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.
SECTION 6.06. Lost Stock Certificates. The Board of Directors may determine the conditions for issuing a new stock certificate in place of one which is alleged to have been lost, stolen, or destroyed, or the Board of Directors may delegate such power to any officer or officers of the Corporation. In their discretion, the Board of Directors or such officer or officers may require the owner of the certificate to give bond, with sufficient surety, to indemnify the Corporation against any loss or claim arising as a result of the issuance of a new certificate. In their discretion, the Board of Directors or such officer or officers may refuse to issue such new certificate save upon the order of some court having jurisdiction in the premises.
SECTION 6.07. Fractional Share Interests or Scrip. The Corporation may, but shall not be obliged to, issue fractional shares of stock, eliminate a fractional interest by rounding off to a full share of stock, arrange for the disposition of a fractional interest by the person entitled to it, pay cash for the fair value of a fractional share of stock determined as of the time when the person entitled to receive it is determined, or issue scrip or other evidence of ownership aggregating a lull share for a certificate which represents the share; but such scrip or other evidence of ownership shall not, unless otherwise provided, entitle the holder to exercise any voting rights, to receive dividends thereon or to participate in any of the assets of the Corporation in the event of liquidation. The Board of Directors may impose any reasonable condition on the issuance of scrip or other evidence of ownership, and may cause such scrip or other evidence of ownership to be issued subject to the condition that it shall become void if not exchanged for a certificate representing a full share of stock before a specified date or subject to the condition that the shares for which such scrip or other evidence of indebtedness is exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of such scrip or other evidence of indebtedness, or subject to a provision of forfeiture of such proceeds to the Corporation if not claimed within a period of not less than three years from the date the scrip or other evidence of ownership was originally issued.
ARTICLE VII
FINANCE
SECTION 7.01. Checks, Drafts, Etc. All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall, unless otherwise provided by resolution of the Board of Directors, be signed by the Chairman of the Board, the President, a Vice-President, an Assistant Vice-President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary.
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SECTION 7.02. Annual Statement of Affairs. The President, chief accounting officer or such other executive officer designated by the Board of Directors by resolution shall prepare annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be submitted at the annual meeting of the stockholders and, within 20 days after the meeting, placed on file at the Corporations principal office.
SECTION 7.03. Fiscal Year. The fiscal year of the Corporation shall be the 12 calendar months period ending, December 31 in each year, unless otherwise provided by the Board of Directors.
SECTION 7.04. Dividends. If declared by the Board of Directors at any meeting thereof, the Corporation may pay dividends on its shares in cash, property, or in shares of the capital stock of the Corporation, unless such dividend is contrary to law or to a restriction contained in the Charter.
SECTION 7.05. Bond. The Board of Directors may require any officer, agent or employee of the Corporation to give a bond to the Corporation, conditioned upon the faithful discharge of his or her duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors.,
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Procedure. Any indemnification or payment of costs and expenses in advance of the final disposition of any proceeding, shall be made promptly, and in any event within 60 days, upon the written request of the director or officer entitled to seek indemnification (the Indemnified Party). The right to indemnification and advances hereunder shall be enforceable by the indemnified Party in any court of competent jurisdiction, if (i) the Corporation denies such request, in whole or in part, or (ii) no disposition thereof is made within 60 days. The Indemnified Partys costs and expenses (including attorneys fees) incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be paid or reimbursed by the Corporation. It shall be a defense to any action for advance for expenses that (a) a determination has been made that the facts then known to those making the determination would preclude indemnification or (b) the Corporation has not received both (i) an undertaking as required by law to repay such advances in the event it shall ultimately be determined that the standard of conduct has not been met and (ii) a written affirmation by the Indemnified Party of such Indemnified Partys good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met.
SECTION 8.02. Exclusivity, Etc. The indemnification and advance of expenses provided by the Charter and these By-Laws shall not be deemed exclusive of any other rights to which a person seeking indemnification or advance or expenses may be entitled under any law (common or statutory), or any agreement, vote of stockholders or disinterested directors or other provision that is consistent with law, both as to action in his or her official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the
28
Corporation, shall continue in respect of all events occurring while a person was a director or officer after such person has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. The Corporation shall not be liable for any payment under this By-Law in connection with a claim made by a director or officer to the extent such director or officer has otherwise actually received payment under insurance policy, agreement, vote or otherwise, of the amounts otherwise indemnifiable hereunder. All rights to indemnification and advance of expenses under the Charter of the Corporation and hereunder shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this By-Law is in effect. Nothing herein shall prevent the amendment of this By-Law, provided that no such amendment shall diminish the rights of any person hereunder with respect to events occurring or claims made before its adoption or as to claims made after its adoption in respect of events occurring before its adoption. Any repeal or modification of this By-Law shall not in any way diminish any rights to indemnification or advance of expenses of such director or officer or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this By-Law or any provision hereof is in force.
SECTION 8.03. Insurance. The Corporation may purchase and maintain insurance on behalf of any Indemnified Party against any liability asserted against and incurred by any Indemnified Party in any protected capacity or arising out of his or her position. The Corporation may purchase and maintain insurance on its behalf in respect of any liability it may incur to provide indemnification under the Charter, this By-Law, or law.
SECTION 8.04. Severability; Definitions. The invalidity or unenforceability of any provision of this Article VIII shall not affect the validity or enforceability of any other provision hereof. The phrase this By-Law in this Article VIII means this Article VIII in its entirety.
ARTICLE IX
SUNDRY PROVISIONS
SECTION 9.01. Books and Records. The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any executive or other committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of these By-Laws shall be kept at the principal office of the Corporation.
SECTION 9.02. Corporate Seal. The Board of Directors shall provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. If the Corporation is required to place its corporate seal to a document, it is sufficient to meet the requirement of any law, rule, or regulation relating to a corporate seal to place the word (seal) adjacent to the signature of the person authorized to sign the document on behalf of the Corporation.
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SECTION 9.03. Voting Stock in Other Corporations. Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the Chairman of the Board, the chief executive officer, the President, a Vice-President, or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.
SECTION 9.04. Mail. Any notice or other document which is required by these By-Laws to be mailed shall be deposited in the United States mails, postage prepaid.
SECTION 9.05. Contracts and Agreements. To the extent permitted by applicable law, and except as otherwise prescribed by the Charter or these By-Laws, the Board of Directors may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer.
SECTION 9.06. Resident Agent; Principal Office. The initial name and address of the resident agent of the Corporation and the initial address of the principal office of the Corporation in the State of Maryland shall be as set forth in the Charter. The Corporation may change its resident agent or principal office from time to time by filing with the Maryland State Department of Assessments and Taxation (the Department) a resolution of the Board of Directors authorizing the change, and the Corporation may change from time to time the address of its resident agent, by filing with the Department a statement of the change executed by the President or any Vice-President.
SECTION 9.07. Amendments. Except as provided in the Charter, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Charter, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such special meeting. Except as provided in the Charter, if the power to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the Charter it shall not divest or limit the power of the stockholders to adopt, amend or repeal By-Laws.4
SECTION 9.08. Reliance. Each director of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be entitled to rely on any information, opinion report or statement, including financial statement or other financial data, prepared or presented by an officer or employee of the Corporation whom the director reasonably believes to be reliable and competent in the. matters presented, by a lawyer, certified public accountant or other person as to a matter which the director reasonably believes to be within the persons professional or expert competence or by a committee of the Board of Directors on which the director does not serve, as
4 | Under Article VI, Section 6 of the Charter, this section of the By-Laws may not be amended by the stockholders without the approval of 2/3 of the stockholders. |
30
to a matter within its designated authority, if the director believes the committee to merit confidence.
SECTION 9.09. Elections Regarding Unsolicited Takeover Statute. Effective as of 11:55 p.m. on December 14, 2020, by resolution of the Board of Directors, the Corporation shall be prohibited from electing to be subject to the provisions of Section 3-803, Section 3-804(a)-(c) and Section 3-805 of the Maryland General Corporation Law, unless a proposal to repeal such resolution, in whole or in part, is first approved by the stockholders of the Corporation by the affirmative vote of at least a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors.
31
CERTIFICATE OF SECRETARY
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of the Amended and Restated By-Laws of Apartment Income REIT Corp., a Maryland corporation, as in effect on the date hereof.
WITNESS my hand and seal of the Corporation.
Date: December 15, 2020
/s/ Lisa R. Cohn |
Lisa R. Cohn |
Executive Vice President, General Counsel and Secretary |
(SEAL)
[Signature Page to Amended and Restated By-Laws of Apartment Investment and Management Company]
32
Exhibit 10.1
EXECUTION VERSION
SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
AIMCO PROPERTIES, L.P.
a Delaware limited partnership
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP
AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM
AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT
THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
TABLE OF CONTENTS
Article 1 DEFINED TERMS |
1 | |||
Article 2 ORGANIZATIONAL MATTERS |
21 | |||
Section 2.1 Organization |
21 | |||
Section 2.2 Name |
21 | |||
Section 2.3 Registered Office and Agent; Principal Office |
22 | |||
Section 2.4 Power of Attorney |
22 | |||
Section 2.5 Term |
23 | |||
Article 3 PURPOSE |
23 | |||
Section 3.1 Purpose and Business |
23 | |||
Section 3.2 Powers |
23 | |||
Section 3.3 Partnership Only for Purposes Specified |
24 | |||
Section 3.4 Representations and Warranties by the Parties |
24 | |||
Article 4 CAPITAL CONTRIBUTIONS |
26 | |||
Section 4.1 Capital Contributions of the Partners |
26 | |||
Section 4.2 Issuances of Additional Partnership Interests |
26 | |||
Section 4.3 Additional Funds |
27 | |||
Section 4.4 Stock Option Plans |
29 | |||
Section 4.5 No Interest; No Return |
31 | |||
Article 5 DISTRIBUTIONS |
31 | |||
Section 5.1 Requirement and Characterization of Distributions |
31 | |||
Section 5.2 Distributions in Kind |
31 | |||
Section 5.3 Amounts Withheld |
32 | |||
Section 5.4 Distributions Upon Liquidation |
32 | |||
Section 5.5 Restricted Distributions |
32 |
Article 6 ALLOCATIONS |
32 | |||
Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss |
32 | |||
Section 6.2 General Allocations |
32 | |||
Section 6.3 Additional Allocation Provisions |
33 | |||
Section 6.4 Tax Allocations |
36 | |||
Article 7 MANAGEMENT AND OPERATIONS OF BUSINESS |
36 | |||
Section 7.1 Management |
36 | |||
Section 7.2 Certificate of Limited Partnership |
40 | |||
Section 7.3 Restrictions on General Partners Authority |
40 | |||
Section 7.4 Reimbursement of the General Partner |
42 | |||
Section 7.5 Outside Activities of the Previous General Partner and the General Partner |
43 | |||
Section 7.6 Contracts with Affiliates |
43 | |||
Section 7.7 Indemnification |
44 | |||
Section 7.8 Liability of the General Partner |
46 | |||
Section 7.9 Other Matters Concerning the General Partner |
47 | |||
Section 7.10 Title to Partnership Assets |
48 | |||
Section 7.11 Reliance by Third Parties |
48 | |||
Article 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS |
49 | |||
Section 8.1 Limitation of Liability |
49 | |||
Section 8.2 Management of Business |
49 | |||
Section 8.3 Outside Activities of Limited Partners |
49 | |||
Section 8.4 Return of Capital |
49 | |||
Section 8.5 Rights of Limited Partners Relating to the Partnership |
50 | |||
Section 8.6 Redemption Rights of Qualifying Parties |
50 | |||
Section 8.7 Partnership Right to Call Limited Partner Interests |
55 |
ii
Article 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS |
55 | |||
Section 9.1 Records and Accounting |
55 | |||
Section 9.2 Fiscal Year |
55 | |||
Section 9.3 Reports |
56 | |||
Article 10 TAX MATTERS |
56 | |||
Section 10.1 Preparation of Tax Returns |
56 | |||
Section 10.2 Tax Elections |
56 | |||
Section 10.3 Tax Matters Partner |
57 | |||
Section 10.4 Partnership Representative |
58 | |||
Section 10.5 Withholding for Taxes, Etc |
60 | |||
Article 11 TRANSFERS AND WITHDRAWALS |
62 | |||
Section 11.1 Transfer |
62 | |||
Section 11.2 Transfer of General Partners Partnership Interest |
62 | |||
Section 11.3 Limited Partners Rights to Transfer |
63 | |||
Section 11.4 Substituted Limited Partners |
65 | |||
Section 11.5 Assignees |
66 | |||
Section 11.6 General Provisions |
66 | |||
Article 12 ADMISSION OF PARTNERS |
68 | |||
Section 12.1 Admission of Successor General Partner |
68 | |||
Section 12.2 Admission of Additional Limited Partners |
68 | |||
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership |
69 | |||
Section 12.4 Admission of Initial Limited Partners |
69 | |||
Article 13 DISSOLUTION, LIQUIDATION AND TERMINATION |
69 | |||
Section 13.1 Dissolution |
69 | |||
Section 13.2 Winding Up |
70 |
iii
Section 13.3 Deemed Distribution and Recontribution |
71 | |||
Section 13.4 Rights of Limited Partners |
72 | |||
Section 13.5 Notice of Dissolution |
72 | |||
Section 13.6 Cancellation of Certificate of Limited Partnership |
72 | |||
Section 13.7 Reasonable Time for Winding-Up |
72 | |||
Article 14 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS; AMENDMENTS; MEETINGS |
72 | |||
Section 14.1 Procedures for Actions and Consents of Partners |
72 | |||
Section 14.2 Amendments |
72 | |||
Section 14.3 Meetings of the Partners |
73 | |||
Article 15 GENERAL PROVISIONS |
74 | |||
Section 15.1 Addresses and Notice |
74 | |||
Section 15.2 Titles and Captions |
74 | |||
Section 15.3 Pronouns and Plurals |
74 | |||
Section 15.4 Further Action |
74 | |||
Section 15.5 Binding Effect |
74 | |||
Section 15.6 Waiver |
74 | |||
Section 15.7 Counterparts |
75 | |||
Section 15.8 Applicable Law |
75 | |||
Section 15.9 Entire Agreement |
75 | |||
Section 15.10 Invalidity of Provisions |
75 | |||
Section 15.11 Limitation to Preserve REIT Status |
75 | |||
Section 15.12 No Partition |
76 | |||
Section 15.13 No Third-Party Rights Created Hereby |
76 | |||
Exhibit A PARTNERS AND PARTNERSHIP UNITS |
A-1 | |||
Exhibit B EXAMPLES REGARDING ADJUSTMENT FACTOR |
B-1 |
iv
Exhibit C LIST OF DESIGNATED PARTIES |
C-1 | |||
Exhibit D NOTICE OF REDEMPTION |
D-1 | |||
Exhibit E FORM OF UNIT CERTIFICATE |
E-1 | |||
Exhibit F AMENDED AND RESTATED PARTNERSHIP UNIT DESIGNATION OF THE CLASS I HIGH PERFORMANCE PARTNERSHIP UNITS OF AIMCO PROPERTIES, L.P. |
F-1 | |||
Exhibit G PARTNERSHIP UNIT DESIGNATION OF THE CLASS ONE PARTNERSHIP PREFERRED UNITS OF
AIMCO |
G-1 | |||
Exhibit H PARTNERSHIP UNIT DESIGNATION OF THE CLASS TWO PARTNERSHIP PREFERRED UNITS OF
AIMCO |
H-1 | |||
Exhibit I PARTNERSHIP UNIT DESIGNATION OF THE CLASS THREE PARTNERSHIP PREFERRED UNITS OF
AIMCO |
I-1 | |||
Exhibit J PARTNERSHIP UNIT DESIGNATION OF THE CLASS FOUR PARTNERSHIP PREFERRED UNITS OF
AIMCO |
J-1 | |||
Exhibit K PARTNERSHIP UNIT DESIGNATION OF THE CLASS SIX PARTNERSHIP PREFERRED UNITS OF
AIMCO |
K-1 | |||
Exhibit L PARTNERSHIP UNIT DESIGNATION OF THE CLASS SEVEN PARTNERSHIP PREFERRED UNITS OF
AIMCO |
L-1 | |||
Exhibit M [reserved] |
M-1 | |||
Exhibit N PARTNERSHIP UNIT DESIGNATION OF THE CLASS NINE PARTNERSHIP PREFERRED UNITS OF
AIMCO |
N-1 | |||
Exhibit O [reserved] |
O-1 | |||
Exhibit P PARTNERSHIP UNIT DESIGNATION OF THE LTIP UNITS OF AIMCO PROPERTIES, L.P. |
P-1 | |||
Exhibit Q PARTNERSHIP UNIT DESIGNATION OF THE CLASS ELEVEN PARTNERSHIP PREFERRED UNITS OF AIMCO PROPERTIES, L.P. |
Q-1 | |||
Exhibit R PARTNERSHIP UNIT DESIGNATION OF THE CLASS TWELVE PARTNERSHIP PREFERRED UNITS OF AIMCO PROPERTIES, L.P. |
R-1 |
v
SIXTH AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P.
THIS SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., as amended and restated as of December 14, 2020 (the Amendment Date), is entered into by and among Apartment Income REIT Corp., a Maryland corporation (the Previous General Partner), REIT Sub 1, REIT Sub 2 (REIT Sub 1, together with REIT Sub 2 and the Previous General Partner (solely in respect of its status as a Limited Partner), the Special Limited Partners), AIMCO-GP, Inc., a Delaware corporation, and the other Limited Partners (as defined below).
WHEREAS, AIMCO-GP, Inc., in its capacity as the general partner, has obtained, to the extent required under the Fifth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., Consent of the Limited Partners, and approved an amendment and restatement of the Agreement of Limited Partnership of AIMCO Properties, L.P. on the terms set forth herein; and
WHEREAS, the Preferred Return (as defined in the Fifth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P.) was an amount equal to zero as of immediately prior to the effectiveness of the restatement of this Agreement on the Amendment Date.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.
Act means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute.
Actions has the meaning set forth in Section 7.7 hereof.
Additional Funds has the meaning set forth in Section 4.3A hereof.
Additional Limited Partner means a Person who is admitted to the Partnership as a Limited Partner pursuant to Section 4.2 and Section 12.2 hereof and who is shown as such on the books and records of the Partnership.
Adjusted Capital Account Deficit means, with respect to any Holder, the deficit balance, if any, in such Holders Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:
(i) decrease such deficit by any amounts that such Holder is obligated to restore pursuant to this Agreement or by operation of law upon liquidation of such Holders Partnership Interest or is deemed to be obligated to restore pursuant to the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) increase such deficit by the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
Adjustment Factor means 1.0; provided, however, that in the event that:
(i) the Previous General Partner (a) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (b) splits or subdivides its outstanding REIT Shares or (c) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction, (i) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (ii) the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination;
(ii) the Previous General Partner distributes any rights, options or warrants to all holders of its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares (or other securities or rights convertible into, exchangeable for or exercisable for REIT Shares) at a price per share less than the Value of a REIT Share on the record date for such distribution (each a Distributed Right), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction (a) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date plus the maximum number of REIT Shares purchasable under such Distributed Rights and (b) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date plus a fraction (1) the numerator of which is the maximum number of REIT Shares purchasable under such Distributed Rights times the minimum purchase price per REIT Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT Share as of the record date; provided, however, that, if any such Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall be adjusted, effective retroactive to the date of distribution of the Distributed Rights,
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to reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price for the purposes of the above fraction; and
(iii) the Previous General Partner shall, by dividend or otherwise, distribute to all holders of its REIT Shares evidences of its indebtedness or assets (including securities, but excluding any dividend or distribution referred to in subsection (i) above), which evidences of indebtedness or assets relate to assets not received by the Previous General Partner, the General Partner and/or the Special Limited Partners pursuant to a pro rata distribution by the Partnership, then the Adjustment Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the close of business on the date fixed for determination of shareholders entitled to receive such distribution by a fraction (i) the numerator shall be such Value of a REIT Share on the date fixed for such determination and (ii) the denominator shall be the Value of a REIT Share on the dates fixed for such determination less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of the portion of the evidences of indebtedness or assets so distributed applicable to one REIT Share.
Any adjustments to the Adjustment Factor shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event. Notwithstanding the foregoing, in the event of any transaction described above with respect to REIT Shares that would otherwise require an adjustment to the Adjustment Factor, no such adjustment shall be made if the Partnership concurrently effects a similar and proportional transaction with respect to the Partnership Common Units. If the Previous General Partner makes an Elective Dividend, no adjustment to the Adjustment Factor shall be made if the Partnership concurrently makes a distribution to Holders of Partnership Common Units in an amount per Unit consisting of either (x) (i) a number of Partnership Common Units (or fraction thereof) equal to the aggregate number of REIT Shares paid as a dividend with respect to all REIT Shares, divided by the total number of REIT Shares outstanding as of the record date for such dividend, and (ii) cash in an amount equal to the aggregate amount of cash paid as a dividend with respect to all REIT Shares, divided by the total number of REIT Shares outstanding as of the record date for such dividend, or (y) cash in an amount equal to the aggregate value, as determined in good faith by the General Partner, of both the REIT Shares and the cash paid as a dividend with respect to all REIT Shares, divided by the total number of REIT Shares outstanding as of the record date for such dividend (the portion of such cash amount in clause (y) that is attributable to the value of the REIT Shares paid as a dividend is referred to herein as the Elective Dividend Cash Payment). For illustrative purposes, examples of adjustments to the Adjustment Factor are set forth on Exhibit B attached hereto.
Affiliate means, with respect to any Person, any Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, control when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms controlling and controlled have meanings correlative to the foregoing.
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Agreement means this Sixth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., as it may be amended, supplemented or restated from time to time.
AIR Partners means the Previous General Partner and its Subsidiaries, excluding the Partnership and its Subsidiaries.
AIR Partners Sharing Percentage means a percentage equal to 100% minus the Non-AIR Holders Sharing Percentage.
Amendment Date has the meaning set forth in the preamble hereto.
Applicable Percentage has the meaning set forth in Section 8.6B hereof.
Appraisal means, with respect to any assets, the written opinion of an independent third party experienced in the valuation of similar assets, selected by the General Partner in good faith. Such opinion may be in the form of an opinion by such independent third party that the value for such property or asset as set by the General Partner is fair, from a financial point of view, to the Partnership.
Assignee means a Person to whom one or more Partnership Common Units have been Transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 hereof.
Available Cash means, with respect to any period for which such calculation is being made,
(i) the sum, without duplication, of:
(1) the Partnerships Net Income or Net Loss (as the case may be) for such period,
(2) Depreciation and all other noncash charges to the extent deducted in determining Net Income or Net Loss for such period,
(3) the amount of any reduction in reserves of the Partnership referred to in clause (ii)(6) below (including, without limitation, reductions resulting because the General Partner determines such amounts are no longer necessary),
(4) the excess, if any, of the net cash proceeds from the sale, exchange, disposition, financing or refinancing of Partnership property for such period over the gain (or loss, as the case may be) recognized from such sale, exchange, disposition, financing or refinancing during such period (excluding Terminating Capital Transactions), and
(5) all other cash received (including amounts previously accrued as Net Income and amounts of deferred income) or any net
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amounts borrowed by the Partnership for such period that was not included in determining Net Income or Net Loss for such period;
(ii) less the sum, without duplication, of:
(1) all principal debt payments made during such period by the Partnership,
(2) capital expenditures made by the Partnership during such period,
(3) investments in any entity (including loans made thereto) to the extent that such investments are not otherwise described in clause (ii)(1) or clause (ii)(2) above,
(4) all other expenditures and payments not deducted in determining Net Income or Net Loss for such period (including amounts paid in respect of expenses previously accrued),
(5) any amount included in determining Net Income or Net Loss for such period that was not received by the Partnership during such period,
(6) the amount of any increase in reserves (including, without limitation, working capital reserves) established during such period that the General Partner determines are necessary or appropriate in its sole and absolute discretion,
(7) any amount distributed or paid in redemption of any Limited Partner Interest or Partnership Units including, without limitation, any Cash Amount paid, and
(8) any Elective Dividend Cash Payment.
Notwithstanding the foregoing, Available Cash shall not include (a) any cash received or reductions in reserves, or take into account any disbursements made, or reserves established, after dissolution and the commencement of the liquidation and winding up of the Partnership or (b) any Capital Contributions, whenever received.
Business Day means any day except a Saturday, Sunday or other day on which commercial banks in Denver, Colorado, Los Angeles, California or New York, New York are authorized or required by law to close.
Capital Account means, with respect to any Holder, the Capital Account maintained by the General Partner for such Holder on the Partnerships books and records in accordance with the following provisions:
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(a) To each Holders Capital Account, there shall be added such Holders Capital Contributions, such Holders distributive share of Net Income and any items in the nature of income or gain that are specially allocated pursuant to Section 6.3 hereof, and the principal amount of any Partnership liabilities assumed by such Holder or that are secured by any property distributed to such Holder.
(b) From each Holders Capital Account, there shall be subtracted the amount of cash and the Gross Asset Value of any property distributed to such Holder pursuant to any provision of this Agreement, such Holders distributive share of Net Losses and any items in the nature of expenses or losses that are specially allocated pursuant to Section 6.3 hereof, and the principal amount of any liabilities of such Holder assumed by the Partnership or that are secured by any property contributed by such Holder to the Partnership.
(c) In the event any interest in the Partnership is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent that it relates to the Transferred interest.
(d) In determining the principal amount of any liability for purposes of subsections (a) and (b) hereof, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.
(e) The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Regulations. If the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts are maintained in order to comply with such Regulations, the General
Partner may make such modification provided that such modification will not have a material effect on the amounts distributable to any Holder without such Holders Consent. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Holders and the amount of Partnership capital reflected on the Partnerships balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.
Capital Contribution means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any Contributed Property that such Partner contributes to the Partnership pursuant to Section 4.1, 4.2 or 4.3 hereof or is deemed to contribute pursuant to Section 4.4 hereof.
Cash Amount means the lesser of (a) an amount of cash equal to the product of (i) the Value of a REIT Share and (ii) the REIT Shares Amount determined as of the applicable Valuation Date or (b) in the case of a Declination followed by a Public Offering Funding, the Public Offering Funding Amount.
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Certificate means the Certificate of Limited Partnership of the Partnership filed in the office of the Secretary of State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act.
Charter means the Articles of Amendment and Restatement of the Previous General Partner filed with the Maryland State Department of Assessments and Taxation with an effective time of 11:55 p.m. on December 14, 2020, as amended, supplemented or restated from time to time.
Code means the Internal Revenue Code of 1986, as amended and in effect from time to time or any successor statute thereto, as interpreted by the applicable Regulations thereunder. Any reference herein to a specific Section or Sections of the Code shall be deemed to include a reference to any corresponding provision of future law.
Company Employee means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Previous General Partner or any corporation that is then a Subsidiary of the Previous General Partner.
Consent means the consent to, approval of, or vote in favor of a proposed action by a Partner given in accordance with Article 14 hereof.
Consent of the Limited Partners means the Consent of a Majority in Interest of the Limited Partners, which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and, except as otherwise provided in this Agreement, may be given or withheld by a Majority in Interest of the Limited Partners, in their reasonable discretion.
Contributed Property means each Property or other asset, in such form as may be permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Code Section 708).
Controlled Entity means, as to any Limited Partner, (a) any corporation more than fifty percent (50%) of the outstanding voting stock of which is owned by such Limited Partner or such Limited Partners Family Members, (b) any trust, whether or not revocable, of which such Limited Partner or such Limited Partners Family Members are the sole beneficiaries, (c) any partnership of which such Limited Partner is the managing partner and in which such Limited Partner or such Limited Partners Family Members hold partnership interests representing at least twenty-five percent (25%) of such partnerships capital and profits and (d) any limited liability company of which such Limited Partner is the manager and in which such Limited Partner or such Limited Partners Family Members hold membership interests representing at least twenty-five percent (25%) of such limited liability companys capital and profits.
Controlling Person means any Person, whatever his or her title, who performs executive or senior management functions for the General Partner or its Affiliates similar to those of directors, executive management and senior management, or any Person who either holds a two percent (2%) or more equity interest in the General Partner or its Affiliates, or has the power to direct or cause the direction of the General Partner or its Affiliates, whether through the ownership of voting securities, by contract or otherwise, or, in the absence of a specific role
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or title, any Person having the power to direct or cause the direction of the management-level employees and policies of the General Partner or its Affiliates. It is not intended that every Person who carries a title such as vice president, senior vice president, secretary or treasurer be included in the definition of Controlling Person.
Cut-Off Date means the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Debt means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Persons interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person that, in accordance with generally accepted accounting principles, should be capitalized.
Declination has the meaning set forth in Section 8.6D hereof.
Depreciation means, for each Fiscal Year or other applicable period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or period, Depreciation shall be in an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year or period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner.
Designated Individual has the meaning set forth in Section 10.4A hereof.
Designated Parties means the Persons designated on Exhibit C attached hereto. The General Partner may, in its sole and absolute discretion, amend Exhibit C to add Persons to be designated as Designated Parties.
Distributed Right has the meaning set forth in the definition of Adjustment Factor.
Effective Date means July 29, 1994.
Elective Dividend means a dividend paid by the Previous General Partner in which stockholders may elect to receive cash or REIT Shares.
Elective Dividend Cash Payment has the meaning set forth in the definition of Adjustment Factor.
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ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
Family Members means, as to a Person that is an individual, such Persons spouse, ancestors, descendants (whether by blood or by adoption), brothers, sisters and inter vivos or testamentary trusts of which only such Person and his spouse, ancestors, descendants (whether by blood or by adoption), brothers and sisters are beneficiaries.
Fiscal Year means the fiscal year of the Partnership, which shall be the calendar year.
Funding Debt means any Debt incurred by or on behalf of the Previous General Partner, the General Partner or the Special Limited Partners for the purpose of providing funds to the Partnership.
General Partner means AIMCO-GP, Inc., a Delaware corporation, and its successors and assigns, as the general partner of the Partnership in their capacities as general partner of the Partnership.
General Partner Interest means the Partnership Interest held by the General Partner, which Partnership Interest is an interest as a general partner under the Act. A General Partner Interest may be expressed as a number of Partnership Common Units, Partnership Preferred Units or any other Partnership Units.
General Partner Loan has the meaning set forth in Section 4.3D hereof.
Gross Asset Value means, with respect to any asset, the assets adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset as determined by the General Partner and agreed to by the contributing Partner. In any case in which the General Partner and the contributing Partner are unable to agree as to the gross fair market value of any contributed asset or assets, such gross fair market value shall be determined by Appraisal.
(b) The Gross Asset Values of all Partnership assets immediately prior to the occurrence of any event described in clause (i), clause (ii), clause (iii), clause (iv) or clause (v) hereof shall be adjusted to equal their respective gross fair market values, as determined by the General Partner using such reasonable method of valuation as it may adopt, as of the following times:
(i) the acquisition of an interest in the Partnership (other than in connection with the execution of this Agreement but including, without limitation, acquisitions pursuant to Section 4.2 hereof or contributions or deemed contributions by the General Partner pursuant to Section 4.2 hereof) by a new or existing Partner in exchange for more than a de minimis Capital Contribution or
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in exchange for services provided to or for the benefit of the Partnership in a partner capacity or in anticipation of becoming a Partner, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership;
(ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership property as consideration for an interest in the Partnership, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership;
(iii) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
(iv) upon the admission of a successor General Partner pursuant to Section 12.1 hereof; and
(v) at such other times as the General Partner shall reasonably determine necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed to a Partner shall be the gross fair market value of such asset on the date of distribution as determined by the distributee and the General Partner provided that, if the distributee is the General Partner or if the distributee and the General Partner cannot agree on such a determination, such gross fair market value shall be determined by Appraisal.
(d) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subsection (d) to the extent that the General Partner reasonably determines that an adjustment pursuant to subsection (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (d).
(e) If the Gross Asset Value of a Partnership asset has been determined or adjusted pursuant to subsection (a), subsection (b) or subsection (d) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Losses.
Holder means either (a) a Partner or (b) an Assignee, owning a Partnership Unit, that is treated as a member of the Partnership for federal income tax purposes.
Imputed Underpayment Amount has the meaning set forth in Section 10.4D hereof.
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Incapacity or Incapacitated means, (i) as to any Partner who is an individual, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner incompetent to manage his or her person or his or her estate; (ii) as to any Partner that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any Partner that is a partnership, the dissolution and commencement of winding up of the partnership; (iv) as to any Partner that is an estate, the distribution by the fiduciary of the estates entire interest in the Partnership; (v) as to any trustee of a trust that is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief of or against such Partner under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partners creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partners properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Partners consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within ninety (90) days of such appointment, or (h) an appointment referred to in clause (g) above is not vacated within ninety (90) days after the expiration of any such stay.
Indemnitee means (i) any Person made a party to a proceeding by reason of its status as (A) the Previous General Partner or the General Partner or (B) a director of the Previous General Partner or the General Partner or an officer or employee of the Partnership or the Previous General Partner or the General Partner and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.
Independent Director means a member of the Board of Directors of the Previous General Partner who is not a Company Employee or a Partnership Employee.
Interest means interest, original issue discount and other similar payments or amounts paid by the Partnership for the use or forbearance of money.
IRS means the Internal Revenue Service, which administers the internal revenue laws of the United States.
Limited Partner means the Special Limited Partners and any Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit A may be amended from time to
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time, or any Substituted Limited Partner or Additional Limited Partner, in such Persons capacity as a Limited Partner in the Partnership.
Limited Partner Interest means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of Partnership Common Units, Partnership Preferred Units or other Partnership Units.
Liquidating Event has the meaning set forth in Section 13.1 hereof.
Liquidator has the meaning set forth in Section 13.2A hereof.
Majority in Interest of the Limited Partners means Limited Partners (other than (i) the Special Limited Partners and (ii) any Limited Partner fifty percent (50%) or more of whose equity is owned, directly or indirectly, by the (a) General Partner or (b) any REIT as to which the General Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2))) holding more than fifty percent (50%) of the outstanding Voting Units held by all Limited Partners (other than (i) the Special Limited Partners and (ii) any Limited Partner fifty percent (50%) or more of whose equity is owned, directly or indirectly, by (a) the General Partner or (b) any REIT as to which the General Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2))).
Net Income or Net Loss means, for each Fiscal Year of the Partnership, an amount equal to the Partnerships taxable income or loss for such year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of Net Income or Net Loss shall be added to (or subtracted from, as the case may be) such taxable income (or loss);
(b) Any expenditure of the Partnership described in Code Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of Net Income or Net Loss, shall be subtracted from (or added to, as the case may be) such taxable income (or loss);
(c) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to subsection (b) or subsection (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;
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(d) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost recovery deductions that would otherwise be taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year;
(f) To the extent that an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partners interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and
(g) Notwithstanding any other provision of this definition of Net Income or Net Loss, any item that is specially allocated pursuant to Section 6.3 hereof shall not be taken into account in computing Net Income or Net Loss. The amounts of the items of Partnership income, gain, loss or deduction available to be specially allocated pursuant to Section 6.3 hereof shall be determined by applying rules analogous to those set forth in this definition of Net Income or Net Loss.
New LP Employee means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of New LP of Previous Public Parent or any entity that is then a Subsidiary of New LP of Previous Public Parent.
New LP of Previous Public Parent means Aimco OP L.P.
New Securities means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase REIT Shares or Preferred Shares, excluding Preferred Shares and grants under the Previous General Partners Stock Option Plans, or (ii) any Debt issued by the Previous General Partner that provides any of the rights described in clause (i).
Non-AIR Holder means any Holder other than any of the AIR Partners.
Non-AIR Holders Sharing Percentage means a percentage equal to 1%, multiplied by a fraction, (i) the numerator of which shall be the number of issued and outstanding Partnership Common Units held by Non-AIR Holders on the applicable record date or date of determination, and (ii) the denominator of which shall be the number of issued and outstanding Partnership Common Units held by Non-AIR Holders on the Amendment Date.
Nonrecourse Deductions has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).
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Nonrecourse Liability has the meaning set forth in Regulations Section 1.752-1(a)(2).
Notice of Redemption means the Notice of Redemption substantially in the form of Exhibit D attached to this Agreement.
Optionee means a Company Employee, Previous Public Parent Employee, Partnership Employee, New LP Employee, Independent Director or Previous Public Parent Director to whom a stock option is granted under the Previous General Partners Stock Option Plans.
Original Limited Partners means the Persons listed as the Limited Partners on Exhibit A originally attached to this Agreement, without regard to any amendment thereto, and does not include any Assignee or other transferee, including, without limitation, any Substituted Limited Partner succeeding to all or any part of the Partnership Interest of any such Person.
Ownership Limit means the applicable restriction on ownership of shares of the Previous General Partner imposed under the Charter.
Partner means the General Partner or a Limited Partner, and Partners means the General Partner and the Limited Partners.
Partner Minimum Gain means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
Partner Nonrecourse Debt has the meaning set forth in Regulations Section 1.704-2(b)(4).
Partner Nonrecourse Deductions has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
Partnership means the limited partnership formed under the Act and pursuant to this Agreement, and any successor thereto.
Partnership Audit Rules means Subchapter C of Chapter 63 of Subtitle F of the Code, as modified by Section 1101 of the Bipartisan Budget Act of 2015, Pub. L. No. 114-74, and any successor statutes thereto or the Treasury Regulations or other authoritative guidance promulgated thereunder.
Partnership Common Unit means a fractional share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2 hereof, but does not include any Partnership Preferred Unit or any other Partnership Unit specified in a Partnership Unit Designation as being other than a Partnership Common Unit; provided, however, that the General Partner Interest and the Limited Partner Interests shall have the differences in rights and privileges as specified in this Agreement. The ownership of Partnership Common Units may (but need not, in the sole and
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absolute discretion of the General Partner) be evidenced by the form of certificate for Partnership Common Units attached hereto as Exhibit E.
Partnership Employee means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Partnership, or any entity that is then a Subsidiary of the Partnership.
Partnership Interest means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Partnership Interest may be expressed as a number of Partnership Common Units, Partnership Preferred Units or other Partnership Units.
Partnership Minimum Gain has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).
Partnership Preferred Unit means a fractional share of the Partnership Interests that the General Partner has authorized pursuant to Section 4.2 hereof that has distribution rights, or rights upon liquidation, winding up and dissolution, that are superior or prior to the Partnership Common Units.
Partnership Record Date means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1 hereof, which record date shall generally be the same as the record date established by the Previous General Partner for a distribution to its shareholders of some or all of its portion of such distribution.
Partnership Representative has the meaning set forth in Section 10.4A hereof.
Partnership Subsidiary means any partnership or limited liability company in any unbroken chain of partnerships or limited liability companies beginning with the Partnership if each of the partnerships or limited liability companies beginning with the Partnership if each of the partnerships or limited liability companies other than the last partnership or limited liability company in the unbroken chain then owns more than fifty percent (50%) of the capital or profits interests in one of the other partnerships or limited liability companies. Partnership Subsidiary shall also mean any corporation in which the Partnership and/or any Partnership Subsidiary owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock.
Partnership Unit shall mean a Partnership Common Unit, a Partnership Preferred Unit or any other fractional share of the Partnership Interests that the General Partner has authorized pursuant to Section 4.2 hereof.
Partnership Unit Designation shall have the meaning set forth in Section 4.2 hereof.
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Percentage Interest means, as to each Partner, its interest in the Partnership Units as determined by dividing the Partnership Units owned by such Partner by the total number of Partnership Units then outstanding.
Permitted Transfer has the meaning set forth in Section 11.3A hereof.
Person means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or other entity.
Pledge has the meaning set forth in Section 11.3A hereof.
Preferred Return means, with respect to each Partnership Common Unit on a specified Partnership Record Date, an amount equal to zero on the Amendment Date (or, if later, the date such Partnership Common Unit is issued), and increased cumulatively on each Partnership Record Date on which such Unit is outstanding by an amount equal to the cash dividends per REIT Share, if any, paid by the Previous General Partner to holders of REIT Shares for which the record date is on such Partnership Record Date or any other date subsequent to the immediately preceding Partnership Record Date, in each case, multiplied by the Adjustment Factor in effect on such date; provided, however, that for each Partnership Common Unit issued after the Amendment Date, the increase that shall occur in accordance with the foregoing on the first Partnership Record Date that occurs on or after the date on which such Partnership Common Unit was first issued shall be the foregoing amount, multiplied by a fraction, the numerator of which is the number of days that such Partnership Common Unit was outstanding up to and including such first Partnership Record Date, and the denominator of which is the total number of days in the period from but excluding the immediately preceding Partnership Record Date to and including such first Partnership Record Date. In the case of an Elective Dividend, the amount of the cash dividend per REIT Share shall be calculated by dividing the aggregate amount of cash paid to all stockholders by the total number of REIT Shares outstanding as of the record date for the Elective Dividend.
Preferred Return Shortfall means, for any Partnership Common Unit, and as of any specified date, the amount (if any) by which (i) the Preferred Return with respect to such Partnership Common Unit as of such specified date, exceeds (ii) the aggregate amount distributed with respect to such Partnership Common Unit after the Amendment Date and prior to such specified date pursuant to Section 5.1A, but excluding any Elective Dividend Cash Payment.
Preferred Share means a share of capital stock of the Previous General Partner now or hereafter authorized or reclassified that has dividend rights, or rights upon liquidation, winding up and dissolution, that are superior or prior to the REIT Shares.
Previous General Partner has the meaning set forth in the Preamble hereof.
Previous General Partners Stock Option Plans means any stock option or equity incentive or award plan adopted by the Previous General Partner.
Previous Public Parent means Apartment Investment and Management Company, a Maryland corporation.
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Previous Public Parent Director means any member of the Board of Directors of the Previous Public Parent who is not a Previous Public Parent Employee or New LP Employee.
Previous Public Parent Employee means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Previous Public Parent or any Subsidiary of the Previous Public Parent.
Primary Offering Notice has the meaning set forth in Section 8.6F(4) hereof.
Properties means any assets and property of the Partnership such as, but not limited to, interests in real property and personal property, including, without limitation, fee interests, interests in ground leases, interests in limited liability companies, joint ventures or partnerships, interests in mortgages, and Debt instruments as the Partnership may hold from time to time.
Public Offering Funding has the meaning set forth in Section 8.6D(2) hereof.
Public Offering Funding Amount means the dollar amount equal to (i) the product of (x) the number of Registrable Shares sold in a Public Offering Funding and (y) the public offering price per share of such Registrable Shares in such Public Offering Funding, less (ii) the aggregate underwriting discounts and commissions in such Public Offering Funding.
Qualified Transferee means an accredited investor as defined in Rule 501 promulgated under the Securities Act.
Qualifying Party means (a) an Original Limited Partner, (b) an Additional Limited Partner, (c) a Designated Party that is either a Substituted Limited Partner or an Assignee, (d) a Family Member, or a lending institution as the pledgee of a Pledge, who is the transferee in a Permitted Transfer or (e) with respect to any Notice of Redemption delivered to the General Partner within the time period set forth in Section 11.3A(4) hereof, a Substituted Limited Partner succeeding to all or part of the Limited Partner Interest of (i) an Original Limited Partner, (ii) an Additional Limited Partner, (iii) a Designated Party that is either a Substituted Limited Partner or an Assignee or (iv) a Family Member, or a lending institution who is the pledgee of a Pledge, who is the transferee in a Permitted Transfer.
Redeemable Units means those Partnership Common Units issued to the Original Limited Partners as of the Effective Date together with such additional Partnership Common Units that, after the Effective Date, may be issued to Additional Limited Partners pursuant to Section 4.2 hereof.
Redemption has the meaning set forth in Section 8.6A hereof.
Registrable Shares has the meaning set forth in Section 8.6D(2) hereof.
Regulations means the applicable income tax regulations under the Code, whether such regulations are in proposed, temporary or final form, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
Regulatory Allocations has the meaning set forth in Section 6.3B(7) hereof.
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REIT means a real estate investment trust qualifying under Code Section 856.
REIT Partner means (a) a Partner that is, or has made an election to qualify as, a REIT, including each of the Special Limited Partners; (b) any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of any Partner that is, or has made an election to qualify as, a REIT and (c) any Partner, including, without limitation, the General Partner, that is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of a REIT.
REIT Payment has the meaning set forth in Section 15.11 hereof.
REIT Requirements has the meaning set forth in Section 5.1 hereof.
REIT Share means a share of the Previous General Partners Class A Common Stock, par value $.01 per share. Where relevant in this Agreement, REIT Shares includes shares of the Previous General Partners Class A Common Stock, par value $.01 per share, issued upon conversion of Preferred Shares.
REIT Shares Amount means, with respect to any Tendered Units and as of any Valuation Date, a number of REIT Shares equal to the sum of (x) the product of (a) the number of Tendered Units, and (b) the Adjustment Factor, and (y) the quotient obtained by dividing (i) the aggregate Preferred Return Shortfall applicable to such Tendered Units by (ii) the Value of a REIT Share (all calculated as of such Valuation Date); provided, however, that, in the event that the Previous General Partner issues to all holders of REIT Shares as of a certain record date rights, options, warrants or convertible or exchangeable securities entitling the Previous General Partners shareholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the Rights), with the record date for such Rights issuance falling within the period starting on the date of the Notice of Redemption and ending on the day immediately preceding the Specified Redemption Date, which Rights will not be distributed before the relevant Specified Redemption Date, then the REIT Shares Amount shall also include such Rights that a holder of that number of REIT Shares would be entitled to receive, expressed, where relevant hereunder, in a number of REIT Shares determined by the Previous General Partner in good faith.
REIT Sub 1 means AIR REIT Sub 1, LLC, a Delaware limited liability company that has elected to be treated as a corporation and will elect to be treated as a REIT for U.S. federal income tax purposes.
REIT Sub 2 means AIR REIT Sub 2, LLC, a Delaware limited liability company that has elected to be treated as a corporation and will elect to be treated as a REIT for U.S. federal income tax purposes.
Related Party means, with respect to any Person, any other Person whose ownership of shares of the Previous General Partners capital stock would be attributed to the first such Person under Code Section 544 (as modified by Code Section 856(h)(1)(B)).
Rights has the meaning set forth in the definition of REIT Shares Amount.
SEC means the Securities and Exchange Commission.
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Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
Single Funding Notice has the meaning set forth in Section 8.6D(3) hereof.
Special Limited Partners has the meaning set forth in the Preamble hereof.
Specified Redemption Date means the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the Business Day next following the date of the closing of the Public Offering Funding; provided, however, that no Specified Redemption Date shall occur during the first Twelve-Month Period; provided, further, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 8.6B hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Subsidiary means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person; provided, however, that, with respect to the Partnership, Subsidiary means solely a partnership or limited liability company (taxed, for federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation) of which the Partnership is a member unless the General Partner has received an unqualified opinion from independent counsel of recognized standing, or a ruling from the IRS, that the ownership of shares of stock of a corporation or other entity will not jeopardize any Special Limited Partners status as a REIT or the status of the General Partner or any other wholly owned subsidiary of a Special Limited Partner as a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)), in which event the term Subsidiary shall include the corporation or other entity which is the subject of such opinion or ruling.
Substituted Limited Partner means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4 hereof.
Tax Items has the meaning set forth in Section 6.4A hereof.
Tax Matters Partner has the meaning set forth in Section 10.3A hereof.
TEFRA Rules means Subchapter C of Chapter 63 of the Code (Section 6221 et seq.) as in effect for any period to which the Partnership Audit Rules do not apply, and any Treasury Regulations or other guidance issued thereunder, and any similar state or local legislation, regulations or guidance.
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Tendered Units has the meaning set forth in Section 8.6A hereof.
Tendering Party has the meaning set forth in Section 8.6A hereof.
Terminating Capital Transaction means any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership.
Transfer, when used with respect to a Partnership Unit, or all or any portion of a Partnership Interest, means any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), Pledge, encumbrance, hypothecation, mortgage, exchange, transfer or other disposition or act of alienation, whether voluntary or involuntary or by operation of law; provided, however, that when the term is used in Article 11 hereof, Transfer does not include (a) any Redemption of Partnership Common Units by the Partnership, or acquisition of Tendered Units by the Previous General Partner, pursuant to Section 8.6 hereof or (b) any redemption of Partnership Units pursuant to any Partnership Unit Designation. The terms Transferred and Transferring have correlative meanings.
Twelve-Month Period means (a) as to an Original Limited Partner or any successor-in-interest that is a Qualifying Party, a twelve-month period ending on the day before the first (1st) anniversary of the Effective Date or on the day before a subsequent anniversary thereof and (b) as to any other Qualifying Party, a twelve-month period ending on the day before the first (1st) anniversary of such Qualifying Partys becoming a Holder of Partnership Common Units or on the day before a subsequent anniversary thereof; provided, however, that the General Partner may, in its sole and absolute discretion, by written agreement with a Qualifying Party, shorten the first Twelve-Month Period to a period of less than twelve (12) months with respect to a Qualifying Party other than an Original Limited Partner or successor-in-interest.
Unitholder means the General Partner or any Holder of Partnership Units.
Valuation Date means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the immediately preceding Business Day.
Value means, on any Valuation Date with respect to a REIT Share, the average of the daily market prices for ten (10) consecutive trading days immediately preceding the Valuation Date (except that, as provided in Section 4.4C hereof, the market price for the trading day immediately preceding the date of exercise of a stock option under the Previous General Partners Stock Option Plans shall be substituted for such average of daily market prices for purposes of Section 4.4 hereof). The market price for any such trading day shall be:
(i) if the REIT Shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
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(ii) if the REIT Shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the REIT Shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Value of the REIT Shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event that the REIT Shares Amount includes Rights (as defined in the definition of REIT Shares Amount) that a holder of REIT Shares would be entitled to receive, then the Value of such Rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.
Voting Units means Partnership Common Units, Class I High Performance Partnership Units and any other class of Partnership Units having the same voting or approval rights as Partnership Common Units.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization. The Partnership is a limited partnership organized pursuant to the provisions of the Act and upon the terms and subject to the conditions set forth in this Agreement. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes.
Section 2.2 Name. The name of the Partnership is AIMCO Properties, L.P. The Partnerships business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words Limited Partnership, L.P., Ltd. or similar words or letters shall be included in the Partnerships name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Partners of such change in the next regular communication to the Partners.
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Section 2.3 Registered Office and Agent; Principal Office. The address of the registered office of the Partnership in the State of Delaware is located at 251 Little Falls Drive, Wilmington, Delaware 19808, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office is Corporation Service Company. The principal office of the Partnership is located at 4582 South Ulster Street, Suite 1700, Denver, CO 80237, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.
Section 2.4 Power of Attorney.
A. Each Limited Partner and each Assignee hereby irrevocably constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:
(1) execute, swear to, seal, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments, supplements or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability to the extent provided by applicable law) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (b) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the distribution or exchange of assets of the Partnership pursuant to the terms of this Agreement; (e) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article 11, Article 12 or Article 13 hereof or the Capital Contribution of any Partner; and (f) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges relating to Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole and absolute discretion of the General Partner, to effectuate the terms or intent of this Agreement.
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Nothing contained herein shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article 14 hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and a special power coupled with an interest, in recognition of the fact that each of the Limited Partners and Assignees will be relying upon the power of the General Partner or the Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the Transfer of all or any portion of such Limited Partners or Assignees Partnership Units or Partnership Interest and shall extend to such Limited Partners or Assignees heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or the Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within fifteen (15) days after receipt of the General Partners or the Liquidators request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.
Section 2.5 Term. The term of the Partnership commenced on May 16, 1994, the date that the original Certificate was filed in the office of the Secretary of State of Delaware in accordance with the Act, and shall continue until the Partnership is dissolved pursuant to the provisions of Article 13 hereof or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of the Partnership is to conduct any business, enterprise or activity permitted by or under the Act, including, but not limited to, (i) to conduct the business of ownership, construction, development and operation of multifamily rental apartment communities, (ii) to enter into any partnership, joint venture, business trust arrangement, limited liability company or other similar arrangement to engage in any business permitted by or under the Act, or to own interests in any entity engaged in any business permitted by or under the Act, (iii) to conduct the business of providing property and asset management and brokerage services, whether directly or through one or more partnerships, joint ventures, subsidiaries, business trusts, limited liability companies or other similar arrangements, and (iv) to do anything necessary or incidental to the foregoing; provided, however, such business and arrangements and interests may be limited to and conducted in such a manner as to permit the Previous General Partner, in the sole and absolute discretion of the General Partner, at all times to be classified as a REIT.
Section 3.2 Powers.
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A. The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership.
B. Notwithstanding any other provision in this Agreement, the General Partner may cause the Partnership not to take, or to refrain from taking, any action that, in the judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the Previous General Partner to continue to qualify as a REIT, (ii) could subject the Previous General Partner to any additional taxes under Code Section 857 or Code Section 4981 or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the Previous General Partner, the General Partner, their securities or the Partnership, unless such action (or inaction) under clause (i), clause (ii) or clause (iii) above shall have been specifically consented to by the Previous General Partner and the General Partner in writing.
Section 3.3 Partnership Only for Purposes Specified. The Partnership shall be a limited partnership only for the purposes specified in Section 3.1 hereof, and this Agreement shall not be deemed to create a company, venture or partnership between or among the Partners with respect to any activities whatsoever other than the activities within the purposes of the Partnership as specified in Section 3.1 hereof. Except as otherwise provided in this Agreement, no Partner shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Partnership, its properties or any other Partner. No Partner, in its capacity as a Partner under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Partner, nor shall the Partnership be responsible or liable for any indebtedness or obligation of any Partner, incurred either before or after the execution and delivery of this Agreement by such Partner, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act.
Section 3.4 Representations and Warranties by the Parties.
A. Each Partner that is an individual (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or a Substituted Limited Partner) represents and warrants to each other Partner(s) that (i) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any material agreement by which such Partner or any of such Partners property is bound, or any statute, regulation, order or other law to which such Partner is subject, (ii) such Partner is neither a foreign person within the meaning of Code Section 1445(f) nor a foreign partner within the meaning of Code Section 1446(e), (iii) such Partner does not own, directly or indirectly, (a) five percent (5%) or more of the total combined voting power of all classes of stock entitled to vote, or five percent (5%) or more of the total number of shares of all classes of stock, of any corporation that is a tenant of any of (I) the General Partner, the Special Limited Partners or any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner, the Special Limited Partners, any qualified REIT
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subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner or the Partnership is a member or (b) an interest of five percent (5%) or more in the assets or net profits of any tenant of any of (I) the General Partner, the Special Limited Partners or any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner, (II) the Partnership or (III) any partnership, venture, or limited liability company of which the General Partner, the Special Limited Partners, any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner or the Partnership is a member and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
B. Each Partner that is not an individual (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or a Substituted Limited Partner) represents and warrants to each other Partner(s) that (i) all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including, without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, directors and/or shareholder(s), as the case may be, as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, charter or bylaws, as the case may be, any material agreement by which such Partner or any of such Partners properties or any of its partners, members, beneficiaries, trustees or shareholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Partner or any of its partners, members, trustees, beneficiaries or shareholders, as the case may be, is or are subject, (iii) such Partner is neither a foreign person within the meaning of Code Section 1445(f) nor a foreign partner within the meaning of Code Section 1446(e), (iv) such Partner does not own, directly or indirectly, (a) five percent (5%) or more of the total combined voting power of all classes of stock entitled to vote, or five percent (5%) or more of the total number of shares of all classes of stock, of any corporation that is a tenant of any of (I) the General Partner, the Special Limited Partners or any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner, the Special Limited Partners, any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner or the Partnership is a member or (b) an interest of five percent (5%) or more in the assets or net profits of any tenant of any of (I) the General Partner, the Special Limited Partners or any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner, (II) the Partnership or (III) any partnership, venture or limited liability company for which the General Partner, the Special Limited Partners, any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to a Special Limited Partner or the Partnership is a member and (v) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
C. Each Partner (including, without limitation, each Substituted Limited Partner as a condition to becoming a Substituted Limited Partner) represents, warrants and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Partner
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further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds that it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment.
D. The representations and warranties contained in Sections 3.4A, 3.4B and 3.4C hereof shall survive the execution and delivery of this Agreement by each Partner (and, in the case of an Additional Limited Partner or a Substituted Limited Partner, the admission of such Additional Limited Partner or Substituted Limited Partner as a Limited Partner in the Partnership) and the dissolution, liquidation and termination of the Partnership.
E. Each Partner (including, without limitation, each Substituted Limited Partner as a condition to becoming a Substituted Limited Partner) hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, that may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners. The Partners have heretofore made Capital Contributions to the Partnership. Each Partner owns Partnership Units in the amount set forth for such Partner on Exhibit A, as the same may be amended from time to time by the General Partner to the extent necessary to reflect accurately sales, exchanges or other Transfers, redemptions, Capital Contributions, the issuance of additional Partnership Units, or similar events having an effect on a Partners ownership of Partnership Units. Except as provided by law or in Section 4.2, 4.3 or 10.5 hereof, the Partners shall have no obligation or right to make any additional Capital Contributions or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests.
A. General. The General Partner is hereby authorized to cause the Partnership to issue additional Partnership Interests, in the form of Partnership Units, for any Partnership purpose, at any time or from time to time, to the Partners (including the General Partner and the Special Limited Partners) or to other Persons, and to admit such Persons as Additional Limited Partners, for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners. Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units (i) upon the conversion, redemption or exchange of any Debt, Partnership Units or other securities issued by the Partnership, (ii) for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership, and (iii) in connection with any merger of
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any other Person into the Partnership if the applicable merger agreement provides that Persons are to receive Partnership Units in exchange for their interests in the Person merging into the Partnership. Subject to Delaware law, any additional Partnership Interests may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties as shall be determined by the General Partner, in its sole and absolute discretion without the approval of any Limited Partner, and set forth in a written document thereafter attached to and made an exhibit to this Agreement (each, a Partnership Unit Designation). Without limiting the generality of the foregoing, the General Partner shall have authority to specify (a) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (b) the right of each such class or series of Partnership Interests to share in Partnership distributions; (c) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership; (d) the voting rights, if any, of each such class or series of Partnership Interests; and (e) the conversion, redemption or exchange rights applicable to each such class or series of Partnership Interests. Upon the issuance of any additional Partnership Interest, the General Partner shall amend Exhibit A as appropriate to reflect such issuance.
B. Issuances to the General Partner or Special Limited Partners. No additional Partnership Units shall be issued to the General Partner or the Special Limited Partners unless (i) the additional Partnership Units are issued to all Partners in proportion to their respective Percentage Interests, (ii) (a) the additional Partnership Units are (x) Partnership Common Units issued in connection with an issuance of REIT Shares, or (y) Partnership Units (other than Partnership Common Units) issued in connection with an issuance of Preferred Shares, New Securities or other interests in the Previous General Partner (other than REIT Shares), which Preferred Shares, New Securities or other interests have designations, preferences and other rights, terms and provisions that are substantially the same as the designations, preferences and other rights, terms and provisions of the additional Partnership Units issued to the General Partner or the Special Limited Partners, and (b) the General Partner or the Special Limited Partners, as the case may be, contributes to the Partnership the cash proceeds or other consideration received in connection with the issuance of such REIT Shares, Preferred Shares, New Securities or other interests in the Previous General Partner, (iii) the additional Partnership Units are issued upon the conversion, redemption or exchange of Debt, Partnership Units or other securities issued by the Partnership, or (iv) the additional Partnership Units are issued pursuant to Section 4.4.
C. No Preemptive Rights. No Person, including, without limitation, any Partner or Assignee, shall have any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Partnership Interest.
A. General. The General Partner may, at any time and from time to time, determine that the Partnership requires additional funds (Additional Funds) for the acquisition or development of additional Properties, for the redemption of Partnership Units or for such other purposes as the General Partner may determine. Additional Funds may be obtained by the Partnership, at the election of the General Partner, in any manner provided in, and in accordance with, the terms of this Section 4.3 without the approval of any Limited Partners.
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B. Additional Capital Contributions. The General Partner, on behalf of the Partnership, may obtain any Additional Funds by accepting Capital Contributions from any Partners or other Persons and issuing additional Partnership Units in consideration therefor.
C. Loans by Third Parties. The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt to any Person (other than the Previous General Partner, the General Partner or the Special Limited Partners) upon such terms as the General Partner determines appropriate, including making such Debt convertible, redeemable or exchangeable for Partnership Units; provided, however, that the Partnership shall not incur any such Debt if (i) a breach, violation or default of such Debt would be deemed to occur by virtue of the Transfer of any Partnership Interest, or (ii) such Debt is recourse to any Partner (unless the Partner otherwise agrees).
D. General Partner Loans. The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt with the Previous General Partner, the General Partner or the Special Limited Partners (each, a General Partner Loan) if (i) such Debt is, to the extent permitted by law, on substantially the same terms and conditions (including interest rate, repayment schedule, and conversion, redemption, repurchase and exchange rights) as Funding Debt incurred by the Previous General Partner, the General Partner or the Special Limited Partners, the net proceeds of which are loaned to the Partnership to provide such Additional Funds, or (ii) such Debt is on terms and conditions no less favorable to the Partnership than would be available to the Partnership from any third party; provided, however, that the Partnership shall not incur any such Debt if (a) a breach, violation or default of such Debt would be deemed to occur by virtue of the Transfer of any Partnership Interest, or (b) such Debt is recourse to any Partner (unless the Partner otherwise agrees).
E. Issuance of Securities by the Previous General Partner. The Previous General Partner shall not issue any additional REIT Shares, Preferred Shares or New Securities unless (i) the Previous General Partner contributes or is deemed to contribute the cash proceeds or other consideration received from the issuance of such additional REIT Shares, Preferred Shares or New Securities, as the case may be, and from the exercise of the rights contained in any such additional New Securities, to any or all of the General Partner and the Special Limited Partners, and (ii) it or they, as the case may be, contribute or is deemed to contribute such cash proceeds or other consideration to the Partnership in exchange for (x) in the case of an issuance of REIT Shares, Partnership Common Units, or (y) in the case of an issuance of Preferred Shares or New Securities, Partnership Units with designations, preferences and other rights, terms and provisions that are substantially the same as the designations, preferences and other rights, terms and provisions of such Preferred Shares or New Securities; provided, however, that notwithstanding the foregoing, the Previous General Partner may issue REIT Shares, Preferred Shares or New Securities (a) pursuant to Section 4.4 or Section 8.6B hereof, (b) pursuant to a dividend or distribution (including any stock split) of REIT Shares, Preferred Shares or New Securities to all of the holders of REIT Shares, Preferred Shares or New Securities, as the case may be, (c) upon a conversion, redemption or exchange of Preferred Shares, (d) upon a conversion, redemption, exchange or exercise of New Securities, or (e) in connection with an acquisition of a property or other asset to be owned, directly or indirectly, by the Previous General Partner if the General Partner determines that such acquisition is in the best interests of the Partnership. In the event of any issuance of additional REIT Shares, Preferred Shares or New
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Securities by the Previous General Partner, and the contribution or deemed contribution to the Partnership, by the General Partner or the Special Limited Partners, of the cash proceeds or other consideration received from such issuance, the Partnership shall pay the Previous General Partners expenses associated with such issuance, including any underwriting discounts or commissions.
Section 4.4 Stock Option Plans.
A. Options Granted to Company Employees, Previous Public Parent Employees, Independent Directors and Previous Public Parent Directors. If at any time or from time to time, in connection with the Previous General Partners Stock Option Plans, a stock option or other award granted to or held by a Company Employee, Previous Public Parent Employee, Independent Director or Previous Public Parent Director is duly exercised or with respect to awards other than stock options, vested:
(1) The Special Limited Partners shall with respect to an exercised stock option, as soon as practicable after such exercise, make a Capital Contribution to the Partnership in an amount equal to the exercise price paid to the Previous General Partner by such exercising party in connection with the exercise of such stock option.
(2) With respect to awards other than stock options, the Special Limited Partners shall issue such number of REIT Shares as are to be issued to the Company Employee, Previous Public Parent Employee, Independent Director or Previous Public Parent Director, as applicable, in accordance with the Stock Option Plan and, with respect to stock options and other awards, notwithstanding the amount of the Capital Contribution actually made pursuant to Section 4.4A(1) hereof, if applicable, the Special Limited Partners shall be deemed to have contributed to the Partnership as a Capital Contribution, in consideration of an additional Limited Partner Interest (expressed in and as additional Partnership Common Units), an amount equal to the Value of a REIT Share as of the date of exercise or vesting (as applicable) multiplied by the number of REIT Shares then being issued in connection with the exercise of such stock option or vesting with respect to other awards.
(3) An equitable Percentage Interest adjustment shall be made in which the Special Limited Partners shall be treated as having made a cash contribution equal to the amount described in Section 4.4A(2) hereof.
B. Options Granted to Partnership Employees or New LP Employees. If at any time or from time to time, in connection with the Previous General Partners Stock Option Plans, a stock option or other award granted to or held by a Partnership Employee or a New LP Employee is duly exercised or with respect to awards other than stock options, vested:
(1) With respect to awards other than stock options, the Previous General Partner shall issue such number of REIT Shares as are to be issued to the Partnership Employee or New LP Employee, as applicable, in accordance with the Stock Option Plan and, with respect to stock options and other awards, the General Partner shall cause the Previous General Partner to sell (or shall be deemed to have sold such shares)
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to the Partnership, and the Partnership shall purchase from the Previous General Partner, the number of REIT Shares as to which such stock option is being exercised or other award is vesting. The purchase price per REIT Share for such sale of REIT Shares to the Partnership shall be the Value of a REIT Share as of the date of exercise of such stock option or date of vesting with respect to other awards.
(2) The Partnership shall sell to the Optionee (or if the Optionee is an employee of a Partnership Subsidiary, the Partnership shall sell to such Partnership Subsidiary, which in turn shall sell to the Optionee), for a cash price per share equal to the Value of a REIT Share at the time of the exercise, the number of REIT Shares equal to (a) the exercise price paid to the Previous General Partner by the exercising party in connection with the exercise of such stock option divided by (b) the Value of a REIT Share at the time of such exercise.
(3) The Partnership shall transfer or be deemed to transfer to the Optionee (or if the Optionee is an employee of a Partnership Subsidiary, the Partnership shall transfer to such Partnership Subsidiary, which in turn shall transfer to the Optionee) at no additional cost, as additional compensation, the number of REIT Shares equal to the number of REIT Shares described in Section 4.4B(1) hereof less, with respect to stock options, the number of REIT Shares described in Section 4.4B(2) hereof.
(4) The Special Limited Partners shall, as soon as practicable after such exercise or vesting, make or be deemed to make, a Capital Contribution to the Partnership of an amount equal to all proceeds received (from whatever source, but excluding any payment in respect of payroll taxes or other withholdings) by the Previous General Partner, the General Partner or the Special Limited Partners in connection with the exercise of such stock option or the vesting of such other award. An equitable Percentage Interest adjustment shall be made in which the Special Limited Partners shall be treated as having made a cash contribution equal to the amount described in Section 4.4B(1) hereof.
C. Special Valuation Rule. For purposes of this Section 4.4, in determining the Value of a REIT Share, only the trading date immediately preceding the exercise of the relevant stock option or the vesting with respect to awards other than stock options under the Previous General Partners Stock Option Plans shall be considered.
D. Future Stock Incentive Plans. Nothing in this Agreement shall be construed or applied to preclude or restrain the Previous General Partner, the General Partner or the Special Limited Partners from adopting, modifying or terminating stock incentive plans, in addition to the Previous General Partners Stock Option Plans, for the benefit of employees, directors or other business associates of the Previous General Partner, the General Partner, the Special Limited Partners, the Partnership or any of their Affiliates. The Limited Partners acknowledge and agree that, in the event that any such plan is adopted, modified or terminated by the Previous General Partner, the General Partner or the Special Limited Partners amendments to this Section 4.4 may become necessary or advisable and that any approval or consent to any such amendments requested by the Previous General Partner, the General Partner or the Special Limited Partners shall not be unreasonably withheld or delayed.
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Section 4.5 No Interest; No Return. No Partner shall be entitled to interest on its Capital Contribution or on such Partners Capital Account. Except as provided herein or by law, no Partner shall have any right to demand or receive the return of its Capital Contribution from the Partnership.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions. Subject to the terms of any Partnership Unit Designation, the General Partner shall cause the Partnership to distribute quarterly all, or such portion as the General Partner may in its sole and absolute discretion determine (provided such amount may not be less than the aggregate Preferred Return Shortfall of all Partnership Common Units held by all Non-AIR Holders), of Available Cash generated by the Partnership during such quarter to the Holders of Partnership Common Units as follows:
A. First, to the Non-AIR Holders of Partnership Common Units as of the Partnership Record Date for such distribution, in accordance with the Preferred Return Shortfalls of their Partnership Common Units, until the aggregate Preferred Return Shortfall applicable to all Partnership Common Units held by the Non-AIR Holders is zero;
B. Second, to the AIR Partners in accordance with the Preferred Return Shortfalls of their Partnership Common Units, until the aggregate Preferred Return Shortfall applicable to all Partnership Common Units held by the AIR Partners is zero; and
C. Third, (i) the Non-AIR Holders Sharing Percentage to the Non-AIR Holders, and (ii) the AIR Partners Sharing Percentage to the AIR Partners, in each case, allocated among them based on their ownership of Partnership Common Units.
The General Partner in its sole and absolute discretion may distribute to the Unitholders Available Cash on a more frequent basis and provide for an appropriate record date. The General Partner shall take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the Previous General Partners qualification as a REIT, to cause the Partnership to distribute amounts sufficient to enable the AIR Partners to transfer funds to the Previous General Partner that, together with amounts received by the Previous General Partner from sources other than the Partnership, will allow the Previous General Partner to pay stockholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the Code and Regulations (the REIT Requirements) and (b) avoid any federal income or excise tax liability of the Previous General Partner.
Section 5.2 Distributions in Kind. No right is given to any Non-AIR Holder to demand and receive property other than cash as provided in this Agreement. The General Partner may determine, in its sole and absolute discretion, to make a distribution in kind of Partnership assets (a) to all Unitholders, in which case such assets shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles 5, 6 and 10 hereof, or (b) only to AIR Partners and not to any Non-AIR Holders if, after giving effect to such distribution to AIR Partners, the net asset value of the Partnership, as reasonably determined by
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the General Partner in good faith, would exceed 200% of the sum of (i) the product of (x) the number of Partnership Common Units then held by Non-AIR Holders, (y) the Value of a REIT Share, and (z) the Adjustment Factor, and (ii) the aggregate liquidation preference of all outstanding Partnership Preferred Units (all calculated as of the date of such distribution).
Section 5.3 Amounts Withheld. All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 hereof with respect to any allocation, payment or distribution to any Unitholder shall be treated as amounts paid or distributed to such Unitholder pursuant to Section 5.1 hereof for all purposes under this Agreement.
Section 5.4 Distributions Upon Liquidation. Notwithstanding the other provisions of this Article 5, net proceeds from a Terminating Capital Transaction, and any other cash received or reductions in reserves made after commencement of the liquidation of the Partnership, shall be distributed to the Unitholders in accordance with Section 13.2 hereof.
Section 5.5 Restricted Distributions. Notwithstanding any provision to the contrary contained in this Agreement, neither the Partnership nor the General Partner, on behalf of the Partnership, shall make a distribution to any Unitholder on account of its Partnership Interest or interest in Partnership Units if such distribution would violate Section 17-607 of the Act or other applicable law.
ARTICLE 6
ALLOCATIONS
Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss. Subject to Section 11.6C hereof, Net Income and Net Loss of the Partnership shall be determined and allocated with respect to each Fiscal Year of the Partnership as of the end of each such year. Except as otherwise provided in this Article 6, and subject to Section 11.6C hereof, an allocation to a Unitholder of a share of Net Income or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Income or Net Loss.
Section 6.2 General Allocations. Subject to the terms of any Partnership Unit Designation, and except as otherwise provided in this Article 6 and subject to Section 11.6C hereof, all Net Income and Net Loss of the Partnership for any relevant Fiscal Year (or other taxable year or taxable period) will be allocated as follows:
A. Net Income. Net Income shall be allocated in the following manner and order of priority:
(1) First, to each Holder, in an amount that will cause such allocation, together with the amount of all previous allocations of Net Income pursuant to this Section 6.2A(1) after the Amendment Date, to be equal to the cumulative distributions received by such Holder with respect to its Partnership Common Units pursuant to (i) Section 5.1, and (ii) in connection with an Elective Dividend by the Previous General Partner (provided that any distribution described in this clause (ii) shall be limited to the
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Elective Dividend Cash Payment received by such Holder), for all taxable periods beginning on and after the Amendment Date;
(2) Second, any remaining Net Income to each Holder in proportion to, and to the extent that, the amount of cumulative Net Loss previously allocated to such Holder exceeds the cumulative amount of Net Income previously allocated to such Holder pursuant to this Section 6.2A(2), in each case after the Amendment Date; and
(3) Third, with respect to all other Net Income, the Non-AIR Holders Sharing Percentage to the Non-AIR Holders, and the AIR Partners Sharing Percentage to the AIR Partners, on a pari passu basis.
B. Net Loss. Net Loss shall be allocated, subject, however, to the limitation set forth in Section 6.2C, to the Non-AIR Holders in proportion to the Non-AIR Holders Sharing Percentage, and to the AIR Partners in proportion to the AIR Partners Sharing Percentage, on a pari passu basis.
C. Net Loss Limitation. Any Net Loss allocated pursuant to Section 6.2B will not exceed the maximum amount of Net Loss that can be so allocated without causing any Holder to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In the event that any but not all of the Holders would have an Adjusted Capital Account Deficit as a consequence of an allocation of Net Loss pursuant to Section 6.2B, the limitation set forth in the immediately preceding sentence will be applied on a Holder-by-Holder basis so as to allocate the maximum permissible Net Loss to each Holder under Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
D. Liquidating Event. If a Liquidating Event occurs in a Partnership taxable year, Net Income and Net Loss (or, if necessary, separate items of income, gain, loss and deduction constituting such Net Income and Net Loss) for such taxable year and any prior taxable years (to the extent permitted by Section 761(c) of the Code) shall be allocated among the Holders in such amounts as will cause, to the greatest extent possible, the Capital Account of each Non-AIR Holder to equal the amount such Non-AIR Holder would be entitled to receive were such Holder to require the Partnership to redeem all of such Holders Partnership Common Units pursuant to Section 8.6. If the Gross Asset Values of the Partnerships assets are adjusted in accordance with subparagraph (b) of the definition of Gross Asset Value, after items are allocated pursuant to Sections 6.2A(1) and (2) and Section 6.2B, such adjustments shall be allocated in accordance with this Section 6.2D.
Notwithstanding anything to the contrary in this Agreement, the Partnership Representative in its discretion is expressly authorized to take any action necessary or appropriate to comply with the Partnership Audit Procedures, and to appropriately allocate the burden of any assessments thereunder among the Partners (as determined in the sole good faith judgment of the General Partner).
Section 6.3 Additional Allocation Provisions. Notwithstanding the foregoing provisions of this Article 6:
A. Intentionally Omitted.
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B. Regulatory Allocations.
(1) Minimum Gain Chargeback. Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 hereof, or any other provision of this Article 6, if there is a net decrease in Partnership Minimum Gain during any Fiscal Year, each Holder of Partnership Common Units shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Holders share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Holder pursuant thereto. The items to be allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3B(1) is intended to qualify as a minimum gain chargeback within the meaning of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
(2) Partner Minimum Gain Chargeback. Except as otherwise provided in Regulations Section 1.704-2(i)(4) or in Section 6.3B(1) hereof, if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each Holder of Partnership Common Units who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Holders share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.7042(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each General Partner, Limited Partner and other Holder pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3B(2) is intended to qualify as a chargeback of partner nonrecourse debt minimum gain within the meaning of Regulations Section 1.704-2(i) and shall be interpreted consistently therewith.
(3) Nonrecourse Deductions and Partner Nonrecourse Deductions. Any Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Holders of Partnership Common Units in accordance with their Partnership Common Units. Any Partner Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Holder(s) who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable, in accordance with Regulations Section 1.704-2(i).
(4) Qualified Income Offset. If any Holder of Partnership Common Units unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain shall be allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such Holder in an amount and manner sufficient to eliminate, to the extent required by such Regulations, the Adjusted Capital Account Deficit of such Holder as quickly as
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possible, provided that an allocation pursuant to this Section 6.3B(4) shall be made if and only to the extent that such Holder would have an Adjusted Capital Account Deficit after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3B(4) were not in the Agreement. It is intended that this Section 6.3B(4) qualify and be construed as a qualified income offset within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(5) Gross Income Allocation. In the event that any Holder of Partnership Common Units has a deficit Capital Account at the end of any Fiscal Year that is in excess of the sum of (1) the amount (if any) that such Holder is obligated to restore to the Partnership upon complete liquidation of such Holders Partnership Interest (including, the Holders interest in outstanding Partnership Preferred Units and other Partnership Units) and (2) the amount that such Holder is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Holder shall be specially allocated items of Partnership income and gain in the amount of such excess to eliminate such deficit as quickly as possible, provided that an allocation pursuant to this Section 6.3B(5) shall be made if and only to the extent that such Holder would have a deficit Capital Account in excess of such sum after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3B(5) and Section 6.3B(4) hereof were not in the Agreement.
(6) Section 754 Adjustment. To the extent that an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2) (iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Holder of Partnership Common Units in complete liquidation of its interest in the Partnership, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Holders in accordance with their Partnership Common Units in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Holders to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(7) Curative Allocations. The allocations set forth in Sections 6.3B(1), (2), (3), (4), (5) and (6) hereof (the Regulatory Allocations) are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Section 6.1 hereof, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Holders of Partnership Common Units so that to the extent possible without violating the requirements giving rise to the Regulatory Allocations, the net amount of such allocations of other items and the Regulatory Allocations to each Holder of a Partnership Common Unit shall be equal to the net amount that would have been allocated to each such Holder if the Regulatory Allocations had not occurred.
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C. Allocation of Excess Nonrecourse Liabilities. For purposes of determining a Holders proportional share of the excess nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752-3(a)(3), each Holders interest in Partnership profits shall be such Holders share of Partnership Common Units.
Section 6.4 Tax Allocations.
A. In General. Except as otherwise provided in this Section 6.4, for income tax purposes under the Code and the Regulations each Partnership item of income, gain, loss and deduction (collectively, Tax Items) shall be allocated among the Holders of Partnership Common Units in the same manner as its correlative item of book income, gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c) Revaluations. Notwithstanding Section 6.4A hereof, Tax Items with respect to Property that is contributed to the Partnership with a Gross Asset Value that varies from its basis in the hands of the contributing Partner immediately preceding the date of contribution shall be allocated among the Holders of Partnership Common Units for income tax purposes pursuant to Regulations promulgated under Code Section 704(c) so as to take into account such variation. The Partnership shall account for such variation under any method approved under Code Section 704(c) and the applicable Regulations as chosen by the General Partner, including, without limitation, the traditional method as described in Regulations Section 1.704-3(b). In the event that the Gross Asset Value of any partnership asset is adjusted pursuant to subsection (b) of the definition of Gross Asset Value (provided in Article 1 hereof), subsequent allocations of Tax Items with respect to such asset shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Code Section 704(c) and the applicable Regulations.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
A. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Partners with or without cause, except with the Consent of the General Partner. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to the other provisions hereof including Section 7.3, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof, including, without limitation:
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(1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit each Special Limited Partner (so long as such Special Limited Partner qualifies as a REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Code Section 4981) and to make distributions to its shareholders sufficient to permit such Special Limited Partner to maintain REIT status or otherwise to satisfy the REIT Requirements), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by deed to secure debt, mortgage, deed of trust or other lien or encumbrance on the Partnerships assets) and the incurring of any obligations that it deems necessary for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, sale, transfer, exchange or other disposition of any assets of the Partnership (including, but not limited to, the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Partnership) or the merger, consolidation, reorganization or other combination of the Partnership with or into another entity;
(4) the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership, the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms that it sees fit, including, without limitation, the financing of the operations and activities of the General Partner, the Partnership or any of the Partnerships Subsidiaries, the lending of funds to other Persons (including, without limitation, the Partnerships Subsidiaries) and the repayment of obligations of the Partnership, its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to and equity investments in the Partnerships Subsidiaries;
(5) the management, operation, leasing, landscaping, repair, alteration, demolition, replacement or improvement of any Property, including, without limitation, any Contributed Property, or other asset of the Partnership or any Subsidiary;
(6) the negotiation, execution and performance of any contracts, leases, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnerships operations or the implementation of the General Partners powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnerships assets;
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(7) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement, the holding, management, investment and reinvestment of cash and other assets of the Partnership, and the collection and receipt of revenues, rents and income of the Partnership;
(8) the selection and dismissal of employees of the Partnership or the General Partner (including, without limitation, employees having titles or offices such as president, vice president, secretary and treasurer), and agents, outside attorneys, accountants, consultants and contractors of the Partnership or the General Partner and the determination of their compensation and other terms of employment or hiring;
(9) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate;
(10) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, limited liability companies, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, any Subsidiary and any other Person in which it has an equity investment from time to time); provided, however, that, as long as any Special Limited Partner has determined to continue to qualify as a REIT, the General Partner may not engage in any such formation, acquisition or contribution that would cause such Special Limited Partner to fail to qualify as a REIT or the General Partner or another wholly owned subsidiary of a Special Limited Partner to fail to qualify as a qualified REIT subsidiary within the meaning of Code Section 856(i)(2);
(11) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment, of any claim, cause of action, liability, debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, and the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;
(12) the undertaking of any action in connection with the Partnerships direct or indirect investment in any Subsidiary or any other Person (including, without limitation, the contribution or loan of funds by the Partnership to such Persons);
(13) the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as it may adopt; provided that such methods are otherwise consistent with the requirements of this Agreement;
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(14) the enforcement of any rights against any Partner pursuant to representations, warranties, covenants and indemnities relating to such Partners contribution of property or assets to the Partnership;
(15) the exercise, directly or indirectly, through any attorney- in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership;
(16) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person;
(17) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest, pursuant to contractual or other arrangements with such Person;
(18) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;
(19) the issuance of additional Partnership Units, as appropriate and in the General Partners sole and absolute discretion, in connection with Capital Contributions by Additional Limited Partners and additional Capital Contributions by Partners pursuant to Article 4 hereof; and
(20) an election to dissolve the Partnership pursuant to Section 13.1C hereof.
B. Each of the Limited Partners agrees that, except as provided in Section 7.3 hereof, the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement (except as provided in Section 7.3 hereof), the Act or any applicable law, rule or regulation. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the Properties of the Partnership and (ii) liability insurance for the Indemnitees hereunder.
D. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital and other reserves in such amounts as
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the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken by it. The General Partner and the Partnership shall not have liability to a Limited Partner under any circumstances as a result of an income tax liability incurred by such Limited Partner as a result of an action (or inaction) by the General Partner pursuant to its authority under this Agreement so long as the action or inaction is taken in good faith.
Section 7.2 Certificate of Limited Partnership. To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, the District of Columbia or any other jurisdiction, in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5A(4) hereof, the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability to the extent provided by applicable law) in the State of Delaware and any other state, or the District of Columbia or other jurisdiction, in which the Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partners Authority.
A. The General Partner may not take any action in contravention of this Agreement, including, without limitation:
(1) take any action that would make it impossible to carry on the ordinary business of the Partnership, except as otherwise provided in this Agreement;
(2) possess Partnership property, or assign any rights in specific Partnership property, for other than a Partnership purpose, except as otherwise provided in this Agreement;
(3) admit a Person as a Partner, except as otherwise provided in this Agreement;
(4) perform any act that would subject a Limited Partner to liability as a general partner in any jurisdiction or any other liability, except as provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other agreement that prohibits or restricts, or has the effect of prohibiting or restricting, the ability of (a) the General Partner, the Previous General Partner or the Partnership from satisfying its
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obligations under Section 8.6 hereof in full or (b) a Limited Partner from exercising its rights under Section 8.6 hereof to effect a Redemption in full, except, in either case, with the written consent of such Limited Partner affected by the prohibition or restriction.
B. The General Partner shall not, without the prior Consent of the Limited Partners, undertake, on behalf of the Partnership, any of the following actions or enter into any transaction that would have the effect of such transactions:
(1) except as provided in Section 7.3C hereof, amend, modify or terminate this Agreement other than to reflect the admission, substitution, termination or withdrawal of Partners pursuant to Article 11 or Article 12 hereof;
(2) make a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the assets of the Partnership;
(3) institute any proceeding for bankruptcy on behalf of the Partnership; or
(4) subject to the rights of Transfer provided in Sections 11.1C and 11.2 hereof, approve or acquiesce to the Transfer of the Partnership Interest of the General Partner, or admit into the Partnership any additional or successor General Partners.
C. Notwithstanding Section 7.3B hereof, the General Partner shall have the power, without the Consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution or withdrawal of Partners or the termination of the Partnership in accordance with this Agreement, and to amend Exhibits A and C in connection with such admission, substitution or withdrawal;
(3) to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;
(4) to satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;
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(5) (a) to reflect such changes as are reasonably necessary (i) for the General Partner or any other wholly owned subsidiary of a Special Limited Partner, as the case may be, to maintain its status as a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) or (ii) for any Special Limited Partner to maintain its status as a REIT or to satisfy the REIT Requirements; (b) to reflect the Transfer of all or any part of a Partnership Interest among the General Partner, the Special Limited Partners or any qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to any Special Limited Partner;
(6) to modify the manner in which Capital Accounts are computed (but only to the extent set forth in the definition of Capital Account or contemplated by the Code or the Regulations); and
(7) the issuance of additional Partnership Interests in accordance with Section 4.2.
The General Partner will provide notice to the Limited Partners when any action under this Section 7.3C is taken.
D. Notwithstanding Sections 7.3B and 7.3C hereof, this Agreement shall not be amended, and no action may be taken by the General Partner, without the Consent of each Partner adversely affected, if such amendment or action would (i) convert a Limited Partner Interest in the Partnership into a General Partner Interest (except as a result of the General Partner acquiring such Partnership Interest), (ii) modify the limited liability of a Limited Partner, (iii) alter the rights of any Partner to receive the distributions to which such Partner is entitled, pursuant to Article 5 or Section 13.2A(4) hereof, or alter the allocations specified in Article 6 hereof (except, in any case, as permitted pursuant to Sections 4.2 and 7.3C hereof), (iv) alter or modify the Redemption rights, Cash Amount or REIT Shares Amount as set forth in Sections 8.6 and 11.2 hereof, or amend or modify any related definitions, or (v) amend this Section 7.3D; provided, however, that the Consent of each Partner adversely affected shall not be required for any amendment or action that affects all Partners holding the same class or series of Partnership Units on a uniform or pro rata basis. Further, no amendment may alter the restrictions on the General Partners authority set forth elsewhere in this Section 7.3 without the Consent specified therein. Any such amendment or action consented to by any Partner shall be effective as to that Partner, notwithstanding the absence of such consent by any other Partner.
Section 7.4 Reimbursement of the General Partner.
A. The General Partner shall not be compensated for its services as general partner of the Partnership except as provided in elsewhere in this Agreement (including the provisions of Articles 5 and 6 hereof regarding distributions, payments and allocations to which it may be entitled in its capacity as the General Partner).
B. Subject to Sections 7.4C and 15.11 hereof, the Partnership shall be liable for, and shall reimburse the General Partner on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all sums expended in connection with the Partnerships business, including, without limitation, (i) expenses relating to
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the ownership of interests in and management and operation of, or for the benefit of, the Partnership, (ii) compensation of officers and employees, including, without limitation, payments under future compensation plans of the General Partner that may provide for stock units, or other phantom stock, pursuant to which employees of the General Partner will receive payments based upon dividends on or the value of REIT Shares, (iii) director fees and expenses; (iv) all costs and expenses of the General Partner being a public company, including costs of filings with the SEC, reports and other distributions to its shareholders and (v) income taxes or other similar types of costs, including but not limited to franchise taxes or related fees (in lieu of reimbursement, the Partnership may instead (in whole or in part) specially allocate income as necessary to reimburse the General Partner in full); provided, however, that the amount of any reimbursement shall be reduced by any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership as permitted pursuant to Section 7.5 hereof. Such reimbursements shall be in addition to any reimbursement of the General Partner as a result of indemnification pursuant to Section 7.7 hereof.
C. To the extent practicable, Partnership expenses shall be billed directly to and paid by the Partnership and, subject to Section 15.11 hereof, reimbursements to the General Partner or any of its Affiliates by the Partnership pursuant to this Section 7.4 shall be treated as guaranteed payments within the meaning of Code Section 707(c).
Section 7.5 Outside Activities of the Previous General Partner and the General Partner. Neither the General Partner nor the Previous General Partner shall directly or indirectly enter into or conduct any business, other than in connection with (a) the ownership, acquisition and disposition of Partnership Interests as General Partner, (b) the management of the business of the Partnership, (c) the operation of the Previous General Partner as a reporting company with a class (or classes) of securities registered under the Exchange Act, (d) each Special Limited Partners operations as a REIT, (e) the offering, sale, syndication, private placement or public offering of stock, bonds, securities or other interests, (f) financing or refinancing of any type, (g) the qualification of the General Partner or any other wholly owned subsidiary of a Special Limited Partner as a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)), (h) the acquisition, ownership, financing, operation, management and disposition of assets held directly by a Special Limited Partner, any of the AIR Partners or any of their Subsidiaries, excluding the Partnership, and (i) such activities as are incidental thereto. Nothing contained herein shall be deemed to prohibit the General Partner or the Previous General Partner from executing guarantees of Partnership debt for which it would otherwise be liable in its capacity as General Partner. The General Partner and any Affiliates of the General Partner may acquire Limited Partner Interests and shall be entitled to exercise all rights of a Limited Partner relating to such Limited Partner Interests.
Section 7.6 Contracts with Affiliates.
A. The Partnership may lend or contribute funds or other assets to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.
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B. Except as provided in Section 7.5 hereof and subject to Section 3.1 hereof, the Partnership may transfer assets to joint ventures, limited liability companies, partnerships, corporations, business trusts or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner, in its sole and absolute discretion, believes to be advisable.
C. Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans funded by the Partnership for the benefit of employees of the General Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership or any of the Partnerships Subsidiaries.
E. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.
A. To the fullest extent permitted by applicable law, the Partnership shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership (Actions) as set forth in this Agreement in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise; provided, however, that the Partnership shall not indemnify an Indemnitee (i) for willful misconduct or a knowing violation of the law or (ii) for any transaction for which such Indemnitee received an improper personal benefit in violation or breach of any provision of this Agreement. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. It is the intention of this Section 7.7A that the Partnership indemnify each Indemnitee to the fullest extent permitted by law. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7A. The termination of any proceeding by conviction of an Indemnitee or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an entry of an order of probation against an
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Indemnitee prior to judgment, does not create a presumption that such Indemnitee acted in a manner contrary to that specified in this Section 7.7A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise provide funds to enable the Partnership to fund its obligations under this Section 7.7.
B. To the fullest extent permitted by law, expenses incurred by an Indemnitee who is a party to a proceeding or otherwise subject to or the focus of or is involved in any Action shall be paid or reimbursed by the Partnership as incurred by the Indemnitee in advance of the final disposition of the Action upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitees good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7B has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee unless otherwise provided in a written agreement with such Indemnitee or in the writing pursuant to which such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of any of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnerships activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
E. Any liabilities which an Indemnitee incurs as a result of acting on behalf of the Partnership or the General Partner (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the IRS, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise) shall be treated as liabilities or judgments or fines under this Section 7.7, unless such liabilities arise as a result of (i) such Indemnitees intentional misconduct or knowing violation of the law, or (ii) any transaction in which such Indemnitee received a personal benefit in violation or breach of any provision of this Agreement or applicable law.
F. In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
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G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Partnerships liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
I. It is the intent of the Partners that any amounts paid by the Partnership to the General Partner pursuant to this Section 7.7 shall be treated as guaranteed payments within the meaning of Code Section 707(c).
Section 7.8 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this Agreement, neither the General Partner nor any of its directors or officers shall be liable or accountable in damages or otherwise to the Partnership, any Partners or any Assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission if the General Partner or such director or officer acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the General Partners shareholders collectively and that the General Partner is under no obligation to give priority to the separate interests of the Limited Partners or the General Partners shareholders (including, without limitation, the tax consequences to Limited Partners, Assignees or the General Partners shareholders) in deciding whether to cause the Partnership to take (or decline to take) any actions.
C. Subject to its obligations and duties as General Partner set forth in Section 7.1A hereof, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees or agents (subject to the supervision and control of the General Partner). The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partners, and its officers and directors, liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part,
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prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
E. Notwithstanding anything herein to the contrary, except for fraud, willful misconduct or gross negligence, or pursuant to any express indemnities given to the Partnership by any Partner pursuant to any other written instrument, no Partner shall have any personal liability whatsoever, to the Partnership or to the other Partner(s), for the debts or liabilities of the Partnership or the Partnerships obligations hereunder, and the full recourse of the other Partner(s) shall be limited to the interest of that Partner in the Partnership. To the fullest extent permitted by law, no officer, director or shareholder of the General Partner shall be liable to the Partnership for money damages except for (i) active and deliberate dishonesty established by a non-appealable final judgment or (ii) actual receipt of an improper benefit or profit in money, property or services. Without limitation of the foregoing, and except for fraud, willful misconduct or gross negligence, or pursuant to any such express indemnity, no property or assets of any Partner, other than its interest in the Partnership, shall be subject to levy, execution or other enforcement procedures for the satisfaction of any judgment (or other judicial process) in favor of any other Partner(s) and arising out of, or in connection with, this Agreement. This Agreement is executed by the officers of the General Partner solely as officers of the same and not in their own individual capacities.
F. To the extent that, at law or in equity, the General Partner has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or the Limited Partners, the General Partner shall not be liable to the Partnership or to any other Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of the General Partner otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such General Partner.
Section 7.9 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters that the General Partner reasonably believes to be within such Persons professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General
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Partner in the power of attorney, have full power and authority to do and perform all and every act and duty that is permitted or required to be done by the General Partner hereunder.
D. Notwithstanding any other provision of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of each Special Limited Partner to continue to qualify as a REIT, (ii) for each Special Limited Partner otherwise to satisfy the REIT Requirements, (iii) to avoid the Special Limited Partners incurring any taxes under Code Section 857 or Code Section 4981 or (iv) for the General Partner or any wholly owned subsidiary of a Special Limited Partner, as the case may be, to continue to qualify as a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)), is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets. Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively with other Partners or Persons, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties. Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without the consent or approval of any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and take any and all actions on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnerships sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expediency of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (iii) such certificate,
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document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability. The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement (including, without limitation, Section 10.5 hereof) or under the Act.
Section 8.2 Management of Business. No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, member, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Partnerships business, transact any business in the Partnerships name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, member, employee, partner, agent, representative, or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners. Subject to any agreements entered into pursuant to Section 7.6D hereof and any other agreements entered into by a Limited Partner or its Affiliates with the General Partner, the Partnership or a Subsidiary (including, without limitation, any employment agreement), any Limited Partner and any Assignee, officer, director, employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct or indirect competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. Subject to such agreements, none of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person (other than the General Partner, to the extent expressly provided herein), and such Person shall have no obligation pursuant to this Agreement, subject to Section 7.6D hereof and any other agreements entered into by a Limited Partner or its Affiliates with the General Partner, the Partnership or a Subsidiary, to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character that, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Return of Capital. Except pursuant to the rights of Redemption set forth in Section 8.6 hereof, no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. Except to the extent provided in Article 6 hereof or otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall
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have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
A. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5C hereof, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partners interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partners own expense:
(1) to obtain a copy of (i) the most recent annual and quarterly reports filed with the SEC by the Previous General Partner or the General Partner pursuant to the Exchange Act and (ii) each report or other written communication sent to the shareholders of the Previous General Partner;
(2) to obtain a copy of the Partnerships federal, state and local income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last known business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and that each Partner has agreed to contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify any Limited Partner that is a Qualifying Party, on request, of the then current Adjustment Factor or any change made to the Adjustment Factor.
C. Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or the General Partner or (ii) the Partnership or the General Partner is required by law or by agreements with unaffiliated third parties to keep confidential.
Section 8.6 Redemption Rights of Qualifying Parties.
A. After the first Twelve-Month Period, a Qualifying Party, but no other Limited Partner or Assignee, shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Redeemable Units held by
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such Tendering Party (such Redeemable Units being hereafter Tendered Units) in exchange (a Redemption) for REIT Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party). A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the Partnership Record Date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem Tendered Units for cash, the Cash Amount shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
B. If the Partnership elects to redeem Tendered Units for REIT Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such REIT Shares to the Tendering Party pursuant to the terms set forth in this Section 8.6B, in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for REIT Shares. The percentage of the Tendered Units tendered for Redemption by the Tendering Party for which the Partnership elects to cause the Previous General Partner to issue REIT Shares (rather than cash) is referred to as the Applicable Percentage. In making such election to cause the Previous General Partner to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Qualifying Parties over another nor discriminates against a group or class of Qualifying Parties. If the Partnership elects to redeem any number of Tendered Units for REIT Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for a number of REIT Shares equal to the product of the REIT Shares Amount and the Applicable Percentage. The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The product of the Applicable Percentage and the REIT Shares Amount, if applicable, shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and accessible REIT Shares and, if applicable, Rights, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 8.6B, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such REIT Shares are issued pursuant to this Section 8.6B, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any
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such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such REIT Shares and Rights for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. REIT Shares issued upon an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 8.6B may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
C. Notwithstanding the provisions of Section 8.6A and 8.6B hereof, the Tendering Parties (i) where the Redemption would consist of less than all the Partnership Common Units held by Partners other than the General Partner and the Special Limited Partners, shall not be entitled to elect or effect a Redemption to the extent that the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) would be reduced, as a result of the Redemption, to less than one percent (1%) and (ii) shall have no rights under this Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 8.6C, it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in REIT Shares otherwise issuable by the Previous General Partner under Section 8.6B hereof.
D. In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for REIT Shares pursuant to Section 8.6B hereof following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Partner on or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous General Partner of a number of REIT Shares (Registrable Shares) equal to the REIT Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding a Partnership Interest (or an interest therein) and having Redemption rights pursuant to this Section 8.6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Partnership Common Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Partnership Common Units to be made subject thereon in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this
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Section 8.6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the current Twelve-Month Period; provided, however, that the Previous General Partner shall not be required to acquire Partnership Common Units pursuant to this Section 8.6D more than twice within a Twelve-Month Period.
Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
E. Notwithstanding the provisions of Section 8.6B hereof, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for the REIT Shares Amount if such exchange would be prohibited under the Charter.
F. Notwithstanding anything herein to the contrary (but subject to Section 8.6C hereof), with respect to any Redemption pursuant to this Section 8.6:
(1) All Partnership Common Units acquired by the Previous General Partner pursuant to Section 8.6B hereof shall be contributed by the Previous General Partner to any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine. Any Partnership Common Units so contributed to the General Partner shall automatically, and without further action required, be converted into and deemed to be a General Partner Interest comprised of the same number of Partnership Common Units. Any Partnership Common Units so contributed to the Special Limited Partners shall remain outstanding.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Redeemable Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Redeemable Units, all of the Redeemable Units held by such Tendering Party.
(3) Each Tendering Party (a) may effect a Redemption only once in each fiscal quarter of a Twelve-Month Period and (b) may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the Previous General Partner for a distribution to its shareholders of some or all of its portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to Section 8.6B hereof, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the
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Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in Section 8.6E hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
(5) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
(6) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 hereof) all Redeemable Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Redeemable Units for all purposes of this Agreement, until such Redeemable Units are either paid for by the Partnership pursuant to Section 8.6A hereof or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the REIT Shares, pursuant to Section 8.6B hereof on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to Section 8.6B hereof, the Tendering Party shall have no rights as a shareholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 8.6F, all Partnership Common Units beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
G. In connection with an exercise of Redemption rights pursuant to this Section 8.6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and
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constructive ownership of REIT Shares by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 8.6G(1) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own REIT Shares in violation of the Ownership Limit.
Section 8.7 Partnership Right to Call Limited Partner Interests. Notwithstanding any other provision of this Agreement, on and after the date on which the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) are less than one percent (1%), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner Interests (other than the Special Limited Partners Limited Partner Interest) by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to Section 8.6 hereof for the amount of Partnership Common Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 8.7. Such notice given by the General Partner to a Limited Partner pursuant to this Section 8.7 shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 8.7, (a) any Limited Partner (whether or not otherwise a Qualifying Party) may, in the General Partners sole and absolute discretion, be treated as a Qualifying Party that is a Tendering Party and (b) the provisions of Sections 8.6C(i), 8.6F(2), 8.6F(3) and 8.6F(5) hereof shall not apply, but the remainder of Section 8.6 hereof shall apply, mutatis mutandis.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting.
A. The General Partner shall keep or cause to be kept at the principal office of the Partnership those records and documents required to be maintained by the Act and other books and records deemed by the General Partner to be appropriate with respect to the Partnerships business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 8.5A or Section 9.3 hereof. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form for, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time.
B. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles, or on such other basis as the General Partner determines to be necessary or appropriate. To the extent permitted by sound accounting practices and principles, the Partnership, the General Partner and the Previous General Partner may operate with integrated or consolidated accounting records, operations and principles.
Section 9.2 Fiscal Year. The Fiscal Year of the Partnership shall be the calendar year.
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A. As soon as practicable, but in no event later than one hundred five (105) days after the close of each Fiscal Year, the General Partner shall cause to be made available to each Limited Partner, of record as of the close of the Fiscal Year, an annual report containing financial statements of the Partnership, or of the Previous General Partner if such statements are prepared solely on a consolidated basis with the Previous General Partner, for such Fiscal Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the General Partner. Such report shall be deemed to be made available to all Limited Partners if it has been filed with the SEC.
B. As soon as practicable, but in no event later than one hundred five (105) days after the close of each calendar quarter (except the last calendar quarter of each year), the General Partner shall cause to be made available to each Limited Partner, of record as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the Previous General Partner if such statements are prepared solely on a consolidated basis with the Previous General Partner, and such other information as may be required by applicable law or regulation or as the General Partner determines to be appropriate. At the request of any Limited Partner, the General Partner shall provide access to the books, records and workpapers upon which the reports required by this Section 9.3 are based, to the extent required by the Act. Such report shall be deemed to be made available to all Limited Partners if it has been filed with the SEC.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns. The General Partner shall arrange for the preparation and timely filing of all returns with respect to Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable effort to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes. The Limited Partners shall promptly provide the General Partner with such information relating to the Contributed Properties, including tax basis and other relevant information, as may be reasonably requested by the General Partner from time to time.
Section 10.2 Tax Elections.
A. Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code, including, but not limited to, the election under Code Section 754 and the election to use the recurring item method of accounting provided under Code Section 461(h) with respect to property taxes imposed on the Partnerships Properties; provided, however, that, if the recurring item method of accounting is elected with respect to such property taxes, the Partnership shall pay the applicable property taxes prior to the date provided in Code Section 461(h) for purposes of determining economic performance. The General Partner shall have the right to seek to revoke
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any such election (including, without limitation, any election under Code Sections 461(h) and 754) upon the General Partners determination in its sole and absolute discretion that such revocation is in the best interests of the Partners.
B. The General Partner is expressly authorized to make any elections, including applicable safe harbor elections, in connection with the issuance of Partnership Interests for services that it deems to be in the best interest of the Partnership. Furthermore, the General Partner is authorized to amend this Agreement as it deems necessary to provide that (1) the Partnership is authorized and directed to elect applicable safe harbor elections, and (2) the Partnership and each of its Partners (including any person to whom a Partnership Interest is transferred in connection with the performance of services) agrees to comply with all requirements of the safe harbor with respect to all Partnership Interests transferred in connection with the performance of services while the election remains effective. Finally, the amendments relating to the safe harbor elections in connection with the issuance of Partnership Interests for services are legally binding on all Partners of the Partnership, and to the extent that it is determined that such amendments are not legally binding on all Partners, then each Partner in the Partnership that transfers a Partnership Interest in connection with the performance of services agrees to execute a document containing provisions that are legally binding on that Partner stating that (X) the Partnership is authorized and directed to elect the safe harbor, and (Y) the Partner agrees to comply with all requirements of the safe harbor with respect to all Partnership Interests transferred in connection with the performance of services while the election remains effective.
Section 10.3 Tax Matters Partner.
A. The General Partner is hereby designated as the tax matters partner of the Partnership, as such term is defined in Section 6231 of the TEFRA Rules with respect to all taxable years to which the TEFRA Rules apply (the Tax Matters Partner). The Tax Matters Partner shall receive no compensation for its services. All third-party costs and expenses incurred by the Tax Matters Partner in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership in addition to any reimbursement pursuant to Section 7.4 hereof. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm to assist the Tax Matters Partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable. At the request of any Limited Partner, the General Partner agrees to consult with such Limited Partner with respect to the preparation and filing of any returns and with respect to any subsequent audit or litigation relating to such returns; provided, however, that the filing of such returns shall be in the sole and absolute discretion of the General Partner.
B. The Tax Matters Partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a tax audit and such judicial proceedings being referred to as judicial review), and in the settlement agreement the Tax Matters Partner may expressly state that such agreement shall bind all Partners, except that such
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settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the Tax Matters Partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a notice partner (as defined in Code Section 6231) or a member of a notice group (as defined in Code Section 6223(b)(2));
(2) in the event that a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a final adjustment) is mailed to the Tax Matters Partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the United States Tax Court or the United States Claims Court, or the filing of a complaint for refund with the District Court of the United States for the district in which the Partnerships principal place of business is located;
(3) to intervene in any action brought by any other Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for assessing any tax that is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the Tax Matters Partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the Tax Matters Partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 hereof shall be fully applicable to the Tax Matters Partner in its capacity as such. The provisions of this Section 10.3 are not applicable to any taxable years subject to the Partnership Audit Rules.
Section 10.4 Partnership Representative.
A. The General Partner is hereby designated to serve as the partnership representative with respect to the Partnership, as provided in Section 6223(a) of the Partnership Audit Rules (the Partnership Representative). For each taxable year in which the Partnership Representative is an entity, the Partnership shall appoint the designated individual identified by the Partnership Representative to act on behalf of the Partnership Representative in accordance with the applicable Treasury Regulations (the Designated Individual). Each Partner expressly consents to such designations and agrees that it will execute, acknowledge, deliver, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent.
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B. The Partnership Representative shall have the sole authority to act on behalf of the Partnership in connection with and make all relevant decisions regarding application of the Partnership Audit Rules, including, but not limited to, any elections under the Partnership Audit Rules or any decisions to settle, compromise, challenge, litigate or otherwise alter the defense of any proceeding before the IRS.
C. The Partners agree to cooperate in good faith to timely provide information requested by the Partnership Representative as needed to comply with the Partnership Audit Rules, including, without limitation, to make any elections available to the Partnership under the Partnership Audit Rules. Each Partner agrees that, upon request of the Partnership, such Partner shall take such actions as may be necessary or desirable (as determined by the Partnership Representative) to (i) allow the Partnership to comply with the provisions of Section 6226 of the Partnership Audit Rules so that any partnership adjustments (as defined in Section 6241(2) of the Partnership Audit Rules) are taken into account by the Partners and former Partners rather than the Partnership; (ii) use the provisions of Section 6225(c) of the Partnership Audit Rules including, but not limited to, filing amended tax returns with respect to any reviewed year (within the meaning of Section 6225(d)(1) of the Partnership Audit Rules) or using the alternative procedure to filing amended returns to reduce the amount of any partnership adjustment otherwise required to be taken into account by the Partnership or (iii) otherwise allow the Partnership and its Partners to address and respond to any matters arising under the Partnership Audit Rules.
D. Notwithstanding other provisions of this Agreement to the contrary, if any partnership adjustment is determined with respect to the Partnership, the Partnership Representative may cause the Partnership to elect pursuant to Section 6226 of the Partnership Audit Rules to have such adjustment passed through to the Partners for the year to which the adjustment relates (i.e., the reviewed year within the meaning of Section 6225(d)(1) of the Partnership Audit Rules). In the event that the Partnership Representative has not caused the Partnership to so elect pursuant to Section 6226 of the Partnership Audit Rules, then any imputed underpayment (as determined in accordance with Section 6225 of the Partnership Audit Rules) or partnership adjustment that does not give rise to an imputed underpayment shall be apportioned among the Partners of the Partnership for the taxable year in which the adjustment is finalized in such manner as may be necessary (as determined by the Partnership Representative in good faith) so that, to the maximum extent possible, the tax and economic consequences of the imputed underpayment or other partnership adjustment and any associated interest and penalties (any such amount, an Imputed Underpayment Amount) are borne by the Partners based upon their interests in the Partnership for the reviewed year. Imputed Underpayment Amounts also shall include any imputed underpayment within the meaning of Section 6225 of the Partnership Audit Rules paid (or payable) by any entity treated as a partnership for U.S. federal income tax purposes in which the Partnership holds (or has held) a direct or indirect interest other than through entities treated as corporations for U.S. federal income tax purposes to the extent that the Partnership bears the economic burden of such amounts, whether by law or contract.
E. Each Partner agrees to indemnify and hold harmless the Partnership from and against any liability with respect to such Partners share of any tax deficiency paid or payable by the Partnership that is allocable to the Partner as determined in accordance with the
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second to last sentence of paragraph D above with respect to an audited or reviewed taxable year for which such Partner was a partner in the Partnership. The obligations set forth in this paragraph E shall survive the termination of any Partners interest in the Partnership, the termination of this Agreement and/or the termination, dissolution, liquidation or winding up of the Partnership, and shall remain binding on each Partner for the period of time necessary to resolve with the IRS (or any other applicable taxing authority) all income tax matters relating to the Partnership and for Partners to satisfy their indemnification obligations, if any, pursuant to this Section 10.4. Any obligation of a Partner pursuant to this paragraph E shall be implemented through adjustments to distributions otherwise payable to such Partner as determined in accordance with Article 5; provided, however, that, at the written request of the Partnership Representative, each Partner or former Partner may be required to contribute to the Partnership such Partners Imputed Underpayment Amount imposed on and paid by the Partnership; provided further, that if a Partner or former Partner individually directly pays, pursuant to the Partnership Audit Rules, any such Imputed Underpayment Amount, then such payment shall reduce any offset to distribution or required capital contribution of such Partner or former Partner. Any amount withheld from distributions pursuant to this paragraph E shall be treated as an amount distributed to such Partner or former Partner for all purposes under this Agreement.
F. All expenses incurred by the Partnership Representative or Designated Individual in connection with its duties as partnership representative or designated individual, as applicable, shall be expenses of the Partnership (including, for the avoidance of doubt, any costs and expenses incurred in connection with any claims asserted against the Partnership Representative or Designated Individual, as applicable, except, in the case of the Partnership Representative, to the extent the Partnership Representative is determined to have performed its duties in the manner described in the final sentence of this paragraph F, and the Partnership shall reimburse the Partnership Representative or Designated Individual, as applicable, for all such costs and expenses). Nothing herein shall be construed to restrict the Partnership Representative or Designated Individual from engaging lawyers, accountants, tax advisers, or other professional advisers or experts to assist the Partnership Representative or Designated Individual in discharging its duties hereunder. Neither the Partnership Representative nor the Designated Individual shall be liable to the Partnership, any Partner or any Affiliate thereof for any costs or losses to any persons, any diminution in value or any liability whatsoever arising as a result of the performance of its duties pursuant to this Section 10.4; provided, however, that the Partnership Representative may be so liable if it or the Designated Individual has engaged in (i) willful breach of any provision of this Section 10.4 or (ii) fraud, willful misconduct or gross negligence, in each case, with respect to its performance of its duties pursuant to this Section 10.4.
Section 10.5 Withholding for Taxes, Etc.
A. Withholding. Each Limited Partner hereby authorizes the Partnership to withhold from such Limited Partner any amount of federal, state, local or foreign taxes that the General Partner determines, in its sole discretion, that the Partnership is, or may in the future be, required to withhold or pay with respect to any amount distributable, allocable or payable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446. Amounts withheld by the General Partner may be estimated
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by the General Partner, in its sole discretion, based on its expectations of future transactions involving the Partnership that may give rise to taxes of such Limited Partner. The General Partner may withhold amounts for taxes (including estimated or projected taxes) from cash or other distributions otherwise payable to a Limited Partner, or from any REIT Shares or Cash Amount otherwise payable to a Limited Partner in connection with a Redemption.
B. Certain Tax Payments. Each Limited Partner hereby authorizes the Partnership to pay on behalf of or with respect to such Limited Partner any amount of federal, state, local or foreign taxes that the General Partner determines, in its sole discretion, that the Partnership is required to pay with respect to any amount distributable, allocable or payable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be paid by the Partnership pursuant to Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution that would otherwise be made to the Limited Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the Available Funds of the Partnership that would, but for such payment, be distributed to the Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partners Partnership Interest to secure such Limited Partners obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5B. In the event that a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.5B within fifteen (15) days after the notice from the General Partner specified above, then the General Partner may, in its sole and absolute discretion, either (x) elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner (including, without limitation, the right to receive distributions), or (y) cause the Partnership to redeem from such Limited Partner a number of Partnership Common Units (or fraction thereof) equal to the quotient obtained by dividing (i) the aggregate amount owed by such Limited Partner to the Partnership pursuant to this Section 10.5B, by (ii) the product of (1) the Adjustment Factor in effect as of date of redemption specified by the General Partner, and (2) the Value of a REIT Share (assuming for such purpose that the Valuation Date is the date of redemption specified by the General Partner). If the General Partner elects to cause the Partnership to redeem any Limited Partners Partnership Common Units pursuant to clause (y) above, it shall promptly so notify such Limited Partner in writing of the date of such redemption and the number of Partnership Common Units so redeemed. Any amounts payable by a Limited Partner under this Section 10.5B shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal, plus four (4) percentage points (but not higher than the maximum lawful rate) from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder, or to assist the Partnership in effecting any redemption of such Limited Partners Partnership Common Units as specified in clause (y) above.
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ARTICLE 11
TRANSFERS AND WITHDRAWALS
A. No part of the interest of a Partner shall be subject to the claims of any creditor, to any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11. Any Transfer or purported Transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void ab initio.
C. Notwithstanding the other provisions of this Article 11 (other than Section 11.6D hereof), the Partnership Interests of the General Partner and the Special Limited Partners may be Transferred, in whole or in part, at any time or from time to time, to or among the General Partner, the Special Limited Partners, and any other Person that is, at the time of such Transfer, a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) with respect to any Special Limited Partner. Any transferee of the entire General Partner Interest pursuant to this Section 11.1C shall automatically become, without further action or Consent of any Limited Partners, the sole general partner of the Partnership, subject to all the rights, privileges, duties and obligations under this Agreement and the Act relating to a general partner. Any transferee of a Limited Partner Interest pursuant to this Section 11.1C shall automatically become, without further action or Consent of any Limited Partners, a Substituted Limited Partner. Upon any Transfer permitted by this Section 11.1C, the transferor Partner shall be relieved of all its obligations under this Agreement. The provisions of Section 11.2B (other than the last sentence thereof), 11.3, 11.4A and 11.5 hereof shall not apply to any Transfer permitted by this Section 11.1C.
Section 11.2 Transfer of General Partners Partnership Interest.
A. The General Partner may not Transfer any of its General Partner Interest or withdraw from the Partnership except as provided in Sections 11.2B and 11.2C hereof.
B. The General Partner shall not withdraw from the Partnership and shall not Transfer all or any portion of its interest in the Partnership (whether by sale, disposition, statutory merger or consolidation, liquidation or otherwise) without the Consent of the Limited Partners, which Consent may be given or withheld in the sole and absolute discretion of the Limited Partners. Upon any Transfer of such a Partnership Interest pursuant to the Consent of the Limited Partners and otherwise in accordance with the provisions of this Section 11.2B, the transferee shall become a successor General Partner for all purposes herein, and shall be vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of
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such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired. It is a condition to any Transfer otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor General Partner under this Agreement with respect to such Transferred Partnership Interest, and such Transfer shall relieve the transferor General Partner of its obligations under this Agreement without the Consent of the Limited Partners. In the event that the General Partner withdraws from the Partnership, in violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon the bankruptcy of the General Partner, a Majority in Interest of the Limited Partners may elect to continue the Partnership business by selecting a successor General Partner in accordance with the Act.
C. The General Partner may merge with another entity if immediately after such merger substantially all of the assets of the surviving entity, other than the General Partner Interest held by the General Partner, are contributed to the Partnership as a Capital Contribution in exchange for Partnership Units.
Section 11.3 Limited Partners Rights to Transfer.
A. General. Prior to the end of the first Twelve-Month Period, no Limited Partner shall Transfer all or any portion of its Partnership Interest to any transferee without the Consent of the General Partner, which Consent may be withheld in its sole and absolute discretion; provided, however, that any Limited Partner may, at any time, without the consent of the General Partner, (i) Transfer all or part of its Partnership Interest to any Designated Party, any Family Member, any Controlled Entity or any Affiliate, provided that the transferee is, in any such case, a Qualified Transferee, or (ii) pledge (a Pledge) all or any portion of its Partnership Interest to a lending institution, that is not an Affiliate of such Limited Partner, as collateral or security for a bona fide loan or other extension of credit, and Transfer such pledged Partnership Interest to such lending institution in connection with the exercise of remedies under such loan or extension or credit (any Transfer or Pledge permitted by this proviso is hereinafter referred to as a Permitted Transfer). After such first Twelve-Month Period, each Limited Partner, and each transferee of Partnership Units or Assignee pursuant to a Permitted Transfer, shall have the right to Transfer all or any portion of its Partnership Interest to any Person, subject to the provisions of Section 11.6 hereof and to satisfaction of each of the following conditions:
(1) General Partner Right of First Refusal. The transferring Partner shall give written notice of the proposed Transfer to the General Partner, which notice shall state (i) the identity of the proposed transferee and (ii) the amount and type of consideration proposed to be received for the Transferred Partnership Units. The General Partner shall have ten (10) Business Days upon which to give the Transferring Partner notice of its election to acquire the Partnership Units on the proposed terms. If it so elects, it shall purchase the Partnership Units on such terms within ten (10) Business Days after giving notice of such election; provided, however, that in the event that the proposed terms involve a purchase for cash, the General Partner may at its election deliver in lieu of all or any portion of such cash a note payable to the Transferring Partner at a date as soon as reasonably practicable, but in no event later than one hundred eighty (180) days after such purchase, and bearing interest at an annual rate equal to the total dividends declared with respect to one (1) REIT Share for the four (4) preceding fiscal
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quarters of the General Partner, divided by the Value as of the closing of such purchase; provided, further, that such closing may be deferred to the extent necessary to effect compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, if applicable, and any other applicable requirements of law. If it does not so elect, the Transferring Partner may Transfer such Partnership Units to a third party, on terms no more favorable to the transferee than the proposed terms, subject to the other conditions of this Section 11.3.
(2) Qualified Transferee. Any Transfer of a Partnership Interest shall be made only to a single Qualified Transferee; provided, however, that, for such purposes, all Qualified Transferees that are Affiliates, or that comprise investment accounts or funds managed by a single Qualified Transferee and its Affiliates, shall be considered together to be a single Qualified Transferee; provided, further, that each Transfer meeting the minimum Transfer restriction of Section 11.3A(3) hereof may be to a separate Qualified Transferee.
(3) Minimum Transfer Restriction. Any Transferring Partner must Transfer not less than the lesser of (i) the greater of five hundred (500) Partnership Units or one-third (1/3) of the number of Partnership Units owned by such Partner as of the Effective Date or (ii) all of the remaining Partnership Units owned by such Transferring Partner; provided, however, that, for purposes of determining compliance with the foregoing restriction, all Partnership Units owned by Affiliates of a Limited Partner shall be considered to be owned by such Limited Partner.
(4) Transferee Agreement to Effect a Redemption. Any proposed transferee shall deliver to the General Partner a written agreement reasonably satisfactory to the General Partner to the effect that the transferee will, within six (6) months after consummation of a Partnership Common Units Transfer, tender its Partnership Common Units for Redemption in accordance with the terms of the Redemption rights provided in Section 8.6 hereof.
(5) No Further Transfers. The transferee (other than a Designated Party) shall not be permitted to effect any further Transfer of the Partnership Units, other than to the General Partner.
(6) Exception for Permitted Transfers. The conditions of Sections 11.3A(1) through 11.3A(5) hereof shall not apply in the case of a Permitted Transfer.
It is a condition to any Transfer otherwise permitted hereunder (whether or not such Transfer is effected during or after the first Twelve-Month Period) that the transferee assumes by operation of law or express agreement all of the obligations of the transferor Limited Partner under this Agreement with respect to such Transferred Partnership Interest, and no such Transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Partner are assumed by a successor corporation by operation of law) shall relieve the transferor Partner of its obligations under this Agreement without the approval of the General Partner, in its sole and absolute discretion. Notwithstanding the foregoing, any transferee of any
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Transferred Partnership Interest shall be subject to any and all ownership limitations (including, without limitation, the Ownership Limit) contained in the Charter that may limit or restrict such transferees ability to exercise its Redemption rights, including, without limitation, the Ownership Limit. Any transferee, whether or not admitted as a Substituted Limited Partner, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Limited Partner, no transferee, whether by a voluntary Transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in Section 11.5 hereof.
B. Incapacity. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partners estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate, and such power as the Incapacitated Limited Partner possessed to Transfer all or any part of its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.
C. Opinion of Counsel. In connection with any Transfer of a Limited Partner Interest, the General Partner shall have the right to receive an opinion of counsel reasonably satisfactory to it to the effect that the proposed Transfer may be effected without registration under the Securities Act and will not otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Interests Transferred. If, in the opinion of such counsel, such Transfer would require the filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Units, the General Partner may prohibit any Transfer otherwise permitted under this Section 11.3 by a Limited Partner of Partnership Interests.
D. Adverse Tax Consequences. No Transfer by a Limited Partner of its Partnership Interests (including any Redemption, any other acquisition of Partnership Units by the General Partner or any acquisition of Partnership Units by the Partnership) may be made to any person if (i) in the opinion of legal counsel for the Partnership, it would result in the Partnership being treated as an association taxable as a corporation, or (ii) such Transfer is effectuated through an established securities market or a secondary market (or the substantial equivalent thereof) within the meaning of Code Section 7704. Upon any Transfer by a Limited Partner of its Partnership Interests, such Limited Partner shall (a) provide the Partnership and the transferee receiving such an interest an affidavit satisfying the requirements of Section 1446(f)(2) of the Code stating, under penalty of perjury, (i) the transferor Limited Partners United States taxpayer identification number and (ii) that such Limited Partner is not a foreign person within the meaning of Code Section 1446, and (b) provide the Partnership with such other information and assistance as the Partnership may request to ensure that the Company is not subject to withholding under Section 1446 of the Code.
Section 11.4 Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a transferee (including any Designated Party or other transferees pursuant to Transfers permitted by
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Section 11.3 hereof) as a Limited Partner in its place. A transferee (including, but not limited to, any Designated Party) of the interest of a Limited Partner may be admitted as a Substituted Limited Partner only with the Consent of the General Partner, which Consent may be given or withheld by the General Partner in its sole and absolute discretion. The failure or refusal by the General Partner to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership or the General Partner. Subject to the foregoing, an Assignee shall not be admitted as a Substituted Limited Partner until and unless it furnishes to the General Partner (i) evidence of acceptance, in form and substance satisfactory to the General Partner, of all the terms, conditions and applicable obligations of this Agreement, (ii) a counterpart signature page to this Agreement executed by such Assignee and (iii) such other documents and instruments as may be required or advisable, in the sole and absolute discretion of the General Partner, to effect such Assignees admission as a Substituted Limited Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement.
C. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address and number of Partnership Units of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and number of Partnership Units of the predecessor of such Substituted Limited Partner.
Section 11.5 Assignees. If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 hereof as a Substituted Limited Partner, as described in Section 11.4 hereof, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Losses and other items of income, gain, loss, deduction and credit of the Partnership attributable to the Partnership Units assigned to such transferee and the rights to Transfer the Partnership Units provided in this Article 11, but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement (other than as expressly provided in Section 8.6 hereof with respect to a Qualifying Party that becomes a Tendering Party), and shall not be entitled to effect a Consent or vote with respect to such Partnership Units on any matter presented to the Limited Partners for approval (such right to Consent or vote, to the extent provided in this Agreement or under the Act, fully remaining with the transferor Limited Partner). In the event that any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer of all of such Limited Partners Partnership Units in accordance with this Article 11, with respect to which the transferee becomes a Substituted Limited Partner, or pursuant to a redemption (or acquisition by the Previous General Partner) of all of its
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Partnership Units pursuant to a Redemption under Section 8.6 hereof and/or pursuant to any Partnership Unit Designation.
B. Any Limited Partner who shall Transfer all of its Partnership Units in a Transfer (i) permitted pursuant to this Article 11 where such transferee was admitted as a Substituted Limited Partner, (ii) pursuant to the exercise of its rights to effect a redemption of all of its Partnership Units pursuant to a Redemption under Section 8.6 hereof and/or pursuant to any Partnership Unit Designation or (iii) to the Previous General Partner or the General Partner, whether or not pursuant to Section 8.6B hereof, shall cease to be a Limited Partner.
C. If any Partnership Unit is Transferred in compliance with the provisions of this Article 11, or is redeemed by the Partnership, or acquired by the Previous General Partner pursuant to Section 8.6 hereof, on any day other than the first day of a Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of income, gain, loss, deduction and credit attributable to such Partnership Unit for such Fiscal Year shall be allocated to the transferor Partner or the Tendering Party, as the case may be, and, in the case of a Transfer or assignment other than a Redemption, to the transferee Partner (including, without limitation, the General Partner and the Special Limited Partners as transferees of the Previous General Partner in the case of an acquisition of Partnership Common Units pursuant to Section 8.6 hereof), by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the interim closing of the books method or another permissible method selected by the General Partner. All distributions of Available Cash attributable to such Partnership Unit with respect to which the Partnership Record Date is before the date of such Transfer, assignment or Redemption shall be made to the transferor Partner or the Tendering Party, as the case may be, and, in the case of a Transfer other than a Redemption, all distributions of Available Cash thereafter attributable to such Partnership Unit shall be made to the transferee Partner.
D. In addition to any other restrictions on Transfer herein contained, in no event may any Transfer or assignment of a Partnership Interest by any Partner (including any Redemption, any acquisition of Partnership Units by the Previous General Partner or any other acquisition of Partnership Units by the Partnership) be made (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) in the event that such Transfer would cause either (a) any Special Limited Partner to cease to comply with the REIT Requirements or (b) the General Partner or any other wholly owned subsidiary of a Special Limited Partner to cease to qualify as a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)); (v) if such Transfer would, in the opinion of counsel to the Partnership or the General Partner, cause a termination of the Partnership for federal or state income tax purposes (except as a result of the Redemption (or acquisition by the Previous General Partner) of all Partnership Common Units held by all Limited Partners other than the Special Limited Partners); (vi) if such Transfer would, in the opinion of legal counsel to the Partnership, cause the Partnership to cease to be classified as a partnership for federal income tax purposes (except as a result of the Redemption (or acquisition by the Previous General Partner) of all Partnership Common Units held by all Limited Partners other than the Special Limited Partners); (vii) if such Transfer would cause the Partnership to become, with respect to any
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employee benefit plan subject to Title I of ERISA, a party-in-interest (as defined in ERISA Section 3(14)) or a disqualified person (as defined in Code Section 4975(c)); (viii) if such Transfer would, in the opinion of legal counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; (ix) if such Transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (x) if such Transfer causes the Partnership to become a publicly traded partnership, as such term is defined in Code Section 469(k)(2) or Code 7704(b); or (xi) if such Transfer subjects the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner. A successor to all of the General Partners General Partner Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to such Transfer. Any such successor shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission.
Section 12.2 Admission of Additional Limited Partners.
A. After the admission to the Partnership of an Original Limited Partner on the date hereof, a Person (other than an existing Partner) who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance, in form and substance satisfactory to the General Partner, of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, (ii) a counterpart signature page to this Agreement executed by such Person and (iii) such other documents or instruments as may be required in the sole and absolute discretion of the General Partner in order to effect such Persons admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partners sole and absolute discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items of income, gain, loss, deduction and credit allocable among Partners and
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Assignees for such Fiscal Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the interim closing of the books method or another permissible method selected by the General Partner. Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner, in accordance with the principles described in Section 11.6C hereof. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all the Partners and Assignees including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership. For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof.
Section 12.4 Admission of Initial Limited Partners. The Persons listed on Exhibit A as limited partners of the Partnership shall be admitted to the Partnership as Limited Partners upon their execution and delivery of this Agreement.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution. The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership without dissolution. However, the Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a Liquidating Event):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal, as defined in the Act (including, without limitation, bankruptcy), of the sole General Partner unless, within ninety (90) days after the withdrawal, a majority in interest (as such phrase is used in Section 17-801(3) of the Act) of the remaining Partners agree in writing, in their sole and absolute discretion, to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a successor General Partner:
C. an election to dissolve the Partnership made by the General Partner in its sole and absolute discretion, with or without the Consent of the Limited Partners;
D. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;
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E. the occurrence of a Terminating Capital Transaction;
F. the Redemption (or acquisition by a Special Limited Partner and/or the General Partner) of all Partnership Common Units other than Partnership Common Units held by the General Partner or a Special Limited Partner that holds all of the interests in the General Partner; or
G. the Redemption (or acquisition by the General Partner) of all Partnership Common Units other than Partnership Common Units held by the General Partner.
Section 13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and Partners. After the occurrence of a Liquidating Event, no Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnerships business and affairs. The General Partner (or, in the event that there is no remaining General Partner or the General Partner has dissolved, become bankrupt within the meaning of the Act or ceased to operate, any Person elected by a Majority in Interest of the Limited Partners (the General Partner or such other Person being referred to herein as the Liquidator)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnerships liabilities and property, and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include shares of stock in the Previous General Partner) shall be applied and distributed in the following order:
(1) First, to the satisfaction of all of the Partnerships debts and liabilities to creditors other than the Partners and their Assignees (whether by payment or the making of reasonable provision for payment thereof);
(2) Second, to the satisfaction of all of the Partnerships debts and liabilities to the General Partner (whether by payment or the making of reasonable provision for payment thereof), including, but not limited to, amounts due as reimbursements under Section 7.4 hereof;
(3) Third, to the satisfaction of all of the Partnerships debts and liabilities to the other Partners and any Assignees (whether by payment or the making of reasonable provision for payment thereof); and
(4) Subject to the terms of any Partnership Unit Designation, the balance, if any, to the General Partner, the Limited Partners and any Assignees in accordance with and in proportion to their positive Capital Account balances, after giving effect to all contributions, distributions and allocations for all periods.
The General Partner shall not receive any additional compensation for any services performed pursuant to this Article 13.
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B. Notwithstanding the provisions of Section 13.2A hereof that require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnerships assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2A hereof, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.
C. In the event that the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to the Partners and Assignees that have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, positive Capital Account balances. If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever. In the sole and absolute discretion of the General Partner or the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Partners pursuant to this Article 13 may be withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and order of priority set forth in Section 13.2A hereof as soon as practicable.
Section 13.3 Deemed Distribution and Recontribution. Notwithstanding any other provision of this Article 13, in the event that the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnerships Property shall not be liquidated, the Partnerships liabilities shall not be paid or discharged and the Partnerships affairs shall not be wound up. Instead, for federal income tax purposes the Partnership shall be deemed to have distributed the Property in kind to the Partners and the Assignees, who shall be deemed to have assumed and taken such Property subject to all Partnership liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Partners and the Assignees shall be deemed to have recontributed the Partnership Property in kind to the Partnership, which shall be deemed to have assumed and taken such Property subject to all such liabilities; provided, however, that nothing in this Section 13.3 shall be deemed to have constituted any Assignee as a Substituted Limited Partner without compliance with the provisions of Section 11.4 hereof.
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Section 13.4 Rights of Limited Partners. Except as otherwise provided in this Agreement, (a) each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contribution, (b) no Limited Partner shall have the right or power to demand or receive property other than cash from the Partnership and (c) no Limited Partner shall have priority over any other Limited Partner as to the return of its Capital Contributions, distributions or allocations.
Section 13.5 Notice of Dissolution. In the event that a Liquidating Event occurs or an event occurs that would, but for an election or objection by one or more Partners pursuant to Section 13.1 hereof, result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners and, in the General Partners sole and absolute discretion or as required by the Act, to all other parties with whom the Partnership regularly conducts business (as determined in the sole and absolute discretion of the General Partner), and the General Partner may, or, if required by the Act, shall, publish notice thereof in a newspaper of general circulation in each place in which the Partnership regularly conducts business (as determined in the sole and absolute discretion of the General Partner).
Section 13.6 Cancellation of Certificate of Limited Partnership. Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2 hereof, the Partnership shall be terminated, a certificate of cancellation shall be filed with the State of Delaware, all qualifications of the Partnership as a foreign limited partnership or association in jurisdictions other than the State of Delaware shall be cancelled, and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 13.7 Reasonable Time for Winding-Up. A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 hereof, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation.
ARTICLE 14
PROCEDURES FOR ACTIONS AND CONSENTS
OF PARTNERS; AMENDMENTS; MEETINGS
Section 14.1 Procedures for Actions and Consents of Partners. The actions requiring consent or approval of Limited Partners pursuant to this Agreement, including Section 7.3 hereof, or otherwise pursuant to applicable law, are subject to the procedures set forth in this Article 14.
Section 14.2 Amendments. Amendments to this Agreement may be proposed by the General Partner or by a Majority in Interest of the Limited Partners. Following such proposal, the General Partner shall submit any proposed amendment to the Limited Partners. The General Partner shall seek the written consent of the Limited Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that the General Partner may deem appropriate. For purposes of obtaining a written consent, the General Partner may
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require a response within a reasonable specified time, but not less than fifteen (15) days, and failure to respond in such time period shall constitute a consent that is consistent with the General Partners recommendation with respect to the proposal; provided, however, that an action shall become effective at such time as requisite consents are received even if prior to such specified time.
Section 14.3 Meetings of the Partners.
A. Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by a Majority in Interest of the Limited Partners. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.3B hereof.
B. Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement for the action in question). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for it by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or its attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing a later date). Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnerships receipt of written notice of such revocation from the Limited Partner executing such proxy.
D. Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate in its sole and absolute discretion. Without limitation, meetings of Partners may be conducted in the same manner as meetings of the General Partners shareholders and may be held at the same time as, and as part of, the meetings of the General Partners shareholders.
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ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice. Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication (including by telecopy, facsimile, or commercial courier service) to the Partner or Assignee at the address set forth in Exhibit A or such other address of which the Partner shall notify the General Partner in writing.
Section 15.2 Titles and Captions. All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to Articles or Sections are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 15.6 Waiver.
A. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.
B. The restrictions, conditions and other limitations on the rights and benefits of the Limited Partners contained in this Agreement, and the duties, covenants and other requirements of performance or notice by the Limited Partners, are for the benefit of the Partnership and, except for an obligation to pay money to the Partnership, may be waived or relinquished by the General Partner, in its sole and absolute discretion, on behalf of the Partnership in one or more instances from time to time and at any time; provided, however, that any such waiver or relinquishment may not be made if it would have the effect of (i) creating liability for any other Limited Partner, (ii) causing the Partnership to cease to qualify as a limited partnership, (iii) reducing the amount of cash otherwise distributable to the Limited Partners, (iv) resulting in the classification of the Partnership as an association or publicly traded partnership taxable as a corporation or (v) violating the Securities Act, the Exchange Act or any state blue sky or other securities laws; provided, further, that any waiver relating to compliance
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with the Ownership Limit or other restrictions in the Charter shall be made and shall be effective only as provided in the Charter.
Section 15.7 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.
Section 15.8 Applicable Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Act, the provisions of this Agreement shall control and take precedence.
Section 15.9 Entire Agreement. This Agreement contains all of the understandings and agreements between and among the Partners with respect to the subject matter of this Agreement and the rights, interests and obligations of the Partners with respect to the Partnership.
Section 15.10 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
Section 15.11 Limitation to Preserve REIT Status. Notwithstanding anything else in this Agreement, to the extent that the amount paid, credited, distributed or reimbursed by the Partnership to any REIT Partner or its officers, directors, employees or agents, whether as a reimbursement, fee, expense or indemnity (a REIT Payment), would constitute gross income to the REIT Partner (or, if the REIT Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of a REIT, to such REIT) for purposes of Code Section 856(c)(2) or Code Section 856(c)(3), then, notwithstanding any other provision of this Agreement, the amount of such REIT Payments, as selected by the General Partner in its discretion from among items of potential distribution, reimbursement, fees, expenses and indemnities, shall be reduced for any Fiscal Year so that the REIT Payments, as so reduced, for or with respect to such REIT Partner shall not exceed the lesser of:
(1) an amount equal to the excess, if any, of (a) four and nine-tenths percent (4.9%) of the REIT Partners (or, if the REIT Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of a REIT, such REITs) total gross income (but excluding the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (I) of Code Section 856(c)(2) over (b) the amount of gross income (within the meaning of Code Section 856(c)(2)) derived by the REIT Partner (or, if the REIT Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of a REIT, by such REIT) from sources other than those described in subsections (A) through (I) of Code Section 856(c)(2) (but not including the amount of any REIT Payments); or
(2) an amount equal to the excess, if any, of (a) twenty-four percent (24%) of the REIT Partners (or, if the REIT Partner is a qualified REIT subsidiary
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(within the meaning of Code Section 856(i)(2)) of a REIT, such REITs) total gross income (but excluding the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (I) of Code Section 856(c)(3) over (b) the amount of gross income (within the meaning of Code Section 856(c)(3)) derived by the REIT Partner (or, if the REIT Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of a REIT, by such REIT) from sources other than those described in subsections (A) through (I) of Code Section 856(c)(3) (but not including the amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts set forth in clauses (i) and (ii) above may be made if the General Partner, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts shall not adversely affect the REIT Partners (or, if the REIT Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of a REIT, such REITs) ability to qualify as a REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a consequence of the limitations set forth in this Section 15.11, such REIT Payments shall carry over and shall be treated as arising in the following Fiscal Year. The purpose of the limitations contained in this Section 15.11 is to prevent any REIT Partner (or, if the REIT Partner is a qualified REIT subsidiary (within the meaning of Code Section 856(i)(2)) of a REIT, such REIT) from failing to qualify as a REIT under the Code by reason of such REIT Partners share of items, including distributions, reimbursements, fees, expenses or indemnities, receivable directly or indirectly from the Partnership, and this Section 15.11 shall be interpreted and applied to effectuate such purpose.
Section 15.12 No Partition. No Partner nor any successor-in-interest to a Partner shall have the right while this Agreement remains in effect to have any property of the Partnership partitioned, or to file a complaint or institute any proceeding at law or in equity to have such property of the Partnership partitioned, and each Partner, on behalf of itself and its successors and assigns hereby waives any such right. It is the intention of the Partners that the rights of the parties hereto and their successors-in-interest to Partnership property, as among themselves, shall be governed by the terms of this Agreement, and that the rights of the Partners and their successors-in-interest shall be subject to the limitations and restrictions as set forth in this Agreement.
Section 15.13 No Third-Party Rights Created Hereby. The provisions of this Agreement are solely for the purpose of defining the interests of the Partners, inter se; and no other person, firm or entity (i.e., a party who is not a signatory hereto or a permitted successor to such signatory hereto) shall have any right, power, title or interest by way of subrogation or otherwise, in and to the rights, powers, title and provisions of this Agreement. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans to the Partnership or to pursue any other right or remedy hereunder or at law or in equity. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may any such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or any of the Partners.
[the next page is the signature page]
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.
PREVIOUS GENERAL PARTNER: | ||
APARTMENT INCOME REIT CORP. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person |
[Signature Page to Sixth Amended and Restated Agreement of Limited Partnership of AIMCO Properties L.P.]
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GENERAL PARTNER: | ||
AIMCO-GP, INC. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person |
[Signature Page to Sixth Amended and Restated Agreement of Limited Partnership of AIMCO Properties L.P.]
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SPECIAL LIMITED PARTNERS: | ||
AIR REIT SUB 1, LLC | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person | ||
AIR REIT SUB 2, LLC | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person | ||
APARTMENT INCOME REIT CORP. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person |
[Signature Page to Sixth Amended and Restated Agreement of Limited Partnership of AIMCO Properties L.P.]
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LIMITED PARTNERS: | ||
By: | AIMCO-GP, INC. | |
as attorney-in-fact | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person |
[Signature Page to Sixth Amended and Restated Agreement of Limited Partnership of AIMCO Properties L.P.]
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EXHIBIT A
PARTNERS AND PARTNERSHIP UNITS
Exhibit A, the list of Partners and Partnership Units, is maintained by the General Partner and omitted from this copy of the Agreement.
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EXHIBIT B
EXAMPLES REGARDING ADJUSTMENT FACTOR
For purposes of the following examples, it is assumed that (a) the Adjustment Factor in effect on June 30, 1995 is 1.0 and (b) on July 1, 1995 (the Partnership Record Date for purposes of these examples), prior to the events described in the examples, there are 100 REIT Shares issued and outstanding.
Example 1
On the Partnership Record Date, the Previous General Partner declares a dividend on its outstanding REIT Shares in REIT Shares. The amount of the dividend is one REIT Share paid in respect of each REIT Share owned. Pursuant to Paragraph (i) of the definition of Adjustment Factor, the Adjustment Factor shall be adjusted on the Partnership Record Date, effective immediately after the stock dividend is declared, as follows:
1.0 * 200 OVER 100 = 2.0
Accordingly, the Adjustment Factor after the stock dividend is declared is 2.0.
Example 2
On the Partnership Record Date, the Previous General Partner distributes options to purchase REIT Shares to all holders of its REIT Shares. The amount of the distribution is one option to acquire one REIT Share in respect of each REIT Share owned. The strike price is $4.00 a share. The Value of a REIT Share on the Partnership Record Date is $5.00 per share. Pursuant to Paragraph (ii) of the definition of Adjustment Factor, the Adjustment Factor shall be adjusted on the Partnership Record Date, effective immediately after the options are distributed, as follows:
1.0 * {(100 + 100)} OVER {(100 + {100 * $4.00} OVER {$5.00})} = 1.1111
Accordingly, the Adjustment Factor after the options are distributed is 1.1111. If the options expire or become no longer exercisable, then the retroactive adjustment specified in Paragraph (ii) of the definition of Adjustment Factor shall apply.
Example 3
On the Partnership Record Date, the Previous General Partner distributes assets to all holders of its REIT Shares. The amount of the distribution is one asset with a fair market value (as determined by the General Partner) of $1.00 in respect of each REIT Share owned. It is also assumed that the assets do not relate to assets received by the Previous General Partner or the General Partner pursuant to a pro rata distribution by the Partnership. The Value of a REIT Share on the Partnership Record Date is $5.00 a share. Pursuant to Paragraph (iii) of the definition of Adjustment Factor, the Adjustment Factor shall be adjusted on the Partnership Record Date, effective immediately after the assets are distributed, as follows:
1.0 * {$5.00} OVER {$5.00 - $1.00} = 1.25
Accordingly, the Adjustment Factor after the assets are distributed is 1.25.
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EXHIBIT C
LIST OF DESIGNATED PARTIES
Terry Considine
Peter K. Kompaniez
Robert P. Lacy
Michael & Verona Sollinger
Patrick Stucker
Stonegate Funding Company
Steven F. Goldstone
Donaldson C. Pillsbury
Christopher Crowley
Richard D. Spizzini
Henry L. King
Alfonso G. Canales
Thomas J. Flynn
Carl E. Yasharian
Margot A. Mathoni
David B. Pall
Thomas E. Woodruff
Glen H. & Joyce E. Rosmann
Warren H. Leland
Amerett L. Donahoe
Daniel E. Landon
Conrad F. Fingerson
Dwight E. Lowell, II
Alfred V. & Lois E. Gangnes
Edward S. Stone
Sycamore Realty Trust, V
E. Oran Brigham
Donald Ravitch
Brian Conboy
Alan B. Grebene
Charles A. Cahill, III
Harold F. & Lucille J. Goodman
Timothy J. Tucker
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EXHIBIT D
NOTICE OF REDEMPTION
To: | AIMCO-GP, Inc. |
c/o Apartment Income REIT Corp.
4582 South Ulster Street
Suite 1700
Denver, Colorado 80237
The undersigned Limited Partner or Assignee hereby tenders for Redemption _______ Partnership Common Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as amended (the Agreement), and the Redemption rights referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning ascribed to them respectively in the Agreement. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Partnership Common Units for REIT Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to the Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Partnership Common Units;
(b) undertakes (i) to surrender such Partnership Common Units and any certificate therefor at the closing of the Redemption and (ii) to furnish to the Previous General Partner, prior to the Specified Redemption Date, the documentation, instruments and information required under Section 8.6G of the Agreement;
(c) directs that the certificate representing the REIT Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of such Redemption be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee is a Qualifying Party;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Partnership Common Units, free and clear of the rights or interests of any other person or entity;
(iii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Partnership Common Units as provided herein;
(iv) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender; and
(e) acknowledges that he will continue to own such Partnership Common Units until and unless such Redemption transaction closes.
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Dated: ______________________
Name of Limited Partner or Assignee: |
|
|
(Signature of Limited Partner or Assignee) |
|
(Street Address) |
|
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:______________________________________________
Please insert social security or identifying number:______________________________________________
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EXHIBIT E
FORM OF UNIT CERTIFICATE
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION, THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that
_______________________________________________________________________
is the owner of
_________________________________________________________________________
FULLY PAID PARTNERSHIP COMMON UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Partnership Common Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership, as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated:
By________________________________
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For Value Received, ________________________________ hereby sells, assigns and transfers unto ___________________________________ _______________________________ Partnership Common Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Partnership Common Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: ____________________
By: ______________________________
Name:
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EXHIBIT F
AMENDED AND RESTATED PARTNERSHIP UNIT DESIGNATION OF
THE CLASS I HIGH PERFORMANCE PARTNERSHIP UNITS OF
AIMCO PROPERTIES, L.P.
WHEREAS, AIMCO-GP, Inc., in its capacity as the general partner, has approved an amendment and restatement of the Partnership Unit Designation of the Class I High Performance Partnership Units (the Original HP Unit Designation) of AIMCO Properties, L.P. on the terms set forth herein.
1. | Number of Units and Designation. |
A class of Partnership Units is hereby designated as Class I High Performance Partnership Units, and the number of Partnership Units constituting such class, as of the date hereof, is 1,998,230, which reflects the effect of the previously completed adjustment as of the Class I High Performance Valuation Date (as defined in the Original HP Partnership Unit Designation and in accordance with Section 3 thereof) (the Completed Class I High Performance Valuation Date).
2. | Definitions. |
For purposes of this Partnership Unit Designation, the following terms shall have the meanings indicated in this Section 2. Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement.
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Class I High Performance Cash Amount shall mean, as of any date, the lesser of (i) an amount of cash equal to the product of the amount that a Holder would receive in respect of each Class I High Performance Partnership Unit if the Partnership sold all of its properties at their fair market value (which may be determined by reference to the Value of a REIT Share), paid all of its debts and distributed the remaining proceeds to the Partners as provided in Section 13.2 of the Agreement, determined as of the applicable Valuation Date, or (ii) in the case of a Declination followed by a Public Offering Funding, the Public Offering Funding Amount.
Class I High Performance Partnership Unit shall mean a Partnership Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Exhibit.
Determination Date shall mean (i) when used with respect to any dividend or other distribution, the date fixed for the determination of the holders of the securities entitled to receive such dividend or distribution, or, if a dividend or distribution is paid or made without fixing such a date, the date of such dividend or distribution, and (ii) when used with respect to any split, subdivision, reverse stock split, combination or reclassification of securities, the date upon which such split, subdivision, reverse stock split, combination or reclassification becomes effective.
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Ex-Date shall mean (i) when used with respect to any dividend or distribution, the first date on which the securities on which the dividend or distribution is payable trade regular way on the relevant exchange or in the relevant market without the right to receive such dividend or distribution, and (ii) when used with respect to any split, subdivision, reverse stock split, combination or reclassification of securities, the first date on which the securities trade regular way on such exchange or in such market to reflect such split, subdivision, reverse stock split, combination or reclassification becoming effective.
Extraordinary Distribution shall mean the distribution by the Previous General Partner, by dividend or otherwise, to all holders of its REIT Shares of evidences of its indebtedness or assets (including securities) other than cash or REIT Shares.
Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Value shall have the meaning set forth in the Agreement, except that Value shall be determined by reference to the average of the daily market prices for twenty (20) consecutive trading days rather than ten (10) consecutive trading days.
3. | [Reserved] |
4. | Distributions. |
The Holders of Class I High Performance Partnership Units are entitled to receive distributions (other than distributions upon liquidation) if, as, when and in the same amounts and of the same type as may be paid to Holders of Partnership Common Units as if each Holder of Class I High Performance Partnership Units held an equal number of Partnership Common Units originally issued on the Completed Class I High Performance Valuation Date.
5. | Allocations. |
(a) Net Income and Net Loss shall be allocated to each of the Holders of Class I High Performance Partnership Units as if each such Holder was the Holder of an equal number of Partnership Common Units originally issued on the Completed Class I High Performance Valuation Date.
(b) In the event that the Partnership disposes of all or substantially all of its assets in a transaction that will lead to a liquidation of the Partnership pursuant to Article XIII of the Agreement, then, notwithstanding Section 6.3.C of the Agreement, each Holder of Class I High Performance Partnership Units shall be specifically allocated items of Partnership income and gain in an amount sufficient to cause the Capital Account of such Holder to be equal to that of a Holder of an equal number of Partnership Common Units.
6. | Redemption. |
Subject to the applicable requirements of Federal securities laws and any securities exchange or quotation system rules or regulations, each Holder of Class I High Performance Partnership Units shall have the redemption rights of Qualifying Parties set forth in Section 8.6 of the Agreement, except that (i) all references therein to Redeemable Units or Partnership
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Common Units shall be deemed to be references to Class I High Performance Partnership Units, (ii) the first Twelve-Month Period applicable to all Class I High Performance Partnership Units shall be deemed to have passed, (iii) all references therein to Cash Amount shall be deemed to be references to the Class I High Performance Cash Amount, and (iv) in the event that the Previous General Partner elects to acquire Class I High Performance Partnership Units that have been tendered for Redemption, the Previous General Partner shall acquire each such Class I High Performance Partnership Unit in exchange for a number of REIT Shares equal to the quotient obtained by dividing the Class I High Performance Cash Amount by the Value of a REIT Share, determined as of the applicable Valuation Date. Notwithstanding anything to the contrary herein, a Holder of Class I High Performance Partnership Units shall not have the right to redeem Class High Performance Partnership Units if the issuance of REIT Shares in exchange for such Class I High Performance Partnership Units would require shareholder approval (which has not been obtained) under the applicable rules of a securities exchange on which the REIT Shares are then listed.
7. | Status of Reacquired Units. |
All Class I High Performance Partnership Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
8. | Restrictions on Ownership and Transfer. |
The restrictions on Transfer set forth in Sections 11.1B and 11.3A of the Agreement shall not apply to Transfers of Class I High Performance Partnership Units which may be Transferred (i) by SMP I, L.L.C., a Delaware limited liability company (SMP) to (a) any Person who is a member (a Member) of SMP immediately prior to such transfer, (b) a Family Member of a Member, (c) a Controlled Entity of a Member, (c) any Person with respect to whom the Member constitutes a Controlled Entity, (d) upon the death of a Member, by will or by the laws of descent and distribution to any Qualified Transferee, and (ii) by any other Person to (a) a Family Member of a such Person, (b) a Controlled Entity of such Person, (c) any other Person with respect to whom such Person constitutes a Controlled Entity, (d) upon the death of such Person, by will or by the laws of descent and distribution to any Qualified Transferee.
9. | Adjustments. |
(a) [intentionally omitted]
(b) In the event that, on or after January 1, 1998, the Previous General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT Shares, (iii) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, or (iv) otherwise reclassifies its outstanding REIT Shares, then, for purposes of determining the AIMCO Total Return, each price of a REIT Share determined as of a date on or after the Ex-Date for such transaction shall be adjusted by multiplying such price by a fraction (x) the numerator of which shall be the number of REIT Shares issued and outstanding on the Determination Date for such dividend,
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distribution, split, subdivision, reverse stock split, combination or reclassification (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (y) the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on the Determination Date for such dividend, distribution, split, subdivision, reverse stock split, combination or reclassification. The General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of the relevant valuation period that would unfairly distort the Value of a REIT Share, including, without limitation, a stock dividend, split subdivision, reverse stock split, or share combination.
(c) The General Partner shall have authority to appropriately adjust the Value of a REIT Share if any other transaction or circumstance occurs or arises that would have an inequitable result.
10. | General. |
The ownership of Class I High Performance Partnership Units may (but need not, in the sole and absolute discretion of the General Partner) be evidenced by one or more certificates. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent conversion, redemption, or any other event having an effect on the ownership of, Class I High Performance Partnership Units.
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EXHIBIT G
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS ONE PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class One Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be Ninety Thousand (90,000).
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Assignee shall mean a Person to whom one or more Preferred Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Cash Amount shall mean, with respect to any Tendered Units, cash in an amount equal to the product of the number of Tendered Units, multiplied by 91.43 (which is the quotient obtained by dividing $8 by 8.75%).
Class One Partnership Preferred Unit or Preferred Unit shall mean a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation.
Cut-Off Date shall mean the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Declination shall have the meaning set forth in Section 6(f) of this Partnership Unit Designation.
Distribution Payment Date shall have the meaning set forth of Section 3(a) of this Partnership Unit Designation.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall have the meaning set forth in Section 5(a) of this Partnership Unit Designation.
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Market Value shall mean, as of any calculation date and with respect to any share of stock, the average of the daily market prices for ten (10) consecutive trading days immediately preceding the calculation date. The market price for any such trading day shall be:
(i) if the shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
(ii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of such ten day period that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Notice of Redemption shall mean a Notice of Redemption in the form of Annex I to this Partnership Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Primary Offering Notice shall have the meaning set forth in Section 6(h)(3) of this Partnership Unit Designation.
Public Offering Funding shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
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Redemption shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Registrable Shares shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
REIT Shares Amount shall mean, with respect to any Tendered Units, a number of REIT Shares equal to the quotient obtained by dividing (i) the Cash Amount for such Tendered Units, by (ii) the Market Value of a REIT Share as of the fifth (5th) Business Day prior to the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Single Funding Notice shall have the meaning set forth in Section 6(f)(3) of this Partnership Unit Designation.
Specified Redemption Date shall mean, with respect to any Redemption, the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the Business Day next following the date of the closing of the Public Offering Funding; provided, however, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 6 hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Tendering Party shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Tendered Units shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class One Partnership Preferred Units, as to the payment of distributions and as to distributions of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class One Partnership Preferred Units (the Partnership
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Units referred to in this paragraph being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class One Partnership Preferred Units, as to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class One Partnership Preferred Units if (i) such class or series of Partnership Units shall be Class G Partnership Preferred Units or (ii) the holders of such class or series of Partnership Units and the Class One Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority one over the other (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class One Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of Partnership Units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class One Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) Holders of Preferred Units will be entitled to receive, when and as declared by the General Partner, quarterly cash distributions at the rate of $2.00 per Preferred Unit. Any such distributions will be cumulative from the date of original issue, whether or not in any distribution period or periods such distributions have been declared, and shall be payable quarterly on February 15, May 15, August 15 and November 15 of each year (or, if not a Business Day, the next succeeding Business Day) (each a Distribution Payment Date), commencing on the first such date occurring after the date of original issue. If the Preferred Units are issued on any day other than a Distribution Payment Date, the first distribution payable on such Preferred Units will be prorated for the portion of the quarterly period that such Preferred Units are outstanding on the basis of twelve 30-day months and a 360-day year. Distributions will be payable in arrears to holders of record as they appear on the records of the Partnership at the close of business on the February 1, May 1, August 1 or November 1, as the case may be, immediately preceding each Distribution Payment Date. Holders of Preferred Units will not be entitled to receive any distributions in excess of cumulative distributions on the Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Preferred Units that may be in arrears. Holders of any Preferred Units that are issued after the date of original issuance will be entitled to receive the same distributions as holders of any Preferred Units issued on the date of original issuance.
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(b) When distributions are not paid in full upon the Preferred Units or any Parity Partnership Units, or a sum sufficient for such payment is not set apart, all distributions declared upon the Preferred Units and any Parity Partnership Units shall be declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Preferred Units and accumulated and unpaid on such Parity Partnership Units. Except as set forth in the preceding sentence, unless distributions on the Preferred Units equal to the full amount of accumulated and unpaid distributions have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past distribution periods, no distributions shall be declared or paid or set apart for payment by the Partnership with respect to any Parity Partnership Units.
(c) Unless full cumulative distributions (including all accumulated, accrued and unpaid distributions) on the Preferred Units have been declared and paid, or declared and set apart for payment, for all past distribution periods, no distributions (other than distributions paid in Junior Partnership Units or options, warrants or rights to subscribe for or purchase Junior Partnership Units) may be declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property may be declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (except for a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Partnership or any affiliate thereof, including, without limitation, Previous General Partner and its affiliates) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Junior Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of Junior Partnership Units.
(d) Notwithstanding the foregoing provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain the Previous General Partners qualification as a REIT.
5. | Liquidation Preference. |
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any allocation of income or gain by the Partnership shall be made to or set apart for the holders of any Junior Partnership Units, to the extent possible, the holders of Preferred Units shall be entitled to be allocated income and gain to effectively enable them to receive a liquidation preference (the Liquidation Preference) per Preferred Unit equal to the sum of (i) 91.93 (which is the quotient obtained by dividing $8 by 8.75%), plus (ii) any accumulated, accrued and unpaid distributions (whether or not earned or declared) to the date of final distribution to such holders; but such holders will not be entitled to any further payment or allocation. Until all holders of the Preferred Units have been paid the Liquidation Preference in full, no allocation of income or gain will be made to any holder of Junior Partnership Units upon the liquidation, dissolution or winding up of the Partnership.
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(b) If, upon any liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Preferred Units shall be insufficient to pay in full the Liquidation Preference and liquidating payments on any Parity Partnership Units, then following certain allocations made by the Partnership, such assets, or the proceeds thereof, shall be distributed among the holders of Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Preferred Units and any such Parity Partnership Units if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the Partnership will not include a consolidation or merger of the Partnership with one or more partnerships, corporations or other entities, or a sale or transfer of all or substantially all of the Partnerships assets.
(d) Upon any liquidation, dissolution or winding up of the Partnership, after all allocations shall have been made in full to the holders of Preferred Units and any Parity Partnership Units to enable them to receive their respective liquidation preferences, any Junior Partnership Units shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
6. | Redemption. |
(a) Except as set forth in Section 6(l) hereof, the Preferred Units may not be redeemed at the option of the Partnership, and will not be required to be redeemed or repurchased by the Partnership or the Previous General Partner except if a holder of a Preferred Unit effects a Redemption, as provided for in Section 6(b) hereof. The Partnership or the Previous General Partner may purchase Preferred Units from time to time in the open market, by tender or exchange offer, in privately negotiated purchases or otherwise.
(b) On or after the first (1st) anniversary of becoming a holder of Preferred Units, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Preferred Units held by such Qualifying Party (such Preferred Units being hereafter Tendered Units) in exchange (a Redemption) for REIT Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party).
(c) If the Partnership elects to redeem Tendered Units for REIT Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such REIT Shares to the Tendering Party pursuant to the terms set forth in this Section 6, in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for REIT Shares. In making such election to cause the Previous General Partner to acquire Tendered
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Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Tendering Parties over another nor discriminates against a group or class of Tendering Parties. If the Partnership elects to redeem any number of Tendered Units for REIT Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for a number of REIT Shares equal to the REIT Shares Amount for such number of the Tendered Units. The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The REIT Shares shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and accessible REIT Shares, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 6, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such REIT Shares are issued pursuant to this Section 6, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such REIT Shares for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. REIT Shares issued upon an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6 may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
(d) The Partnership shall have no obligation to effect any redemption unless and until a Tendering Party has given the Partnership a Notice of Redemption. Each Notice of Redemption shall be sent by hand delivery or by first class mail, postage prepaid, to AIMCO Properties, L.P., c/o AIMCO-GP, Inc., 4582 South Ulster Street, Suite 1700, Denver, Colorado 80237, Attention: Investor Relations, or to such other address as the Partnership shall specify in writing by delivery to the holders of the Preferred Units in the same manner as that set forth above for delivery of the Notice of Redemption. At any time prior to the Specified Redemption Date for any Redemption, any holder may revoke its Notice of Redemption.
(e) A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the record date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem any number of Tendered Units for cash, the Cash Amount for such number of Tendered Units shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
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(f) In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for REIT Shares pursuant to this Section 6 following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the Previous General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous General Partner of a number of REIT Shares (Registrable Shares) equal to the REIT Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding Preferred Units and having Redemption rights pursuant to this Section 6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Preferred Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Preferred Units to be made subject thereon in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the next twelve months; provided, however, that the Previous General Partner shall not be required to acquire Preferred Units pursuant to this Section 6(f) more than twice within any twelve-month period.
Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
(g) Notwithstanding the provisions of this Section 6, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for the REIT Shares if such exchange would be prohibited under the Charter.
(h) Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 6:
(1) All Preferred Units acquired by the Previous General Partner pursuant to this Section 6 hereof shall be contributed by the Previous General Partner to
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any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine. Any Preferred Units so contributed to the General Partner shall automatically, and without further action required, be converted into and deemed to be a General Partner Interest comprised of an equal number of Partnership Common Units. Any Preferred Units so contributed to the Special Limited Partners shall be converted into Partnership Common Units.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Preferred Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Preferred Units, all of the Preferred Units held by such Tendering Party.
(3) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to this Section 6, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in Section 6(f) hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
(4) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
(5) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(6) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 of the Agreement) all Preferred Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Preferred Units for all purposes of the Agreement, until such Preferred Units are either paid for by the Partnership pursuant to this Section 6 or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the REIT Shares, pursuant to this Section 6 on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6, the Tendering Party shall have no rights as a shareholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 6(h), all Partnership Common Units and Partnership Preferred Units, including Preferred
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Units, beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
(i) In connection with an exercise of Redemption rights pursuant to this Section 6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares and any other classes or shares of the Previous General Partner by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares or any other class of shares of the Previous General Partner prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares or any other class of shares of the Previous General Partner by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 6(i)(a) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own REIT Shares or other shares of the Previous General Partner in violation of the Ownership Limit.
(j) On or after the Specific Redemption Date, each holder of Preferred Units shall surrender to the Partnership the certificate evidencing such holders Preferred Units, at the address to which a Notice of Redemption is required to be sent. Upon such surrender of a certificate, the Partnership shall thereupon pay the former holder thereof the applicable Cash Amount and/or deliver REIT Shares for the Preferred Units evidenced thereby. From and after the Specific Redemption Date (i) distributions with respect to the Preferred Units shall cease to accumulate, (ii) the Preferred Units shall no longer be deemed outstanding, (iii) the holders thereof shall cease to be Partners to the extent of their interest in such Preferred Units, and (iv) all rights whatsoever with respect to the Preferred Units shall terminate, except the right of the holders of the Preferred Units to receive Cash Amount and/or REIT Shares therefor, without interest or any sum of money in lieu of interest thereon, upon surrender of their certificates therefor.
(k) Notwithstanding the provisions of this Section 6, the Tendering Parties (i) shall not be entitled to elect or effect a Redemption where the Redemption would consist of less than all the Preferred Units held by Partners and, to the extent that the aggregate Percentage Interests of the Limited Partners would be reduced, as a result of the Redemption, to less than one percent (1%) and (ii) shall have no rights under the Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 6(k), it shall be null and void ab initio, and the Tendering Party shall not acquire
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any rights or economic interests in REIT Shares otherwise issuable by the Previous General Partner hereunder.
(l) Notwithstanding any other provision of the Agreement, on and after the date on which the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) are less than one percent (1%), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner Interests (other than the Special Limited Partners Limited Partner Interest) by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to this Section 6 for the amount of Preferred Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 6(l). Such notice given by the General Partner to a Limited Partner pursuant to this Section 6(l) shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 6(l), (a) any Limited Partner (whether or not eligible to be a Tendering Party) may, in the General Partners sole and absolute discretion, be treated as a Tendering Party and (b) the provisions of Sections 6(f)(f)(1), 6(h)(2), 6(h)(3) and 6(h)(5) hereof shall not apply, but the remainder of this Section shall apply, mutatis mutandis.
7. | Status of Reacquired Units. |
All Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
8. | General. |
The ownership of the Preferred Units shall be evidenced by one or more certificates in the form of Annex II hereto. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the Class One Partnership Preferred Units.
9. | Allocations of Income and Loss. |
For each taxable year, (i) each holder of Preferred Units will be allocated net income of the Partnership in an amount equal to the distributions made on such holders Preferred Units during such taxable year, and (ii) each holder of Preferred Units will be allocated its pro rata share, based on the portion of outstanding Preferred Units held by it, of any net loss of the Partnership that is not allocated to holders of Partnership Common Units or other interests in the Partnership. Upon liquidation, dissolution or winding up of the Partnership, the holders of Preferred Units will be allocated income and gain sufficient to enable them to realize the Liquidation Preference in full.
10. | Voting Rights. |
Except as otherwise required by applicable law or in the Agreement, the holders of the Preferred Units will have the same voting rights as holders of the Partnership Common Units. So long as any Preferred Units are outstanding, in addition to any other vote or consent of partners
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required by law or by the Agreement, the affirmative vote or consent of holders of at least 50% of the outstanding Preferred Units will be necessary for effecting any amendment of any of the provisions of the Partnership Unit Designation of the Preferred Units that materially and adversely affects the rights or preferences of the holders of the Preferred Units. The creation or issuance of any class or series of Partnership units, including, without limitation, any Partnership units that may have rights junior to, on a parity with, or senior or superior to the Preferred Units will not be deemed to have a material adverse effect on the rights or preferences of the holders of Preferred Units. The Partnership shall give the holders of the Preferred Units at least twenty-one (21) days advance notice of the proposed issuance of any Senior Partnership Units. With respect to the exercise of the above described voting rights, each Preferred Unit will have one (1) vote per Preferred Unit.
11. | Restrictions on Transfer. |
Preferred Units are subject to the same restrictions on transfer applicable to Common Units, as set forth in the Agreement.
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ANNEX I
TO EXHIBIT G
NOTICE OF REDEMPTION
To: AIMCO Properties, L.P.
c/o AIMCO-GP, Inc.
4582 South Ulster Street
Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned Limited Partner or Assignee hereby tenders for redemption Class One Partnership Preferred Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the Class One Partnership Preferred Units. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Class One Partnership Preferred Units for REIT Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to the Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Class One Partnership Preferred Units;
(b) undertakes (i) to surrender such Class One Partnership Preferred Units and any certificate therefor at the closing of the Redemption contemplated hereby and (ii) to furnish to the Previous General Partner, prior to the Specified Redemption Date:
(1) A written affidavit, dated the same date as this Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) the undersigned Limited Partner or Assignee and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the undersigned Limited Partner or Assignee nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the undersigned Limited Partner or Assignee nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption contemplated hereby on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption contemplated hereby on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by the undersigned Limited Partner or Assignee and any Related Party remain unchanged from that disclosed in the affidavit required by paragraph (1) above, or (b) after giving effect to the Redemption contemplated hereby, neither the undersigned Limited Partner or Assignee nor any Related Party shall own REIT Shares in violation of the Ownership Limit.
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(c) directs that the certificate representing the REIT Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of the Redemption contemplated hereby be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Preferred Units, free and clear of the rights or interests of any other person or entity;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Preferred Units as provided herein; and
(iii) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender.
Dated: ______________________
Name of Limited Partner or Assignee: |
|
|
(Signature of Limited Partner or Assignee) |
|
(Street Address) |
|
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:__________________________
Please insert social security or identifying number:__________________________
Signature Guaranteed by: |
|
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NOTICE: THE SIGNATURE OF THIS NOTICE OF REDEMPTION MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE FOR THE CLASS ONE PREFERRED UNITS WHICH ARE BEING REDEEMED IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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ANNEX II
TO EXHIBIT G
FORM OF UNIT CERTIFICATE
OF
CLASS ONE PARTNERSHIP PREFERRED UNITS
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION, THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that ______________________________________________________________
is the owner of ________________________________________________________________
CLASS ONE PARTNERSHIP PREFERRED UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Class One Partnership Preferred Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership of AIMCO Properties, L.P., as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated: | ||||||
By |
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ASSIGNMENT
For Value Received, ________________________________ hereby sells, assigns and transfers unto __________________________________ _____________________________ Class One Partnership Preferred Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Class One Partnership Preferred Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: __________________________ | ||||||
By: | ||||||
Name: | ||||||
Signature Guaranteed by: | ||||||
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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EXHIBIT H
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS TWO PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class Two Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be Ten Million (10,000,000).
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Assignee shall mean a Person to whom one or more Preferred Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Cash Amount shall mean, with respect to any Tendered Units, cash in an amount equal to the product of (i) the number of Tendered Units, multiplied by (ii) the Liquidation Preference for a Preferred Unit.
Class Two Partnership Preferred Unit or Preferred Unit shall mean a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation.
Common Shares shall mean the shares of Class A Common Stock of the Previous General Partner.
Common Shares Amount shall mean, with respect to any Tendered Units, a number of Common Shares equal to the quotient obtained by dividing (i) the Cash Amount for such Tendered Units, by (ii) the Market Value of a Common Share calculated as of the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units.
Cut-Off Date shall mean the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Declination shall have the meaning set forth in Section 6(f) of this Partnership Unit Designation.
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Distribution Payment Date shall have the meaning set forth in Section 4(a) of this Partnership Unit Designation.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall have the meaning set forth in Section 5(a) of this Partnership Unit Designation.
Market Value shall mean, as of any calculation date and with respect to any share of stock, the average of the daily market prices for ten (10) consecutive trading days immediately preceding the calculation date. The market price for any such trading day shall be:
(i) if the shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
(ii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of such ten day period that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Notice of Redemption shall mean a Notice of Redemption in the form of Annex I to this Partnership Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
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Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Preferred Shares shall mean shares of the Class I Cumulative Preferred Stock of the Previous General Partner.
Primary Offering Notice shall have the meaning set forth in Section 6(h)(4) of this Partnership Unit Designation.
Public Offering Funding shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Redemption shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Registrable Shares shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Single Funding Notice shall have the meaning set forth in Section 6(f)(3) of this Partnership Unit Designation.
Specified Redemption Date shall mean, with respect to any Redemption, the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the Business Day next following the date of the closing of the Public Offering Funding; provided, however, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 5 hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Tendering Party shall have the meaning set forth in Section 6(b) hereof.
Tendered Units shall have the meaning set forth in Section 6(b) hereof.
3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Two Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or
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winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Two Partnership Preferred Units (the Partnership Units referred to in this paragraph being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Two Partnership Preferred Units, as to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Two Partnership Preferred Units if (i) such class or series of Partnership Units shall be Class G Partnership Preferred Units or Class One Partnership Preferred Units or (ii) the holders of such class or series of Partnership Units and the Class Two Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority one over the other (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Two Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of Partnership Units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class Two Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) Holders of Preferred Units will be entitled to receive, when and as declared by the General Partner, quarterly cash distributions at the rate of $0.50 per Preferred Unit; provided, however, that at any time and from time to time on or after March 1, 2005, the Partnership may adjust the quarterly cash distribution rate on the Preferred Units to equal 25% of the lower of (i) two percent (2%) plus the annual interest rate then applicable to U.S. Treasury notes with a maturity of five years and (ii) the annual dividend rate on the class or series of preferred stock most recently issued by the Previous General Partner that (x) is not convertible into another security of the Previous General Partner at the option of the holder and (y) ranks on a parity with its Class H Cumulative Preferred Stock. Such adjustment shall become effective upon the date the Partnership issues a notice to such effect to the holders of the Preferred Units. Any such distributions will be cumulative from the date of original issue, whether or not in any distribution period or periods such distributions have been declared, and shall be payable quarterly on February 15, May 15, August 15 and November 15 of each year (or, if not a Business Day, the next succeeding Business Day) (each a Distribution Payment Date), commencing on the first such date occurring after the date of original issue. If the Preferred Units are issued on any day other than a Distribution Payment Date, the first distribution payable on such Preferred Units will be prorated for the portion of the quarterly period that such
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Preferred Units are outstanding on the basis of twelve 30-day months and a 360-day year. Distributions will be payable in arrears to holders of record as they appear on the records of the Partnership at the close of business on the February 1, May 1, August 1 or November 1, as the case may be, immediately preceding each Distribution Payment Date. Holders of Preferred Units will not be entitled to receive any distributions in excess of cumulative distributions on the Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Preferred Units that may be in arrears. Holders of any Preferred Units that are issued after the date of original issuance will be entitled to receive the same distributions as holders of any Preferred Units issued on the date of original issuance.
(b) When distributions are not paid in full upon the Preferred Units or any Parity Partnership Units, or a sum sufficient for such payment is not set apart, all distributions declared upon the Preferred Units and any Parity Partnership Units shall be declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Preferred Units and accumulated and unpaid on such Parity Partnership Units. Except as set forth in the preceding sentence, unless distributions on the Preferred Units equal to the full amount of accumulated and unpaid distributions have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past distribution periods, no distributions shall be declared or paid or set apart for payment by the Partnership with respect to any Parity Partnership Units.
(c) Unless full cumulative distributions (including all accumulated, accrued and unpaid distributions) on the Preferred Units have been declared and paid, or declared and set apart for payment, for all past distribution periods, no distributions (other than distributions paid in Junior Partnership Units or options, warrants or rights to subscribe for or purchase Junior Partnership Units) may be declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property may be declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (except for a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Partnership or any affiliate thereof, including, without limitation, the Previous General Partner and its affiliates) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Junior Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of Junior Partnership Units.
(d) Notwithstanding the foregoing provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain the Previous General Partners qualification as a REIT.
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5. | Liquidation Preference. |
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any allocation of income or gain by the Partnership shall be made to or set apart for the holders of any Junior Partnership Units, to the extent possible, the holders of Preferred Units shall be entitled to be allocated income and gain to effectively enable them to receive a liquidation preference (the Liquidation Preference) of (i) $25 per Preferred Unit, plus (ii) accumulated, accrued and unpaid distributions (whether or not earned or declared) to the date of final distribution to such holders; but such holders shall not be entitled to any further payment or allocation. Until all holders of the Preferred Units have been paid the Liquidation Preference in full, no allocation of income or gain will be made to any holder of Junior Units upon the liquidation, dissolution or winding up of the Partnership.
(b) If, upon any liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Preferred Partnership Units shall be insufficient to pay in full the Liquidation Preference and liquidating payments on any Parity Partnership Units, then following certain allocations made by the Partnership, such assets, or the proceeds thereof, shall be distributed among the holders of Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Preferred Units and any such Parity Partnership Units if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the Partnership will not include a consolidation or merger of the Partnership with one or more partnerships, corporations or other entities, or a sale or transfer of all or substantially all of the Partnerships assets.
(d) Upon any liquidation, dissolution or winding up of the Partnership, after all allocations shall have been made in full to the holders of Preferred Units and any Parity Partnership Units to enable them to receive their respective liquidation preferences, any Junior Partnership Units shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
6. | Redemption. |
(a) Except as set forth in Section 6(l) hereof, the Preferred Units may not be redeemed at the option of the Partnership, and will not be required to be redeemed or repurchased by the Partnership or the Previous General Partner except if a holder of a Preferred Unit effects a Redemption, as provided for in Section 6(b) hereof. The Partnership or the Previous General Partner may purchase Preferred Units from time to time in the open market, by tender or exchange offer, in privately negotiated purchases or otherwise.
(b) On or after the first (1st) anniversary of becoming a holder of Preferred Units, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Preferred Units held by such Qualifying Party (any Preferred Units tendered for Redemption being hereafter Tendered
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Units) in exchange (a Redemption) for Common Shares or Preferred Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party).
(c) If the Partnership elects to redeem Tendered Units for Common Shares or Preferred Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such Common Shares or Preferred Shares to the Tendering Party pursuant to the terms set forth in this Section 6, in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for Common Shares or Preferred Shares. In making such election to cause the Previous General Partner to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Tendering Parties over another nor discriminates against a group or class of Tendering Parties. If the Partnership elects to redeem any number of Tendered Units for Common Shares or Preferred Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for (i) a number of Common Shares equal to the Common Shares Amount for such number of Tendered Units, (ii) if (x) the Notice of Redemption for such Tendered Units is received by the General Partner after the second (2nd) anniversary of the Tendering Party becoming a holder of such Preferred Units and (y) the Preferred Shares are then listed on the New York Stock Exchange or another national securities exchange, a number of Preferred Shares equal to such number of Tendered Units, or (iii) any combination of (i) and (ii). The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The Common Shares or Preferred Shares shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and non-assessable shares, free of any pledge, lien, encumbrance or restriction other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 6, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such Common Shares or Preferred Shares are issued pursuant to this Section 6, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such Common Shares or Preferred Shares for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. Common Shares or Preferred Shares issued upon an acquisition of
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the Tendered Units by the Previous General Partner pursuant to this Section 6 may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
(d) The Partnership shall have no obligation to effect any redemption unless and until a Tendering Party has given the Partnership a Notice of Redemption. Each Notice of Redemption shall be sent by hand delivery or by first class mail, postage prepaid, to AIMCO Properties, L.P., c/o AIMCO-GP, Inc., 4582 South Ulster Street, Suite 1700, Denver, Colorado 80237, Attention: Investor Relations, or to such other address as the Partnership shall specify in writing by delivery to the holders of the Preferred Units in the same manner as that set forth above for delivery of the Notice of Redemption. At any time prior to the Specified Redemption Date for any Redemption, any holder may revoke its Notice of Redemption.
(e) A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the record date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem any number of Tendered Units for cash, the Cash Amount for such number of Tendered Units shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
(f) In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for Common Shares or Preferred Shares pursuant to this Section 6 following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the Previous General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous General Partner of a number of Common Shares or Preferred Shares (Registrable Shares) equal to the Common Shares or Preferred Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding Preferred Units and having Redemption rights pursuant to this Section 6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Preferred Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Preferred Units to be made subject thereon in writing to the General Partner within ten
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(10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the next twelve months; provided, however, that the Previous General Partner shall not be required to acquire Preferred Units pursuant to this Section 6(f) more than twice within any twelve-month period.
Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
(g) Notwithstanding the provisions of this Section 6, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for the Common Shares or Preferred Shares if such exchange would be prohibited under the Charter.
(h) Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 6:
(1) All Preferred Units acquired by the Previous General Partner pursuant to this Section 6 hereof shall be contributed by the Previous General Partner to any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Preferred Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Preferred Units, all of the Preferred Units held by such Tendering Party.
(3) Each Tendering Party (a) may effect a Redemption only once in each fiscal quarter of a Twelve-Month Period and (b) may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the Previous General Partner for a distribution to its shareholders of some or all of its portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to this Section 6, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in this Section 6(f) hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the
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earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
(5) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
(6) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 of the Agreement) all Preferred Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Preferred Units for all purposes of the Agreement, until such Preferred Units are either paid for by the Partnership pursuant to this Section 6 or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the REIT Shares, pursuant to this Section 6 on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6, the Tendering Party shall have no rights as a shareholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 6(h), all Partnership Common Units and Partnership Preferred Units, including Preferred Units, beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
(i) In connection with an exercise of Redemption rights pursuant to this Section 6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of Common Shares or Preferred Shares and any other classes or shares of the Previous General Partner by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own Common Shares or Preferred Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional Common Shares, Preferred Shares or any other class of shares of the Previous General Partner prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of Common Shares or Preferred Shares or any other class of shares of the
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Previous General Partner by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 6(i)(a) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own Common Shares or Preferred Shares or other shares of the Previous General Partner in violation of the Ownership Limit.
(j) On or after the Specific Redemption Date, each holder of Preferred Units shall surrender to the Partnership the certificate evidencing such holders Preferred Units, at the address to which a Notice of Redemption is required to be sent. Upon such surrender of a certificate, the Partnership shall thereupon pay the former holder thereof the applicable Cash Amount and/or deliver Common Shares or Preferred Shares for the Preferred Units evidenced thereby. From and after the Specific Redemption Date (i) distributions with respect to the Preferred Units shall cease to accumulate, (ii) the Preferred Units shall no longer be deemed outstanding, (iii) the holders thereof shall cease to be Partners to the extent of their interest in such Preferred Units, and (iv) all rights whatsoever with respect to the Preferred Units shall terminate, except the right of the holders of the Preferred Units to receive Cash Amount and/or Common Shares or Preferred Shares therefor, without interest or any sum of money in lieu of interest thereon, upon surrender of their certificates therefor.
(k) Notwithstanding the provisions of this Section 6, the Tendering Parties (i) shall not be entitled to elect or effect a Redemption where the Redemption would consist of less than all the Preferred Units held by Partners and, to the extent that the aggregate Percentage Interests of the Limited Partners would be reduced, as a result of the Redemption, to less than one percent (1%) and (ii) shall have no rights under the Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 6(k), it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in Common Shares or Preferred Shares otherwise issuable by the Previous General Partner hereunder.
(l) Notwithstanding any other provision of the Agreement, on and after the date on which the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) are less than one percent (1%), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner Interests (other than the Special Limited Partners Limited Partner Interest) by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to this Section 6 for the amount of Preferred Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 6(l). Such notice given by the General Partner to a Limited Partner pursuant to this Section 6(l) shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 6(l), (a) any Limited Partner (whether or not eligible to be a Tendering Party) may, in the General Partners sole and absolute discretion, be treated as a Tendering Party and (b) the provisions of Sections 6(f)(1), 6(h)(2), 6(h)(3) and 6(h)(5) hereof shall not apply, but the remainder of this Section shall apply, mutatis mutandis.
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7. | Status of Reacquired Units. |
All Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
8. | General. |
The ownership of the Preferred Units shall be evidenced by one or more certificates in the form of Annex II hereto. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the Preferred Units.
9. | Allocations of Income and Loss. |
For each taxable year, (i) each holder of Preferred Units will be allocated net income of the Partnership in an amount equal to the distributions made on such holders Preferred Units during such taxable year, and (ii) each holder of Preferred Units will be allocated its pro rata share, based on the portion of outstanding Preferred Units held by it, of any net loss of the Partnership that is not allocated to holders of Partnership Common Units or other interests in the Partnership. Upon liquidation, dissolution or winding up of the Partnership, the holders of Preferred Units will be allocated income and gain sufficient to enable them to realize the Liquidation Preference in full.
10. | Voting Rights. |
Except as otherwise required by applicable law or in the Agreement, the holders of the Preferred Units will have the same voting rights as holders of the Partnership Common Units. As long as any Preferred Units are outstanding, in addition to any other vote or consent of partners required by law or by the Agreement, the affirmative vote or consent of holders of at least 50% of the outstanding Preferred Units will be necessary for effecting any amendment of any of the provisions of the Partnership Unit Designation of the Preferred Units that materially and adversely affects the rights or preferences of the holders of the Preferred Units. The creation or issuance of any class or series of Partnership Units, including, without limitation, any Partnership Units that may have rights junior to, on a parity with, or senior or superior to the Preferred Units, will not be deemed to have a material adverse effect on the rights or preferences of the holders of Preferred Units. With respect to the exercise of the above-described voting rights, each Preferred Unit will have one (1) vote per Preferred Unit.
11. | Restrictions on Transfer. |
Preferred Units are subject to the same restrictions on transfer applicable to Common Units, as set forth in the Agreement.
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ANNEX I
TO EXHIBIT H
NOTICE OF REDEMPTION
To: | AIMCO Properties, L.P. |
c/o AIMCO-GP, Inc.
4582 South Ulster Street
Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned Limited Partner or Assignee hereby tenders for redemption Class Two Partnership Preferred Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the Class Two Partnership Preferred Units. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Class Two Partnership Preferred Units for Common Shares or Preferred Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to the Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Class Two Partnership Preferred Units;
(b) undertakes (i) to surrender such Class Two Partnership Preferred Units and any certificate therefor at the closing of the Redemption contemplated hereby and (ii) to furnish to the Previous General Partner, prior to the Specified Redemption Date:
(1) A written affidavit, dated the same date as this Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of Common Shares or Preferred Shares by (i) the undersigned Limited Partner or Assignee and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the undersigned Limited Partner or Assignee nor any Related Party will own Common Shares or Preferred Shares in excess of the Ownership Limit;
(2) A written representation that neither the undersigned Limited Partner or Assignee nor any Related Party has any intention to acquire any additional Common Shares or Preferred Shares prior to the closing of the Redemption contemplated hereby on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption contemplated hereby on the Specified Redemption Date, that either (a) the actual and constructive ownership of Common Shares or Preferred Shares by the undersigned Limited Partner or Assignee and any Related Party remain unchanged from that disclosed in the affidavit required by paragraph (1) above, or (b) after giving effect to the
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Redemption contemplated hereby, neither the undersigned Limited Partner or Assignee nor any Related Party shall own Common Shares or Preferred Shares in violation of the Ownership Limit.
(c) directs that the certificate representing the Common Shares or Preferred Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of the Redemption contemplated hereby be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Preferred Units, free and clear of the rights or interests of any other person or entity;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Preferred Units as provided herein; and
(iii) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender.
Dated: ______________________
Name of Limited Partner or Assignee: |
|
(Signature of Limited Partner or Assignee) |
(Street Address) |
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:__________________________
Please insert social security or identifying number:__________________________
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Signature Guaranteed by: |
|
NOTICE: THE SIGNATURE OF THIS NOTICE OF REDEMPTION MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE FOR THE CLASS TWO PREFERRED UNITS WHICH ARE BEING REDEEMED IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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ANNEX II
TO EXHIBIT H
FORM OF UNIT CERTIFICATE
OF
CLASS TWO PARTNERSHIP PREFERRED UNITS
[THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION,] THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, AS IT MAY BE AMENDED AND/OR SUPPLEMENTED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that ______________________________________________________________
is the owner of ________________________________________________________________
CLASS TWO PARTNERSHIP PREFERRED UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Class Two Partnership Preferred Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership of AIMCO Properties, L.P., as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated:
By |
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ASSIGNMENT
For Value Received, ________________________________ hereby sells, assigns and transfers unto ___________________________________ _______________________________ Class Two Partnership Preferred Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Class Two Partnership Preferred Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: ________________ | ||||||
By: | ||||||
Name: | ||||||
Signature Guaranteed by: | ||||||
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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EXHIBIT I
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS THREE PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class Three Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be three million (3,000,000).
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Assignee shall mean a Person to whom one or more Preferred Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Cash Amount shall mean, with respect to any Tendered Unit, cash in an amount equal to the Liquidation Preference of such Tendered Unit.
Class Three Partnership Preferred Unit or Preferred Unit shall mean a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation.
Cut-Off Date shall mean the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Declination shall have the meaning set forth in Section 6(f) of this Partnership Unit Designation.
Distribution Payment Date shall have the meaning set forth of Section 4(b) of this Partnership Unit Designation.
Distribution Rate shall mean 9.5%, subject to adjustment as provided in Section 4(a) of this Partnership Unit Designation.
Dividend Yield shall mean, as of any calculation date and with respect to any class or series of capital stock, the quotient obtained by dividing (i) the aggregate dollar amount of dividends payable on one share of such class or series of capital stock, in accordance with its
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terms, for the 12 month period ending on the dividend payment date immediately preceding such calculation date, by (ii) the Market Value of one share of such stock as of such calculation date.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall have the meaning set forth in Section 5(a) of this Partnership Unit Designation.
Market Value shall mean, as of any calculation date and with respect to any share of stock, the average of the daily market prices for ten (10) consecutive trading days immediately preceding the calculation date. The market price for any such trading day shall be:
(i) if the shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
(ii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of such ten day period that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Notice of Redemption shall mean a Notice of Redemption in the form of Annex I to this Partnership Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
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Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Previous General Partner shall mean Apartment Income REIT Corp., a Maryland corporation.
Primary Offering Notice shall have the meaning set forth in Section 6(h)(4) of this Partnership Unit Designation.
Public Offering Funding shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Qualifying Preferred Stock shall mean any class or series of non-convertible perpetual preferred stock that (i) has been issued by a corporation that has elected to be taxed as a REIT, (ii) has a fixed rate of distributions or dividends, (iii) has a fixed liquidation preference (and which entitles the holder thereof to no payments other than the payment of distributions at a fixed rate and the payment of a fixed liquidation preference), (iv) is listed on the New York Stock Exchange, (v) cannot be redeemed at the option of the issuer for the first five years after issuance of such class or series of preferred stock and that, at the Reset Date (or, if applicable, as of the date the calculation of the Weighted Average of Preferred Stock Dividend Yields is being made for purposes hereof in respect of such Reset Date) cannot be so redeemed and (vi) is issued by an issuer the unsecured debt of which has an average rating from Moodys Investors Services, Inc., Standard & Poors Rating Services or Duff & Phelps Credit Rating Co. in a category that is one rating category below the average rating, as of such date, of the Previous General Partners unsecured debt.
Redemption shall have the meaning set forth in Section 6(b)(i) of this Partnership Unit Designation.
Registrable Shares shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
REIT Shares Amount shall mean, with respect to any Tendered Units, a number of REIT Shares equal to the quotient obtained by dividing (i) the Cash Amount for such Tendered Units, by (ii) the Market Value of a REIT Share as of the fifth (5th) Business Day prior to the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units.
Reset Date shall mean December 21, 2004 and every fifth anniversary of such date that occurs thereafter.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Single Funding Notice shall have the meaning set forth in Section 6(f)(3) of this Partnership Unit Designation.
Specified Redemption Date shall mean, with respect to any Redemption, the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the
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Business Day next following the date of the closing of the Public Offering Funding; provided, however, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 6 hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Tendering Party shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Tendered Units shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Weighted Average of Preferred Stock Dividend Yields shall mean, as of any date of calculation, the average of the Dividend Yields, as of such date, of each Qualifying Preferred Stock (other than a Qualifying Preferred Stock issued by the Previous General Partner) that has been outstanding during the entire year immediately preceding the date of calculation. Each such class of Qualifying Preferred Stock (except Qualifying Preferred Stock of the Previous General Partner) shall be weighted for its total market value.
3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Three Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Three Partnership Preferred Units (the Partnership Units referred to in this paragraph being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Three Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Three Partnership Preferred Units if (i) such class or series of Partnership Units shall be Class G Partnership Preferred Units, Class One Partnership Preferred Units or Class Two Partnership Preferred Units or (ii) the holders of such class or series of Partnership Units and the Class Three Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid distributions per unit or other denomination or
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liquidation preferences, without preference or priority one over the other (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Three Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of Partnership Units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class Three Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) The Quarterly Distribution Amount, as of any date, shall be equal to (i) the Distribution Rate then in effect, multiplied by (ii) $25, and divided by (iii) four. Holders of Preferred Units will be entitled to receive, when and as declared by the General Partner, quarterly cash distributions in an amount per Preferred Unit equal to the Quarterly Distribution Amount in effect as of the date such distribution is declared by the General Partner, and no more. On each Reset Date, the Distribution Rate thereafter in effect shall be adjusted by the General Partner to equal the lesser of (i) the Distribution Rate in effect immediately prior to such Reset Date or (ii) the Dividend Yield of the class of Qualifying Preferred Stock most recently issued by the Previous General Partner or, if there is no class of Qualifying Preferred Stock of the Previous General Partner outstanding as of any Reset Date, the Weighted Average of Preferred Stock Dividend Yields, calculated as of the end of the calendar quarter immediately preceding such Reset Date; provided, further, that if for any reason there are no classes of Qualifying Preferred Stock of the type described in the definition of Weighted Average of Preferred Stock Dividend Yields outstanding on any Reset Date and the reference to the Weighted Average of Preferred Stock Dividend Yields would otherwise be determinative of the calculation of the adjusted Distribution Rate on such Reset Date, the adjusted Distribution Rate for the succeeding five (5) year period shall be the Distribution Rate in effect immediately prior to such Reset Date. Upon any such adjustment of the Distribution Rate, the General Partner shall send a notice describing such adjustment to the holders of the Preferred Units at their respective addresses, as set forth on Exhibit A to the Agreement.
(b) Any such distributions will be cumulative from the date of original issue, whether or not in any distribution period or periods such distributions have been declared, and shall be payable quarterly on February 15, May 15, August 15 and November 15 of each year (or, if not a Business Day, the next succeeding Business Day) (each a Distribution Payment Date), commencing on the first such date occurring after the date of original issue. If the Preferred Units are issued on any day other than a Distribution Payment Date, the first distribution payable on such Preferred Units will be prorated for the portion of the quarterly period that such Preferred Units are outstanding on the basis of twelve 30-day months and a 360-day year. Distributions will be payable in arrears to holders of record as they appear on the records of the Partnership at the close of business on the February 1, May 1, August 1 or November 1, as the case may be, immediately preceding each Distribution Payment Date. If the
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Preferred Units are issued other than on a record date for the payment of distributions to the holders of Preferred Units, the Quarterly Distribution Amount shall, for any quarter in which the Distribution Rate changes on any Reset Date, be appropriately prorated based on the portions of such quarter during which the different Distribution Rates were in effect, on the basis of twelve 30-day months and a 360-day year. Holders of Preferred Units will not be entitled to receive any distributions in excess of cumulative distributions on the Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Preferred Units that may be in arrears. Holders of any Preferred Units that are issued after the date of original issuance will be entitled to receive the same distributions as holders of any Preferred Units issued on the date of original issuance.
(c) When distributions are not paid in full upon the Preferred Units or any Parity Partnership Units, or a sum sufficient for such payment is not set apart, all distributions declared upon the Preferred Units and any Parity Partnership Units shall be declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Preferred Units and accumulated and unpaid on such Parity Partnership Units. Except as set forth in the preceding sentence, unless distributions on the Preferred Units equal to the full amount of accumulated and unpaid distributions have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past distribution periods, no distributions shall be declared or paid or set apart for payment by the Partnership with respect to any Parity Partnership Units.
(d) Unless full cumulative distributions (including all accumulated, accrued and unpaid distributions) on the Preferred Units have been declared and paid, or declared and set apart for payment, for all past distribution periods, no distributions (other than distributions paid in Junior Partnership Units or options, warrants or rights to subscribe for or purchase Junior Partnership Units) may be declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property may be declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (except for a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Partnership or any affiliate thereof, including, without limitation, Previous General Partner and its affiliates) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Junior Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of Junior Partnership Units.
(e) Notwithstanding the foregoing provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain the Previous General Partners qualification as a REIT.
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5. | Liquidation Preference. |
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any allocation of income or gain by the Partnership shall be made to or set apart for the holders of any Junior Partnership Units, to the extent possible, the holders of Preferred Units shall be entitled to be allocated income and gain to the extent necessary to enable them to receive a liquidation preference (the Liquidation Preference) per Preferred Unit equal to the sum of (i) $25 plus (ii) any accumulated, accrued and unpaid distributions (whether or not earned or declared) to the date of final distribution to such holders; but such holders will not be entitled to any further payment or allocation. Until all holders of the Preferred Units have been paid the Liquidation Preference in full, no allocation of income or gain will be made to any holder of Junior Partnership Units upon the liquidation, dissolution or winding up of the Partnership.
(b) If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Preferred Units shall be insufficient to pay in full the Liquidation Preference and liquidating payments on any Parity Partnership Units, then following appropriate allocations of Partnership income, gain, deduction and loss, such assets, or the proceeds thereof, shall be distributed among the holders of Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Preferred Units and any such Parity Partnership Units if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the Partnership will not include a consolidation or merger of the Partnership with one or more partnerships, corporations or other entities, or a sale or transfer of all or substantially all of the Partnerships assets.
(d) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, after all allocations shall have been made in full to the holders of Preferred Units and any Parity Partnership Units to the extent necessary to enable them to receive their respective liquidation preferences, any Junior Partnership Units shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
6. | Redemption. |
(a) Except as set forth in Section 6(l) hereof, the Preferred Units may not be redeemed at the option of the Partnership, and will not be required to be redeemed or repurchased by the Partnership or the Previous General Partner except if a holder of a Preferred Unit effects a Redemption, as provided for in Section 6(b) hereof. The Partnership or the Previous General Partner may purchase Preferred Units from time to time in the open market, by tender or exchange offer, in privately negotiated purchases or otherwise.
(b) On or after the first (1st) anniversary of becoming a holder of Preferred Units, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Preferred Units held by such
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Qualifying Party (such Preferred Units being hereafter Tendered Units) in exchange (a Redemption) for REIT Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party).
(c) If the Partnership elects to redeem Tendered Units for REIT Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such REIT Shares to the Tendering Party pursuant to the terms set forth in this Section 6 in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for Federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for REIT Shares. In making such election to cause the Previous General Partner to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Tendering Parties over another nor discriminates against a group or class of Tendering Parties. If the Partnership elects to redeem any number of Tendered Units for REIT Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for a number of REIT Shares equal to the REIT Shares Amount for such number of the Tendered Units. The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The REIT Shares shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and accessible REIT Shares, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 6, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such REIT Shares are issued pursuant to this Section 6, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such REIT Shares for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. REIT Shares issued upon an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6 may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
(d) The Partnership shall have no obligation to effect any redemption unless and until a Tendering Party has given the Partnership a Notice of Redemption. Each Notice of
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Redemption shall be sent by hand delivery or by first class mail, postage prepaid, to AIMCO Properties, L.P., c/o AIMCO-GP, Inc., 4582 South Ulster Street, Suite 1700, Denver, Colorado 80237, Attention: Investor Relations, or to such other address as the Partnership shall specify in writing by delivery to the holders of the Preferred Units in the same manner as that set forth above for delivery of the Notice of Redemption. At any time prior to the Specified Redemption Date for any Redemption, any holder may revoke its Notice of Redemption.
(e) A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the record date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem any number of Tendered Units for cash, the Cash Amount for such number of Tendered Units shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
(f) In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for REIT Shares pursuant to this Section 6 following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the Previous General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous General Partner of a number of REIT Shares (Registrable Shares) equal to the REIT Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding Preferred Units and having Redemption rights pursuant to this Section 6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Preferred Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Preferred Units to be made subject thereon in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the next twelve months; provided, however, that the Previous General Partner shall not be required to acquire Preferred Units pursuant to this Section 6(f) more than twice within any twelve-month period.
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Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
(g) Notwithstanding the provisions of this Section 6, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for REIT Shares if such exchange would be prohibited under the Charter.
(h) Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 6:
(1) All Preferred Units acquired by the Previous General Partner pursuant to this Section 6 hereof shall be contributed by the Previous General Partner to any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine. Any Preferred Units so contributed to the General Partner shall automatically, and without further action required, be converted into and deemed to be a General Partner Interest comprised of an equal number of Partnership Common Units. Any Preferred Units so contributed to the Special Limited Partners shall be converted into Partnership Common Units.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Preferred Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Preferred Units, all of the Preferred Units held by such Tendering Party.
(3) No Tendering Party may (a) effect a Redemption more than once in any fiscal quarter of a Twelve-Month Period or (b) effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the Previous General Partner for a distribution to its shareholders of some or all of its portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to this Section 6, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in Section 6(f) hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
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(5) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
(6) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 of the Agreement) all Preferred Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Preferred Units for all purposes of the Agreement, until such Preferred Units are either paid for by the Partnership pursuant to this Section 6 or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the REIT Shares, pursuant to this Section 6 on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6, the Tendering Party shall have no rights as a shareholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 6(h), all Partnership Common Units and Partnership Preferred Units, including Preferred Units, beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
(i) In connection with an exercise of Redemption rights pursuant to this Section 6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares and any other classes or shares of the Previous General Partner by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares or any other class of shares of the Previous General Partner prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares or any other class of shares of the Previous General Partner by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 6(i)(a) or (b) after giving effect to the Redemption, neither the
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Tendering Party nor any Related Party shall own REIT Shares or other shares of the Previous General Partner in violation of the Ownership Limit.
(j) On or after the Specific Redemption Date, each holder of Preferred Units shall surrender to the Partnership the certificate evidencing such holders Preferred Units, at the address to which a Notice of Redemption is required to be sent. Upon such surrender of a certificate, the Partnership shall thereupon pay the former holder thereof the applicable Cash Amount and/or deliver REIT Shares for the Preferred Units evidenced thereby. From and after the Specific Redemption Date (i) distributions with respect to the Preferred Units shall cease to accumulate, (ii) the Preferred Units shall no longer be deemed outstanding, (iii) the holders thereof shall cease to be Partners to the extent of their interest in such Preferred Units, and (iv) all rights whatsoever with respect to the Preferred Units shall terminate, except the right of the holders of the Preferred Units to receive Cash Amount and/or REIT Shares therefor, without interest or any sum of money in lieu of interest thereon, upon surrender of their certificates therefor.
(k) Notwithstanding the provisions of this Section 6, the Tendering Parties (i) shall not be entitled to elect or effect a Redemption where the Redemption would consist of less than all the Preferred Units held by Partners and, to the extent that the aggregate Percentage Interests of the Limited Partners would be reduced, as a result of the Redemption, to less than one percent (1%) and (ii) shall have no rights under the Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 6(k), it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in REIT Shares otherwise issuable by the Previous General Partner hereunder.
(l) Notwithstanding any other provision of the Agreement, on and after the date on which the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) are less than one percent (1%), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner Interests (other than the Special Limited Partners Limited Partner Interest) by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to this Section 6 for the amount of Preferred Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 6(l). Such notice given by the General Partner to a Limited Partner pursuant to this Section 6(l) shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 6(l), (a) any Limited Partner (whether or not eligible to be a Tendering Party) may, in the General Partners sole and absolute discretion, be treated as a Tendering Party and (b) the provisions of Sections 6(f)(1), 6(h)(2), 6(h)(3) and 6(h)(5) hereof shall not apply, but the remainder of this Section shall apply, mutatis mutandis.
7. | Status of Reacquired Units. |
All Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
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8. | General. |
The ownership of the Preferred Units shall be evidenced by one or more certificates in the form of Annex II hereto. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the Class Three Partnership Preferred Units.
9. | Allocations of Income and Loss. |
Subject to the terms of Section 5 hereof, for each taxable year, (i) each holder of Preferred Units will be allocated, to the extent possible, net income of the Partnership in an amount equal to the distributions made on such holders Preferred Units during such taxable year, and (ii) each holder of Preferred Units will be allocated its pro rata share, based on the portion of outstanding Preferred Units held by it, of any net loss of the Partnership that is not allocated to holders of Partnership Common Units or other interests in the Partnership.
10. | Voting Rights. |
Except as otherwise required by applicable law or in the Agreement, the holders of the Preferred Units will have the same voting rights as holders of the Partnership Common Units. As long as my Preferred Units are outstanding, in addition to any other vote or consent of partners required by law or by the Agreement, the affirmative vote or consent of holders of at least 50% of the outstanding Preferred Units will be necessary for effecting any amendment of any of the provisions of the Partnership Unit Designation of the Preferred Units that materially and adversely affects the rights or preferences of the holders of the Preferred Units. The creation or issuance of any class or series of Partnership units, including, without limitation, any Partnership units that may have rights junior to, on a parity with, or senior or superior to the Preferred Units, will not be deemed to have a material adverse effect on the rights or preferences of the holders of Preferred Units. With respect to the exercise of the above described voting rights, each Preferred Unit will have one (1) vote per Preferred Unit.
11. | Restrictions on Transfer. |
Preferred Units are subject to the same restrictions on transfer as are, and the holders of Preferred Units shall be entitled to the same rights of transfer as are, applicable to Common Units as set forth in the Agreement.
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ANNEX I
TO EXHIBIT I
NOTICE OF REDEMPTION
To: | AIMCO Properties, L.P. |
c/o AIMCO-GP, Inc.
4582 South Ulster Street
Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned Limited Partner or Assignee hereby tenders for redemption Class Three Partnership Preferred Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the Class Three Partnership Preferred Units. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Class Three Partnership Preferred Units for REIT Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Class Three Partnership Preferred Units;
(b) undertakes (i) to surrender such Class Three Partnership Preferred Units and any certificate therefor at the closing of the Redemption contemplated hereby and (ii) to furnish to Previous General Partner, prior to the Specified Redemption Date:
(1) A written affidavit, dated the same date as this Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) the undersigned Limited Partner or Assignee and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the undersigned Limited Partner or Assignee nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the undersigned Limited Partner or Assignee nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption contemplated hereby on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption contemplated hereby on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by the undersigned Limited Partner or Assignee and any Related Party remain unchanged from that disclosed in the affidavit required by paragraph (1) above, or (b) after giving effect to the Redemption contemplated hereby, neither the undersigned Limited Partner or Assignee nor any Related Party shall own REIT Shares in violation of the Ownership Limit.
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(c) directs that the certificate representing the REIT Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of the Redemption contemplated hereby be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Preferred Units, free and clear of the rights or interests of any other person or entity;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Preferred Units as provided herein; and
(iii) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender.
Dated: ______________________
Name of Limited Partner or Assignee: |
|
|
(Signature of Limited Partner or Assignee) |
|
(Street Address) |
|
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:__________________________
Please insert social security or identifying number:__________________________
Signature Guaranteed by: |
|
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NOTICE: THE SIGNATURE OF THIS NOTICE OF REDEMPTION MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE FOR THE CLASS THREE PREFERRED UNITS WHICH ARE BEING REDEEMED IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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ANNEX II
TO EXHIBIT I
FORM OF UNIT CERTIFICATE
OF
CLASS THREE PARTNERSHIP PREFERRED UNITS
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION, THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, AS IT MAY BE AMENDED AND/OR SUPPLEMENTED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that ______________________________________________________________
is the owner of ________________________________________________________________
CLASS THREE PARTNERSHIP PREFERRED UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Class Three Partnership Preferred Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership of AIMCO Properties, L.P., as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated:
By |
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ASSIGNMENT
For Value Received, ________________________________ hereby sells, assigns and transfers unto ___________________________________ _______________________________ Class Three Partnership Preferred Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Class Three Partnership Preferred Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: ________________
By: | ||
Name: |
Signature Guaranteed by: |
|
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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EXHIBIT J
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS FOUR PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class Four Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be 5,100,000.
2. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Adjustment Factor means 1.0; provided, however, that in the event that:
(i) the Previous General Partner (a) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (b) splits or subdivides its outstanding REIT Shares or (c) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction, (i) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (ii) the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination;
(ii) the Previous General Partner distributes any rights, options or warrants to all holders of its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares (or other securities or rights convertible into, exchangeable for or exercisable for REIT Shares) at a price per share less than the Value of a REIT Share on the record date for such distribution (each a Distributed Right), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction (a) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date plus the maximum number of REIT Shares purchasable under such Distributed Rights and (b) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date plus a fraction (1) the numerator of which is the maximum number of REIT Shares purchasable under such
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Distributed Rights times the minimum purchase price per REIT Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT Share as of the record date; provided, however, that, if any such Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall be adjusted, effective retroactive to the date of distribution of the Distributed Rights, to reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price for the purposes of the above fraction; and
(iii) the Previous General Partner shall, by dividend or otherwise, distribute to all holders of its REIT Shares evidences of its indebtedness or assets (including securities, but excluding any dividend or distribution referred to in subsection (i) above), which evidences of indebtedness or assets relate to assets not received by the Previous General Partner, the General Partner and/or the Special Limited Partners pursuant to a pro rata distribution by the Partnership, then the Adjustment Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the close of business on the date fixed for determination of shareholders entitled to receive such distribution by a fraction (i) the numerator shall be such Value of a REIT Share on the date fixed for such determination and (ii) the denominator shall be the Value of a REIT Share on the dates fixed for such determination less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of the portion of the evidences of indebtedness or assets so distributed applicable to one REIT Share.
Any adjustments to the Adjustment Factor shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event. Other than with respect to the Spin-Off Adjustment, all references to Previous General Partner (including in the definition of REIT Shares) with respect to occurrences prior to December 15, 2020 shall refer instead to the Previous Public Parent (i.e., Apartment Investment and Management Company). In respect of the distribution of shares of common stock of Apartment Income REIT Corp. to holders of shares of common stock of Apartment Investment and Management Company (the Spin-Off), the Adjustment Factor shall be adjusted (the Spin-Off Adjustment) to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the Spin-Off by a fraction (i) the numerator of which shall be the Value of a REIT Share (with the reference to Previous General Partner in the definition of REIT Share deemed to be to the Previous Public Parent) after the end of trading on the last trading day prior to the Spin-Off and (ii) the denominator of which shall be the Value of a REIT Share (with the reference to Previous General Partner in the definition of REIT Share deemed to be to the Previous Public Parent) after the end of trading on the last trading day prior to the Spin-Off less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of a share of common stock of the Previous Public Parent after giving effect to the Spin-Off.
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
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Assignee shall mean a Person to whom one or more Preferred Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Cash Amount shall mean, with respect to any Tendered Units, cash in an amount equal to the sum of (x) the product of (i) the number of Tendered Units, multiplied by (ii) the Liquidation Preference for a Preferred Unit, plus, (y) if positive, the product of (i) the number of Tendered Units, multiplied by (ii) the Liquidation Preference for a Preferred Unit (excluding any accumulated, accrued or unpaid distributions), multiplied by (iii) the quotient obtained by dividing (a) the amount by which the Market Value of a Common Share, calculated as of the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units, exceeds $45, by (b) $45.
Class Four Partnership Preferred Unit or Preferred Unit shall mean a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation.
Common Shares shall mean the shares of Class A Common Stock of the Previous General Partner.
Common Shares Amount shall mean, with respect to any Tendered Units, a number of Common Shares equal to the quotient obtained by dividing (i) the Cash Amount for such Tendered Units, by (ii) the Market Value of a Common Share calculated as of the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units.
Conversion Price shall mean, as of any date, the quotient obtained by dividing $45 by the Adjustment Factor in effect as of such date.
Current Market Price of a share of any Equity Stock shall mean the closing price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, on such day, in either case as reported on the principal national securities exchange on which such securities are listed or admitted for trading, or, if such security is not quoted on any national securities exchange, on the Nasdaq National Market or if such security is not quoted on the Nasdaq National Market, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by Nasdaq or, if bid and asked prices for each security on such day shall not have been reported through Nasdaq, the average of the bid and asked prices on such day as furnished by any New York Stock Exchange or National Association of Securities Dealers, Inc. member firm regularly making a market in such security selected for such purpose by the Chief Executive Officer of the General Partner or the Board of Directors of the General Partner or if any class or series of securities are not publicly traded, the fair value of the shares of such class as determined reasonably and in good faith by the Board of Directors of the General Partner.
Cut-Off Date shall mean the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Declination shall have the meaning set forth in Section 6(f) of this Partnership Unit Designation.
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Distribution Payment Date shall have the meaning set forth in Section 4(a) of this Partnership Unit Designation.
Equity Stock shall mean one or more shares of any class of capital stock of the Previous General Partner.
Internal Rate of Return shall mean, as of any determination date, the effective discount rate under which the present value of the Inflows associated with an outstanding Class Four Partnership Preferred Unit equals $25. For purposes of calculation of Internal Rate of Return, Inflows shall mean (a) all distributions (whether paid in cash or property) that have been received in respect of such unit, (b) the cash payment in respect of distributions payable on such unit pursuant to Section 7(b)(iii) hereof if such unit were converted to Partnership Common Units on the determination date, and (c) the amount by which the Market Value of a REIT Share, as of the determination date, exceeds the Conversion Price then in effect. For purposes of calculating the amounts of any Inflows, all distributions received in property shall be deemed to have a value equal to the Market Value of such distributions as of the date such distribution is received. Neither the fact of any transfer of any units of the Class Four Partnership Preferred Units nor the amount of any consideration received by the holder thereof or paid by any successor holder in connection with any transfer shall affect the calculation of Internal Rate of Return.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall have the meaning set forth in Section 5(a) of this Partnership Unit Designation.
Market Value shall mean, as of any calculation date and with respect to any share of stock, the average of the daily market prices for ten (10) consecutive trading days (or twenty (20) consecutive Trading Days for purposes of calculating Internal Rate of Return) immediately preceding the calculation date. The market price for any such trading day shall be:
(i) if the shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
(ii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source
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designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of such ten day period that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Notice of Redemption shall mean a Notice of Redemption in the form of Annex I to this Partnership Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Primary Offering Notice shall have the meaning set forth in Section 6(h)(4) of this Partnership Unit Designation.
Public Offering Funding shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Redemption shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Registrable Shares shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Single Funding Notice shall have the meaning set forth in Section 6(f)(3) of this Partnership Unit Designation.
Specified Redemption Date shall mean, with respect to any Redemption, the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the Business Day next following the date of the closing of the Public Offering Funding; provided, however, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 5 hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the
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aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Tendering Party shall have the meaning set forth in Section 6(b) hereof.
Tendered Units shall have the meaning set forth in Section 6(b) hereof.
Trading Day shall mean, when used with respect to the Closing Price of a share of any Equity Stock, (i) if the Equity Stock is listed or admitted to trading on the NYSE, a day on which the NYSE is open for the transaction of business, (ii) if the Equity Stock is not listed or admitted to trading on the NYSE but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Equity Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Equity Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
Transfer Agent shall mean such transfer agent as may be designated by the Partnership or its designee as the transfer agent for the Class Four Partnership Preferred Units; provided, that if the Partnership has not designated a transfer agent then the Partnership shall act as the transfer agent for the Class Four Partnership Preferred Units.
3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Four Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Four Partnership Preferred Units (the Partnership Units referred to in this paragraph being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Four Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Four Partnership Preferred Units if (i) such class or series of Partnership Units shall be Class G Partnership Preferred Units, Class One Partnership Preferred Units, Class Two Partnership Preferred Units or Class Three Partnership Preferred Units, or (ii) the holders of such class or series of Partnership Units and the Class Four Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution
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or winding up in proportion to their respective amounts of accrued and unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority one over the other (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Four Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of Partnership Units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class Four Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) Holders of Preferred Units will be entitled to receive, when and as declared by the General Partner, quarterly cash distributions at the rate of $0.50 per Preferred Unit. Any such distributions will be cumulative from the date of original issue, whether or not in any distribution period or periods such distributions have been declared, and shall be payable quarterly on February 15, May 15, August 15 and November 15 of each year (or, if not a Business Day, the next succeeding Business Day) (each a Distribution Payment Date), commencing on the first such date occurring after the date of original issue. If the Preferred Units are issued on any day other than a Distribution Payment Date, the first distribution payable on such Preferred Units will be prorated for the portion of the quarterly period that such Preferred Units are outstanding on the basis of twelve 30-day months and a 360-day year. Distributions will be payable in arrears to holders of record as they appear on the records of the Partnership at the close of business on February 1, May 1, August 1 or November 1, as the case may be, immediately preceding each Distribution Payment Date. Holders of Preferred Units will not be entitled to receive any distributions in excess of cumulative distributions on the Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Preferred Units that may be in arrears. Holders of any Preferred Units that are issued after the date of original issuance will be entitled to receive the same distributions as holders of any Preferred Units issued on the date of original issuance.
(b) When distributions are not paid in full upon the Preferred Units or any Parity Partnership Units, or a sum sufficient for such payment is not set apart, all distributions declared upon the Preferred Units and any Parity Partnership Units shall be declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Preferred Units and accumulated and unpaid on such Parity Partnership Units. Except as set forth in the preceding sentence, unless distributions on the Preferred Units equal to the full amount of accumulated and unpaid distributions have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past distribution periods, no distributions shall be declared or paid or set apart for payment by the Partnership with respect to any Parity Partnership Units.
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(c) Unless full cumulative distributions (including all accumulated, accrued and unpaid distributions) on the Preferred Units have been declared and paid, or declared and set apart for payment, for all past distribution periods, no distributions (other than distributions paid in Junior Partnership Units or options, warrants or rights to subscribe for or purchase Junior Partnership Units) may be declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property may be declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (except for a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Partnership or any affiliate thereof, including, without limitation, the Previous General Partner and its affiliates) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Junior Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of Junior Partnership Units.
(d) Notwithstanding the foregoing provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain the Previous General Partners qualification as a REIT.
5. | Liquidation Preference. |
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any allocation of income or gain by the Partnership shall be made to or set apart for the holders of any Junior Partnership Units, to the extent possible, the holders of Preferred Units shall be entitled to be allocated income and gain to effectively enable them to receive a liquidation preference (the Liquidation Preference) of (i) $25 per Preferred Unit, plus (ii) accumulated, accrued and unpaid distributions (whether or not earned or declared) to the date of final distribution to such holders; but such holders shall not be entitled to any further allocation of income or gain. Until all holders of the Preferred Units have been paid the Liquidation Preference in full, no allocation of income or gain will be made to any holder of Junior Units upon the liquidation, dissolution or winding up of the Partnership.
(b) If, upon any liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Preferred Partnership Units shall be insufficient to pay in full the Liquidation Preference and liquidating payments on any Parity Partnership Units, then following certain allocations made by the Partnership, such assets, or the proceeds thereof, shall be distributed among the holders of Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Preferred Units and any such Parity Partnership Units if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the Partnership will not include a consolidation or merger of the Partnership with one or more
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partnerships, corporations or other entities, or a sale or transfer of all or substantially all of the Partnerships assets.
(d) Upon any liquidation, dissolution or winding up of the Partnership, after all allocations shall have been made in full to the holders of Preferred Units and any Parity Partnership Units to enable them to receive their respective liquidation preferences, any Junior Partnership Units shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
6. | Redemption. |
(a) Except as set forth in Section 6(l) hereof, the Preferred Units may not be redeemed at the option of the Partnership, and will not be required to be redeemed or repurchased by the Partnership or the Previous General Partner except if a holder of a Preferred Unit effects a Redemption, as provided for in Section 6(b) hereof. The Partnership or the Previous General Partner may purchase Preferred Units from time to time in the open market, by tender or exchange offer, in privately negotiated purchases or otherwise.
(b) On or after the first (1st) anniversary of becoming a holder of Preferred Units, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Preferred Units held by such Qualifying Party (any Preferred Units tendered for Redemption being hereafter Tendered Units) in exchange (a Redemption) for Common Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party).
(c) If the Partnership elects to redeem Tendered Units for Common Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such Common Shares to the Tendering Party pursuant to the terms set forth in this Section 6, in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for Common Shares. In making such election to cause the Previous General Partner to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Tendering Parties over another nor discriminates against a group or class of Tendering Parties. If the Partnership elects to redeem any number of Tendered Units for Common Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for a number of Common Shares equal to the Common Shares Amount for such number of Tendered Units. The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal
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opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The Common Shares shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and non-assessable shares, free of any pledge, lien, encumbrance or restriction other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 6, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such Common Shares are issued pursuant to this Section 6, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such Common Shares for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. Common Shares issued upon an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6 may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
(d) The Partnership shall have no obligation to effect any redemption unless and until a Tendering Party has given the Partnership a Notice of Redemption. Each Notice of Redemption shall be sent by hand delivery or by first class mail, postage prepaid, to AIMCO Properties, L.P., c/o AIMCO-GP, Inc., 4582 South Ulster Street, Suite 1700, Denver, Colorado 80237, Attention: Investor Relations, or to such other address as the Partnership shall specify in writing by delivery to the holders of the Preferred Units in the same manner as that set forth above for delivery of the Notice of Redemption. At any time prior to the Specified Redemption Date for any Redemption, any holder may revoke its Notice of Redemption.
(e) A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the record date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem any number of Tendered Units for cash, the Cash Amount for such number of Tendered Units shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
(f) In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for Common Shares pursuant to this Section 6 following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date.
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(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the Previous General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous General Partner of a number of Common Shares (Registrable Shares) equal to the Common Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding Preferred Units and having Redemption rights pursuant to this Section 6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Preferred Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Preferred Units to be made subject thereon in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the next twelve months; provided, however, that the Previous General Partner shall not be required to acquire Preferred Units pursuant to this Section 6(f) more than twice within any twelve-month period.
Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
(g) Notwithstanding the provisions of this Section 6, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for the Common Shares if such exchange would be prohibited under the Charter.
(h) Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 6:
(1) All Preferred Units acquired by the Previous General Partner pursuant to this Section 6 hereof shall be contributed by the Previous General Partner to any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Preferred Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Preferred Units, all of the Preferred Units held by such Tendering Party.
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(3) Each Tendering Party (a) may effect a Redemption only once in each fiscal quarter of a Twelve-Month Period and (b) may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the Previous General Partner for a distribution to its shareholders of some or all of its portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to this Section 6, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in Section 6(f) hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
(5) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
(6) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 of the Agreement) all Preferred Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Preferred Units for all purposes of the Agreement, until such Preferred Units are either paid for by the Partnership pursuant to this Section 6 or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the REIT Shares, pursuant to this Section 6 on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6, the Tendering Party shall have no rights as a shareholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 6(h), all Partnership Common Units and Partnership Preferred Units, including Preferred Units, beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
(i) In connection with an exercise of Redemption rights pursuant to this Section 6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
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(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of Common Shares and any other classes or shares of the Previous General Partner by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own Common Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional Common Shares or any other class of shares of the Previous General Partner prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of Common Shares or any other class of shares of the Previous General Partner by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 6(i)(a) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own Common Shares or other shares of the Previous General Partner in violation of the Ownership Limit.
(j) On or after the Specific Redemption Date, each holder of Preferred Units shall surrender to the Partnership the certificate evidencing such holders Preferred Units, at the address to which a Notice of Redemption is required to be sent. Upon such surrender of a certificate, the Partnership shall thereupon pay the former holder thereof the applicable Cash Amount and/or deliver Common Shares for the Preferred Units evidenced thereby. From and after the Specific Redemption Date (i) distributions with respect to the Preferred Units shall cease to accumulate, (ii) the Preferred Units shall no longer be deemed outstanding, (iii) the holders thereof shall cease to be Partners to the extent of their interest in such Preferred Units, and (iv) all rights whatsoever with respect to the Preferred Units shall terminate, except the right of the holders of the Preferred Units to receive Cash Amount and/or Common Shares therefor, without interest or any sum of money in lieu of interest thereon, upon surrender of their certificates therefor.
(k) Notwithstanding the provisions of this Section 6, the Tendering Parties (i) shall not be entitled to elect or effect a Redemption where the Redemption would consist of less than all the Preferred Units held by Partners and, to the extent that the aggregate Percentage Interests of the Limited Partners would be reduced, as a result of the Redemption, to less than one percent (1%) and (ii) shall have no rights under the Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 6(k), it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in Common Shares otherwise issuable by the Previous General Partner hereunder.
(l) Notwithstanding any other provision of the Agreement, on and after the date on which the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) are less than one percent (1%), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner
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Interests (other than the Special Limited Partners Limited Partner Interest) by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to this Section 6 for the amount of Preferred Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 6(l). Such notice given by the General Partner to a Limited Partner pursuant to this Section 6(l) shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 6(l), (a) any Limited Partner (whether or not eligible to be a Tendering Party) may, in the General Partners sole and absolute discretion, be treated as a Tendering Party and (b) the provisions of Sections 6(f)(1), 6(h)(2), 6(h)(3) and 6(h)(5) hereof shall not apply, but the remainder of this Section shall apply, mutatis mutandis.
7. | Conversion. |
(a) (i) Subject to and upon compliance with the provisions of this Section 7, a holder of Class Four Partnership Preferred Units shall have the right, at such holders option, to convert such units, in whole or in part, into the number of Partnership Common Units per Class Four Partnership Preferred Unit obtained by dividing the Liquidation Preference (excluding any accumulated, accrued and unpaid distributions) per Class Four Partnership Preferred Unit by the Conversion Price in effect at the time and on the date provided for in subparagraph (b)(iv) of this Section 7. In order to exercise the conversion right, the holder of each Class Four Partnership Preferred Unit to be converted shall surrender the certificate representing such unit, duly endorsed or assigned to the Partnership or in blank, at the office of the Transfer Agent, accompanied by written notice to the Partnership that the holder thereof elects to convert such Class Four Partnership Preferred Unit.
(ii) With respect to any Class Four Partnership Preferred Units that have been issued and outstanding for at least two (2) years, if, as of any date, the Internal Rate of Return exceeds 12.5%, then the Partnership shall have the right, but not the obligation, to cause such Class Four Partnership Preferred Units to be converted, in whole or in part, into the number of Partnership Common Units per Class Four Partnership Preferred Unit obtained by dividing the Liquidation Preference (excluding any accumulated, accrued and unpaid distributions) per Class Four Partnership Preferred Unit by the Conversion Price in effect at the time and on the date provided for in subparagraph (b)(iv) of this Section 7. In order to exercise the conversion right, the Partnership shall send notice of such conversion to each holder of record of Class Four Partnership Preferred Units no later than five Business Days after a date on which the Internal Rate of Return exceeds 12.5%. Such notice shall be provided by facsimile or, if facsimile is not available, then by first class mail, postage prepaid, at such holders address as the same appears on the records of the Partnership. Any notice which was transmitted or mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date received by the holder. Each such notice shall state, as appropriate: (1) the date of conversion, which date may be any date within one business day following the date on which the notice is transmitted or mailed; (2) the number of units of Class Four Partnership Preferred Units to be converted and, if fewer than all such units held by such holder are to be converted, the number of such units to be converted; and (3) the then current Conversion Price. Upon receiving such notice of conversion, each such holder shall promptly surrender the certificates representing such Class Four Partnership Preferred Units as are being converted on the conversion date, duly endorsed or
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assigned to the Partnership or in blank, at the office of the Transfer Agent; provided, however, that the failure to so surrender any such certificates shall not in any way affect the validity of the conversion of the underlying Class Four Partnership Preferred Units into Partnership Common Units.
(b) (i) Unless the Partnership Common Units issuable on conversion are to be issued in the same name as the name in which such Class Four Partnership Preferred Units are registered, each such unit surrendered following conversion shall be accompanied by instruments of transfer, in form satisfactory to the Partnership, duly executed by the holder or such holders duly authorized representative, and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Partnership demonstrating that such taxes have been paid).
(ii) A holder of Class Four Partnership Preferred Units shall, as of the date of the conversion of such units to Partnership Common Units, be entitled to receive a cash payment in respect of any distributions (whether or not earned or declared) that are accumulated, accrued and unpaid thereon as of the time of such conversion, provided, however, that payment in respect of any distributions on such units that has been declared but for which the Distribution Payment Date has not yet been reached shall be payable as of such Distribution Payment Date. Except as provided above, the Partnership shall make no payment or allowance for unpaid distributions, whether or not in arrears, on converted units.
(iii) As promptly as practicable after the surrender of certificates for Class Four Partnership Preferred Units as aforesaid, and in any event no later than three business days after the date of such surrender, the Partnership shall issue and deliver at such office to such holder, or send on such holders written order, a certificate or certificates for the number of full Partnership Common Units issuable upon the conversion of such Class Four Partnership Preferred Units in accordance with the provisions of this Section 7, and any fractional interest in respect of a Partnership Common Unit arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7.
(iv) Each conversion shall be deemed to have been effected (x) in the case of a conversion pursuant to subparagraph (a)(i) of this Section 7 immediately prior to the close of business on the date on which the certificates for Class Four Partnership Preferred Units shall have been surrendered and such notice received by the Partnership as provided in subparagraph (a)(i) of this Section 7, and (y) in the case of a conversion pursuant to subparagraph (a)(ii) of this Section 7, immediately prior to the close of business on the date identified as the conversion date in the notice of conversion sent by the Partnership pursuant to subparagraph (a)(ii) of this Section 7; and, in the case of (x) or (y), the person or persons in whose name or names any certificate or certificates for Partnership Common Units shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the units 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 transfer books of the Partnership shall be closed on that date, in which event such person or persons shall be deemed to become such holder or holders of record at the close of business on the next succeeding day on which such transfer books are open, but such conversion shall be at the Conversion Price in effect on the date in the notice of conversion sent by the Partnership as aforesaid.
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(c) No fractional Partnership Common Units or scrip representing fractions of a Partnership Common Unit shall be issued upon conversion of the Class Four Partnership Preferred Units. Instead of any fractional interest in a Partnership Common Unit that would otherwise be deliverable upon the conversion of Class Four Partnership Preferred Units, the Partnership shall pay to the holder of such units an amount of cash equal to the product of (i) such fraction and (ii) the value of a REIT Share as of the date of conversion. If more than one of any holders units shall be converted at one time, the number of full Partnership Common Units issuable upon conversion thereof shall be computed on the basis of the aggregate number of Class Four Partnership Preferred Units so converted.
(d) If the Partnership shall be a party to any transaction (including with limitation a merger, consolidation, statutory exchange, sale of all or substantially all of the Partnerships assets or recapitalization of the Partnership Common Units, but excluding any transaction as to which a charge in the Adjustment Factor would be effected) (each of the foregoing being referred to herein as a Transaction), in each case, as a result of which Partnership Common Units shall be converted into the right to receive securities or other property (including cash or any combination thereof), each Class Four Partnership Preferred Unit which is not converted into the right to receive securities or other property in connection with such Transaction shall thereupon be convertible into the kind and amount of securities and other property (including cash or any combination thereof) receivable upon such consummation by a holder of that number of Partnership Common Units into which Class Four Partnership Preferred Units were convertible immediately prior to such Transaction. The Partnership shall not be a party to any transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (d), and it shall not consent or agree to the occurrence of any Transaction until the Partnership has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Class Four Partnership Preferred Units that will contain provisions enabling the holders of the Class Four Partnership Preferred Units that remain outstanding after such Transaction to convert into the consideration received by holders of Partnership Common Units at the Conversion Price in effect immediately prior to such Transaction. The provisions of this Paragraph (d) shall apply to successive Transactions.
(e) Whenever the Conversion Price is adjusted as herein provided (whether pursuant to paragraph (d) of this Section 7 or as a result of a change in the Adjustment Factor), the General Partner shall promptly file with the Transfer Agent an officers 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 General Partner shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each holder of Class Four Partnership Preferred Units at such holders address as shown on the records of the Partnership.
(f) In any case in which an adjustment to the Adjustment Factor shall become effective immediately after the effective date of an event, retroactive to the record date, if any, for such event, the Partnership may defer until the occurrence of such event (A) issuing to the holder of any Class Four Partnership Preferred Units converted after such record date and before the occurrence of such event the additional Partnership Common Units issuable upon such
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conversion by reason of the adjustment required by such event over and above the Partnership Common Units issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to Section 7(c).
(g) There shall be no adjustment of the Conversion Price in case of the issuance of any unit of the Partnership except as specifically set forth in the definition of Adjustment Factor or in this Section 7. In addition, notwithstanding any other provision contained in the definition of Adjustment Factor or in this Section 7, there shall be no adjustment of the Conversion Price upon the payment of any cash distributions on any units of the Partnership.
(h) If the Partnership shall take any action affecting the Partnership Common Units, other than action described in the definition of Adjustment Factor or in this Section 7 that, in the opinion of the General Partner would materially adversely affect the conversion rights of the holders of Class Four Partnership Preferred Units, the Conversion Price for the Class Four Partnership Preferred Units may be adjusted, to the extent permitted by law in such manner, if any, and at such time as the General Partner, in its sole discretion, may determine to be equitable under the circumstances.
(i) The Partnership will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Partnership Common Units or other securities or property on conversion of Class Four Partnership Preferred Units pursuant hereto; provided, however, that the Partnership shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of Partnership Common Units or other securities or property in a name other than that of the holder of the Class Four Partnership Preferred Units 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 Partnership the amount of any such tax or established, to the reasonable satisfaction of the Partnership, that such tax has been paid.
(j) In addition to any other adjustment required hereby, to the extent permitted by law, the Partnership from time to time may decrease the Conversion Price by any amount, permanently or for a period of at least twenty Business Days, if the decrease is irrevocable during the period.
(k) For purposes of the definition of Twelve-Month Period in the Agreement, any holder of Class Four Partnership Preferred Units that have been converted to Partnership Common Units shall be deemed to have acquired such Partnership Common Units when such Class Four Partnership Units were acquired.
8. | Status of Reacquired Units. |
All Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
9. | General. |
The ownership of the Preferred Units shall be evidenced by one or more certificates in the form of Annex II hereto. The General Partner shall amend Exhibit A to the Agreement from
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time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the Preferred Units.
10. | Allocations of Income and Loss. |
For each taxable year, each holder of Preferred Units will be allocated a portion of the Net Income and Net Loss of the Partnership equal to the portion of the Net Income and Net Loss of the Partnership that would be allocated to such holder pursuant to Article 6 of the Agreement if such holder held a number of Partnership Common Units equal to (i) the number of Preferred Units held by such holder, multiplied by (ii) 0.625. Upon liquidation, dissolution or winding up of the Partnership, the Partnership shall endeavor to allocate income and gain to the holders of the Preferred Units such that the Capital Accounts related to the Preferred Units are equal to their Liquidation Preference.
11. | Voting Rights. |
Except as otherwise required by applicable law or in the Agreement, the holders of the Preferred Units will have the same voting rights as holders of the Partnership Common Units. As long as any Preferred Units are outstanding, in addition to any other vote or consent of partners required by law or by the Agreement, the affirmative vote or consent of holders of at least 50% of the outstanding Preferred Units will be necessary for effecting any amendment of any of the provisions of the Partnership Unit Designation of the Preferred Units that materially and adversely affects the rights or preferences of the holders of the Preferred Units. The creation or issuance of any class or series of Partnership Units, including, without limitation, any Partnership Units that may have rights junior to, on a parity with, or senior or superior to the Preferred Units, will not be deemed to materially and adversely affect the rights
or preferences of the holders of Preferred Units. With respect to the exercise of the above-described voting rights, each Preferred Unit will have one (1) vote per Preferred Unit.
12. | Restrictions on Transfer. |
Preferred Units are subject to the same restrictions on transfer applicable to Common Units, as set forth in the Agreement.
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ANNEX I
TO EXHIBIT J
NOTICE OF REDEMPTION
To: | AIMCO Properties, L.P. |
c/o AIMCO-GP, Inc.
4582 South Ulster Street,
Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned Limited Partner or Assignee hereby tenders for redemption Class Four Partnership Preferred Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the Class Four Partnership Preferred Units. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Class Four Partnership Preferred Units for Common Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to the Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Class Four Partnership Preferred Units;
(b) undertakes (i) to surrender such Class Four Partnership Preferred Units and any certificate therefor at the closing of the Redemption contemplated hereby and (ii) to furnish to the Previous General Partner, prior to the Specified Redemption Date:
(1) A written affidavit, dated the same date as this Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of Common Shares by (i) the undersigned Limited Partner or Assignee and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the undersigned Limited Partner or Assignee nor any Related Party will own Common Shares in excess of the Ownership Limit;
(2) A written representation that neither the undersigned Limited Partner or Assignee nor any Related Party has any intention to acquire any additional Common Shares prior to the closing of the Redemption contemplated hereby on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption contemplated hereby on the Specified Redemption Date, that either (a) the actual and constructive ownership of Common Shares by the undersigned Limited Partner or Assignee and any Related Party remain unchanged from that disclosed in the affidavit required by paragraph (1) above, or (b) after giving effect to the Redemption contemplated hereby, neither the undersigned Limited Partner or Assignee nor any Related Party shall own Common Shares in violation of the Ownership Limit.
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(c) directs that the certificate representing the Common Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of the Redemption contemplated hereby be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Preferred Units, free and clear of the rights or interests of any other person or entity;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Preferred Units as provided herein; and
(iii) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender.
Dated: ______________________
Name of Limited Partner or Assignee: |
|
|
(Signature of Limited Partner or Assignee) |
|
(Street Address) |
|
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:______________________________________________
Please insert social security or identifying number:______________________________________________
Signature Guaranteed by: |
|
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NOTICE: THE SIGNATURE OF THIS NOTICE OF REDEMPTION MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE FOR THE CLASS FOUR PREFERRED UNITS WHICH ARE BEING REDEEMED IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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ANNEX II
TO EXHIBIT J
FORM OF UNIT CERTIFICATE
OF
CLASS FOUR PARTNERSHIP PREFERRED UNITS
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION,] THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that ______________________________________________________________
is the owner of ________________________________________________________________
CLASS FOUR PARTNERSHIP PREFERRED UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Class Four Partnership Preferred Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership of AIMCO Properties, L.P., as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated:
By |
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ASSIGNMENT
For Value Received, ________________________________ hereby sells, assigns and transfers unto ___________________________________ _______________________________ Class Four Partnership Preferred Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Class Four Partnership Preferred Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: ________________
By: | ||
Name: |
Signature Guaranteed by: |
|
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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EXHIBIT K
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS SIX PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class Six Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be 900,000.
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Adjustment Factor means 1.0; provided, however, that in the event that:
(i) the Previous General Partner (a) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (b) splits or subdivides its outstanding REIT Shares or (c) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction, (i) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (ii) the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination;
(ii) the Previous General Partner distributes any rights, options or warrants to all holders of its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares (or other securities or rights convertible into, exchangeable for or exercisable for REIT Shares) at a price per share less than the Value of a REIT Share on the record date for such distribution (each a Distributed Right), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction (a) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date plus the maximum number of REIT Shares purchasable under such Distributed Rights and (b) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date plus a fraction (1) the numerator of which is the maximum number of REIT Shares purchasable under such
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Distributed Rights times the minimum purchase price per REIT Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT Share as of the record date; provided, however, that, if any such Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall be adjusted, effective retroactive to the date of distribution of the Distributed Rights, to reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price for the purposes of the above fraction; and
(iii) the Previous General Partner shall, by dividend or otherwise, distribute to all holders of its REIT Shares evidences of its indebtedness or assets (including securities, but excluding any dividend or distribution referred to in subsection (i) above), which evidences of indebtedness or assets relate to assets not received by the Previous General Partner, the General Partner and/or the Special Limited Partners pursuant to a pro rata distribution by the Partnership, then the Adjustment Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the close of business on the date fixed for determination of shareholders entitled to receive such distribution by a fraction (i) the numerator shall be such Value of a REIT Share on the date fixed for such determination and (ii) the denominator shall be the Value of a REIT Share on the dates fixed for such determination less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of the portion of the evidences of indebtedness or assets so distributed applicable to one REIT Share.
Any adjustments to the Adjustment Factor shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event. Other than with respect to the Spin-Off Adjustment, all references to Previous General Partner (including in the definition of REIT Shares) with respect to occurrences prior to December 15, 2020 shall refer instead to the Previous Public Parent (i.e., Apartment Investment and Management Company). In respect of the distribution of shares of common stock of Apartment Income REIT Corp. to holders of shares of common stock of Apartment Investment and Management Company (the Spin-Off), the Adjustment Factor shall be adjusted (the Spin-Off Adjustment) to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the Spin-Off by a fraction (i) the numerator of which shall be the Value of a REIT Share (with the reference to Previous General Partner in the definition of REIT Share deemed to be to the Previous Public Parent) after the end of trading on the last trading day prior to the Spin-Off and (ii) the denominator of which shall be the Value of a REIT Share (with the reference to Previous General Partner in the definition of REIT Share deemed to be to the Previous Public Parent) after the end of trading on the last trading day prior to the Spin-Off less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of a share of common stock of the Previous Public Parent after giving effect to the Spin-Off.
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
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Assignee shall mean a Person to whom one or more Preferred Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Cash Amount shall mean, with respect to any Tendered Units, cash in an amount equal to the sum of (x) the product of (i) the number of Tendered Units, multiplied by (ii) the Liquidation Preference for a Preferred Unit, plus, (y) if positive, the product of (i) the number of Tendered Units, multiplied by (ii) the Liquidation Preference for a Preferred Unit (excluding any accumulated, accrued or unpaid distributions), multiplied by (iii) the quotient obtained by dividing (a) the amount by which the Market Value of a Common Share, calculated as of the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units, exceeds $50, by (b) $50.
Class Six Partnership Preferred Unit or Preferred Unit shall mean a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation.
Common Shares shall mean the shares of Class A Common Stock of the Previous General Partner.
Common Shares Amount shall mean, with respect to any Tendered Units, a number of Common Shares equal to the quotient obtained by dividing (i) the Cash Amount for such Tendered Units, by (ii) the Market Value of a Common Share calculated as of the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units.
Conversion Price shall mean, as of any date, the quotient obtained by dividing $50 by the Adjustment Factor in effect as of such date.
Current Market Price of a share of any Equity Stock shall mean the closing price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, on such day, in either case as reported on the principal national securities exchange on which such securities are listed or admitted for trading, or, if such security is not quoted on any national securities exchange, on the Nasdaq National Market or if such security is not quoted on the Nasdaq National Market, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by Nasdaq or, if bid and asked prices for each security on such day shall not have been reported through Nasdaq, the average of the bid and asked prices on such day as furnished by any New York Stock Exchange or National Association of Securities Dealers, Inc. member firm regularly making a market in such security selected for such purpose by the Chief Executive Officer of the General Partner or the Board of Directors of the General Partner or if any class or series of securities are not publicly traded, the fair value of the shares of such class as determined reasonably and in good faith by the Board of Directors of the General Partner.
Cut-Off Date shall mean the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Declination shall have the meaning set forth in Section 6(f) of this Partnership Unit Designation.
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Distribution Payment Date shall have the meaning set forth in Section 4(a) of this Partnership Unit Designation.
Equity Stock shall mean one or more shares of any class of capital stock of the Previous General Partner.
Internal Rate of Return shall mean, as of any determination date, the effective discount rate under which the present value of the Inflows associated with an outstanding Class Six Partnership Preferred Unit equals $25. For purposes of calculation of Internal Rate of Return, Inflows shall mean (a) all distributions (whether paid in cash or property) that have been received in respect of such unit, (b) the cash payment in respect of distributions payable on such unit pursuant to Section 7(b)(iii) hereof if such unit were converted to Partnership Common Units on the determination date, and (c) the amount by which the Market Value of a REIT Share, as of the determination date, exceeds the Conversion Price then in effect. For purposes of calculating the amounts of any Inflows, all distributions received in property shall be deemed to have a value equal to the Market Value of such distributions as of the date such distribution is received. Neither the fact of any transfer of any units of the Class Six Partnership Preferred Units nor the amount of any consideration received by the holder thereof or paid by any successor holder in connection with any transfer shall affect the calculation of Internal Rate of Return.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall have the meaning set forth in Section 5(a) of this Partnership Unit Designation.
Market Value shall mean, as of any calculation date and with respect to any share of stock, the average of the daily market prices for ten (10) consecutive trading days (or twenty (20) consecutive Trading Days for purposes of calculating Internal Rate of Return) immediately preceding the calculation date. The market price for any such trading day shall be:
(i) if the shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
(ii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on
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such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of such ten day period that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Notice of Redemption shall mean a Notice of Redemption in the form of Annex I to this Partnership Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Primary Offering Notice shall have the meaning set forth in Section 6(h)(4) of this Partnership Unit Designation.
Public Offering Funding shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Redemption shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Registrable Shares shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Single Funding Notice shall have the meaning set forth in Section 6(f)(3) of this Partnership Unit Designation.
Specified Redemption Date shall mean, with respect to any Redemption, the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the Business Day next following the date of the closing of the Public Offering Funding; provided, however, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 5 hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding
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or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Tendering Party shall have the meaning set forth in Section 6(b) hereof.
Tendered Units shall have the meaning set forth in Section 6(b) hereof.
Trading Day shall mean, when used with respect to the Closing Price of a share of any Equity Stock, (i) if the Equity Stock is listed or admitted to trading on the NYSE, a day on which the NYSE is open for the transaction of business, (ii) if the Equity Stock is not listed or admitted to trading on the NYSE but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Equity Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Equity Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
Transfer Agent shall mean such transfer agent as may be designated by the Partnership or its designee as the transfer agent for the Class Six Partnership Preferred Units; provided, that if the Partnership has not designated a transfer agent then the Partnership shall act as the transfer agent for the Class Six Partnership Preferred Units.
3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Six Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Six Partnership Preferred Units (the Partnership Units referred to in this paragraph being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Six Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Six Partnership Preferred Units if (i) such class or series of Partnership Units shall be Class G Partnership Preferred Units, Class One Partnership Preferred Units, Class Two Partnership Preferred Units, Class Three Partnership Preferred Units or Class Four Partnership Preferred Units or (ii) the holders of such class or series of Partnership Units and the Class Six Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and
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unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority one over the other (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Six Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of Partnership Units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class Six Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) Holders of Preferred Units will be entitled to receive, when and as declared by the General Partner, quarterly cash distributions at the rate of $0.53125 per Preferred Unit. Any such distributions will be cumulative from the date of original issue, whether or not in any distribution period or periods such distributions have been declared, and shall be payable quarterly on February 15, May 15, August 15 and November 15 of each year (or, if not a Business Day, the next succeeding Business Day) (each a Distribution Payment Date), commencing on the first such date occurring after the date of original issue. If the Preferred Units are issued on any day other than a Distribution Payment Date, the first distribution payable on such Preferred Units will be prorated for the portion of the quarterly period that such Preferred Units are outstanding on the basis of twelve 30-day months and a 360-day year. Distributions will be payable in arrears to holders of record as they appear on the records of the Partnership at the close of business on February 1, May 1, August 1 or November 1, as the case may be, immediately preceding each Distribution Payment Date. Holders of Preferred Units will not be entitled to receive any distributions in excess of cumulative distributions on the Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Preferred Units that may be in arrears. Holders of any Preferred Units that are issued after the date of original issuance will be entitled to receive the same distributions as holders of any Preferred Units issued on the date of original issuance.
(b) When distributions are not paid in full upon the Preferred Units or any Parity Partnership Units, or a sum sufficient for such payment is not set apart, all distributions declared upon the Preferred Units and any Parity Partnership Units shall be declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Preferred Units and accumulated and unpaid on such Parity Partnership Units. Except as set forth in the preceding sentence, unless distributions on the Preferred Units equal to the full amount of accumulated and unpaid distributions have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past distribution periods, no distributions shall be declared or paid or set apart for payment by the Partnership with respect to any Parity Partnership Units.
(c) Unless full cumulative distributions (including all accumulated, accrued and unpaid distributions) on the Preferred Units have been declared and paid, or declared and set
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apart for payment, for all past distribution periods, no distributions (other than distributions paid in Junior Partnership Units or options, warrants or rights to subscribe for or purchase Junior Partnership Units) may be declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property may be declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (except for a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Partnership or any affiliate thereof, including, without limitation, the Previous General Partner and its affiliates) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Junior Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of Junior Partnership Units.
(d) Notwithstanding the foregoing provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain the Previous General Partners qualification as a REIT.
5. | Liquidation Preference. |
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any allocation of income or gain by the Partnership shall be made to or set apart for the holders of any Junior Partnership Units, to the extent possible, the holders of Preferred Units shall be entitled to be allocated income and gain to effectively enable them to receive a liquidation preference (the Liquidation Preference) of (i) $25 per Preferred Unit, plus (ii) accumulated, accrued and unpaid distributions (whether or not earned or declared) to the date of final distribution to such holders; but such holders shall not be entitled to any further allocation of income or gain. Until all holders of the Preferred Units have been paid the Liquidation Preference in full, no allocation of income or gain will be made to any holder of Junior Units upon the liquidation, dissolution or winding up of the Partnership.
(b) If, upon any liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Preferred Partnership Units shall be insufficient to pay in full the Liquidation Preference and liquidating payments on any Parity Partnership Units, then following certain allocations made by the Partnership, such assets, or the proceeds thereof, shall be distributed among the holders of Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Preferred Units and any such Parity Partnership Units if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the Partnership will not include a consolidation or merger of the Partnership with one or more partnerships, corporations or other entities, or a sale or transfer of all or substantially all of the Partnerships assets.
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(d) Upon any liquidation, dissolution or winding up of the Partnership, after all allocations shall have been made in full to the holders of Preferred Units and any Parity Partnership Units to enable them to receive their respective liquidation preferences, any Junior Partnership Units shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
6. | Redemption. |
(a) Except as set forth in Section 6(l) hereof, the Preferred Units may not be redeemed at the option of the Partnership, and will not be required to be redeemed or repurchased by the Partnership or the Previous General Partner except if a holder of a Preferred Unit effects a Redemption, as provided for in Section 6(b) hereof. The Partnership or the Previous General Partner may purchase Preferred Units from time to time in the open market, by tender or exchange offer, in privately negotiated purchases or otherwise.
(b) On or after the first (1st) anniversary of becoming a holder of Preferred Units, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Preferred Units held by such Qualifying Party (any Preferred Units tendered for Redemption being hereafter Tendered Units) in exchange (a Redemption) for Common Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party).
(c) If the Partnership elects to redeem Tendered Units for Common Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such Common Shares to the Tendering Party pursuant to the terms set forth in this Section 6, in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for Common Shares. In making such election to cause the Previous General Partner to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Tendering Parties over another nor discriminates against a group or class of Tendering Parties. If the Partnership elects to redeem any number of Tendered Units for Common Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for a number of Common Shares equal to the Common Shares Amount for such number of Tendered Units. The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The Common Shares shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and non-assessable shares, free of
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any pledge, lien, encumbrance or restriction other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 6, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such Common Shares are issued pursuant to this Section 6, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such Common Shares for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. Common Shares issued upon an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6 may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
(d) The Partnership shall have no obligation to effect any redemption unless and until a Tendering Party has given the Partnership a Notice of Redemption. Each Notice of Redemption shall be sent by hand delivery or by first class mail, postage prepaid, to AIMCO Properties, L.P., c/o AIMCO-GP, Inc., 4582 South Ulster Street, Suite 1700, Denver, Colorado 80237, Attention: Investor Relations, or to such other address as the Partnership shall specify in writing by delivery to the holders of the Preferred Units in the same manner as that set forth above for delivery of the Notice of Redemption. At any time prior to the Specified Redemption Date for any Redemption, any holder may revoke its Notice of Redemption.
(e) A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the record date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem any number of Tendered Units for cash, the Cash Amount for such number of Tendered Units shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
(f) In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for Common Shares pursuant to this Section 6 following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the Previous General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous
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General Partner of a number of Common Shares (Registrable Shares) equal to the Common Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding Preferred Units and having Redemption rights pursuant to this Section 6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Preferred Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Preferred Units to be made subject thereon in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the next twelve months; provided, however, that the Previous General Partner shall not be required to acquire Preferred Units pursuant to this Section 6(f) more than twice within any twelve-month period.
Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
(g) Notwithstanding the provisions of this Section 6, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for the Common Shares if such exchange would be prohibited under the Charter.
(h) Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 6:
(1) All Preferred Units acquired by the Previous General Partner pursuant to this Section 6 hereof shall be contributed by the Previous General Partner to any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Preferred Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Preferred Units, all of the Preferred Units held by such Tendering Party.
(3) Each Tendering Party (a) may effect a Redemption only once in each fiscal quarter of a Twelve-Month Period and (b) may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the
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record date established by the Previous General Partner for a distribution to its shareholders of some or all of its portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to this Section 6, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in Section 6(f) hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
(5) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
(6) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 of the Agreement) all Preferred Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Preferred Units for all purposes of the Agreement, until such Preferred Units are either paid for by the Partnership pursuant to this Section 6 or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the REIT Shares, pursuant to this Section 6 on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6, the Tendering Party shall have no rights as a shareholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 6(h), all Partnership Common Units and Partnership Preferred Units, including Preferred Units, beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
(i) In connection with an exercise of Redemption rights pursuant to this Section 6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of Common Shares and any other classes or shares of the
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Previous General Partner by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own Common Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional Common Shares or any other class of shares of the Previous General Partner prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of Common Shares or any other class of shares of the Previous General Partner by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 6(i)(a) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own Common Shares or other shares of the Previous General Partner in violation of the Ownership Limit.
(j) On or after the Specific Redemption Date, each holder of Preferred Units shall surrender to the Partnership the certificate evidencing such holders Preferred Units, at the address to which a Notice of Redemption is required to be sent. Upon such surrender of a certificate, the Partnership shall thereupon pay the former holder thereof the applicable Cash Amount and/or deliver Common Shares for the Preferred Units evidenced thereby. From and after the Specific Redemption Date (i) distributions with respect to the Preferred Units shall cease to accumulate, (ii) the Preferred Units shall no longer be deemed outstanding, (iii) the holders thereof shall cease to be Partners to the extent of their interest in such Preferred Units, and (iv) all rights whatsoever with respect to the Preferred Units shall terminate, except the right of the holders of the Preferred Units to receive Cash Amount and/or Common Shares therefor, without interest or any sum of money in lieu of interest thereon, upon surrender of their certificates therefor.
(k) Notwithstanding the provisions of this Section 6, the Tendering Parties (i) shall not be entitled to elect or effect a Redemption where the Redemption would consist of less than all the Preferred Units held by Partners and, to the extent that the aggregate Percentage Interests of the Limited Partners would be reduced, as a result of the Redemption, to less than one percent (1%) and (ii) shall have no rights under the Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 6(k), it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in Common Shares otherwise issuable by the Previous General Partner hereunder.
(l) Notwithstanding any other provision of the Agreement, on and after the date on which the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) are less than one percent (1%), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner Interests (other than the Special Limited Partners Limited Partner Interest) by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to this Section 6 for the amount of Preferred Units to be specified by the General Partner, in its sole and
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absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 6(l). Such notice given by the General Partner to a Limited Partner pursuant to this Section 6(l) shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 6(l), (a) any Limited Partner (whether or not eligible to be a Tendering Party) may, in the General Partners sole and absolute discretion, be treated as a Tendering Party and (b) the provisions of Sections 6(f)(1), 6(h)(2), 6(h)(3) and 6(h)(5) hereof shall not apply, but the remainder of this Section shall apply, mutatis mutandis.
7. | Conversion. |
(a) (i) Subject to and upon compliance with the provisions of this Section 7, a holder of Class Six Partnership Preferred Units shall have the right, at such holders option, to convert such units, in whole or in part, into the number of Partnership Common Units per Class Six Partnership Preferred Unit obtained by dividing the Liquidation Preference (excluding any accumulated, accrued and unpaid distributions) per Class Six Partnership Preferred Unit by the Conversion Price in effect at the time and on the date provided for in subparagraph (b)(iv) of this Section 7. In order to exercise the conversion right, the holder of each Class Six Partnership Preferred Unit to be converted shall surrender the certificate representing such unit, duly endorsed or assigned to the Partnership or in blank, at the office of the Transfer Agent, accompanied by written notice to the Partnership that the holder thereof elects to convert such Class Six Partnership Preferred Unit.
(ii) With respect to any Class Six Partnership Preferred Units that have been issued and outstanding for at least three (3) years, if, as of any date, the Internal Rate of Return exceeds 12.5%, then the Partnership shall have the right, but not the obligation, to cause such Class Six Partnership Preferred Units to be converted, in whole or in part, into the number of Partnership Common Units per Class Six Partnership Preferred Unit obtained by dividing the Liquidation Preference (excluding any accumulated, accrued and unpaid distributions) per Class Six Partnership Preferred Unit by the Conversion Price in effect at the time and on the date provided for in subparagraph (b)(iv) of this Section 7. In order to exercise the conversion right, the Partnership shall send notice of such conversion to each holder of record of Class Six Partnership Preferred Units no later than five Business Days after a date on which the Internal Rate of Return exceeds 12.5%. Such notice shall be provided by facsimile or, if facsimile is not available, then by first class mail, postage prepaid, at such holders address as the same appears on the records of the Partnership. Any notice which was transmitted or mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date received by the holder. Each such notice shall state, as appropriate: (1) the date of conversion, which date may be any date within one business day following the date on which the notice is transmitted or mailed; (2) the number of units of Class Six Partnership Preferred Units to be converted and, if fewer than all such units held by such holder are to be converted, the number of such units to be converted; and (3) the then current Conversion Price. Upon receiving such notice of conversion, each such holder shall promptly surrender the certificates representing such Class Six Partnership Preferred Units as are being converted on the conversion date, duly endorsed or assigned to the Partnership or in blank, at the office of the Transfer Agent; provided, however, that the failure to so surrender any such certificates shall not in any way affect the validity of the conversion of the underlying Class Six Partnership Preferred Units into Partnership Common Units.
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(b) (i) Unless the Partnership Common Units issuable on conversion are to be issued in the same name as the name in which such Class Six Partnership Preferred Units are registered, each such unit surrendered following conversion shall be accompanied by instruments of transfer, in form satisfactory to the Partnership, duly executed by the holder or such holders duly authorized representative, and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Partnership demonstrating that such taxes have been paid).
(ii) A holder of Class Six Partnership Preferred Units shall, as of the date of the conversion of such units to Partnership Common Units, be entitled to receive a cash payment in respect of any distributions (whether or not earned or declared) that are accumulated, accrued and unpaid thereon as of the time of such conversion, provided, however, that payment in respect of any distributions on such units that has been declared but for which the Distribution Payment Date has not yet been reached shall be payable as of such Distribution Payment Date. Except as provided above, the Partnership shall make no payment or allowance for unpaid distributions, whether or not in arrears, on converted units.
(iii) As promptly as practicable after the surrender of certificates for Class Six Partnership Preferred Units as aforesaid, and in any event no later than three business days after the date of such surrender, the Partnership shall issue and deliver at such office to such holder, or send on such holders written order, a certificate or certificates for the number of full Partnership Common Units issuable upon the conversion of such Class Six Partnership Preferred Units in accordance with the provisions of this Section 7, and any fractional interest in respect of a Partnership Common Unit arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7.
(iv) Each conversion shall be deemed to have been effected (x) in the case of a conversion pursuant to subparagraph (a)(i) of this Section 7 immediately prior to the close of business on the date on which the certificates for Class Six Partnership Preferred Units shall have been surrendered and such notice received by the Partnership as provided in subparagraph (a)(i) of this Section 7, and (y) in the case of a conversion pursuant to subparagraph (a)(ii) of this Section 7, immediately prior to the close of business on the date identified as the conversion date in the notice of conversion sent by the Partnership pursuant to subparagraph (a)(ii) of this Section 7; and, in the case of (x) or (y), the person or persons in whose name or names any certificate or certificates for Partnership Common Units shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the units 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 transfer books of the Partnership shall be closed on that date, in which event such person or persons shall be deemed to become such holder or holders of record at the close of business on the next succeeding day on which such transfer books are open, but such conversion shall be at the Conversion Price in effect on the date in the notice of conversion sent by the Partnership as aforesaid.
(v) No fractional Partnership Common Units or scrip representing fractions of a Partnership Common Unit shall be issued upon conversion of the Class Six Partnership Preferred Units. Instead of any fractional interest in a Partnership Common Unit that would otherwise be deliverable upon the conversion of Class Six Partnership Preferred Units, the
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Partnership shall pay to the holder of such units an amount of cash equal to the product of (i) such fraction and (ii) the value of a REIT Share as of the date of conversion. If more than one of any holders units shall be converted at one time, the number of full Partnership Common Units issuable upon conversion thereof shall be computed on the basis of the aggregate number of Class Six Partnership Preferred Units so converted.
(c) If the Partnership shall be a party to any transaction (including with limitation a merger, consolidation, statutory exchange, sale of all or substantially all of the Partnerships assets or recapitalization of the Partnership Common Units, but excluding any transaction as to which a charge in the Adjustment Factor would be effected) (each of the foregoing being referred to herein as a Transaction), in each case, as a result of which Partnership Common Units shall be converted into the right to receive securities or other property (including cash or any combination thereof), each Class Six Partnership Preferred Unit which is not converted into the right to receive securities or other property in connection with such Transaction shall thereupon be convertible into the kind and amount of securities and other property (including cash or any combination thereof) receivable upon such consummation by a holder of that number of Partnership Common Units into which Class Six Partnership Preferred Units were convertible immediately prior to such Transaction. The Partnership shall not be a party to any transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (d), and it shall not consent or agree to the occurrence of any Transaction until the Partnership has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Class Six Partnership Preferred Units that will contain provisions enabling the holders of the Class Six Partnership Preferred Units that remain outstanding after such Transaction to convert into the consideration received by holders of Partnership Common Units at the Conversion Price in effect immediately prior to such Transaction. The provisions of this Paragraph (d) shall apply to successive Transactions.
(d) Whenever the Conversion Price is adjusted as herein provided (whether pursuant to paragraph (d) of this Section 7 or as a result of a change in the Adjustment Factor), the General Partner shall promptly file with the Transfer Agent an officers 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 General Partner shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each holder of Class Six Partnership Preferred Units at such holders address as shown on the records of the Partnership.
(e) In any case in which an adjustment to the Adjustment Factor shall become effective immediately after the effective date of an event, retroactive to the record date, if any, for such event, the Partnership may defer until the occurrence of such event (A) issuing to the holder of any Class Six Partnership Preferred Units converted after such record date and before the occurrence of such event the additional Partnership Common Units issuable upon such conversion by reason of the adjustment required by such event over and above the Partnership Common Units issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to Section 7(c).
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(f) There shall be no adjustment of the Conversion Price in case of the issuance of any unit of the Partnership except as specifically set forth in the definition of Adjustment Factor or in this Section 7. In addition, notwithstanding any other provision contained in the definition of Adjustment Factor or in this Section 7, there shall be no adjustment of the Conversion Price upon the payment of any cash distributions on any units of the Partnership.
(g) If the Partnership shall take any action affecting the Partnership Common Units, other than action described in the definition of Adjustment Factor or in this Section 7 that, in the opinion of the General Partner would materially adversely affect the conversion rights of the holders of Class Six Partnership Preferred Units, the Conversion Price for the Class Six Partnership Preferred Units may be adjusted, to the extent permitted by law in such manner, if any, and at such time as the General Partner, in its sole discretion, may determine to be equitable under the circumstances.
(h) The Partnership will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Partnership Common Units or other securities or property on conversion of Class Six Partnership Preferred Units pursuant hereto; provided, however, that the Partnership shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of Partnership Common Units or other securities or property in a name other than that of the holder of the Class Six Partnership Preferred Units 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 Partnership the amount of any such tax or established, to the reasonable satisfaction of the Partnership, that such tax has been paid.
(i) In addition to any other adjustment required hereby, to the extent permitted by law, the Partnership from time to time may decrease the Conversion Price by any amount, permanently or for a period of at least twenty Business Days, if the decrease is irrevocable during the period.
(j) For purposes of the definition of Twelve-Month Period in the Agreement, any holder of Class Six Partnership Preferred Units that have been converted to Partnership Common Units shall be deemed to have acquired such Partnership Common Units when such Class Six Partnership Units were acquired.
8. | Status of Reacquired Units. |
All Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
9. | General. |
The ownership of the Preferred Units shall be evidenced by one or more certificates in the form of Annex II hereto. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the Preferred Units.
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10. | Allocations of Income and Loss. |
For each taxable year, each holder of Preferred Units will be allocated a portion of the Net Income and Net Loss of the Partnership equal to the portion of the Net Income and Net Loss of the Partnership that would be allocated to such holder pursuant to Article 6 of the Agreement if such holder held a number of Partnership Common Units equal to (i) the number of Preferred Units held by such holder, multiplied by (ii) 0.5. Upon liquidation, dissolution or winding up of the Partnership, the Partnership shall endeavor to allocate income and gain to the holders of the Preferred Units such that the Capital Accounts related to the Preferred Units are equal to their Liquidation Preference.
11. | Voting Rights. |
Except as otherwise required by applicable law or in the Agreement, the holders of the Preferred Units will have the same voting rights as holders of the Partnership Common Units. As long as any Preferred Units are outstanding, in addition to any other vote or consent of partners required by law or by the Agreement, the affirmative vote or consent of holders of at least 50% of the outstanding Preferred Units will be necessary for effecting any amendment of any of the provisions of the Partnership Unit Designation of the Preferred Units that materially and adversely affects the rights or preferences of the holders of the Preferred Units. The creation or issuance of any class or series of Partnership Units, including, without limitation, any Partnership Units that may have rights junior to, on a parity with, or senior or superior to the Preferred Units, will not be deemed to materially and adversely affect the rights or preferences of the holders of Preferred Units. With respect to the exercise of the above-described voting rights, each Preferred Unit will have one (1) vote per Preferred Unit.
12. | Restrictions on Transfer. |
Preferred Units are subject to the same restrictions on transfer applicable to Common Units, as set forth in the Agreement.
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ANNEX I
TO EXHIBIT K
NOTICE OF REDEMPTION
To: | AIMCO Properties, L.P. |
c/o AIMCO-GP, Inc.
4582 South Ulster Street
Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned Limited Partner or Assignee hereby tenders for redemption Class Six Partnership Preferred Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the Class Six Partnership Preferred Units. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Class Six Partnership Preferred Units for Common Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to the Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Class Six Partnership Preferred Units;
(b) undertakes (i) to surrender such Class Six Partnership Preferred Units and any certificate therefor at the closing of the Redemption contemplated hereby and (ii) to furnish to the Previous General Partner, prior to the Specified Redemption Date:
(1) A written affidavit, dated the same date as this Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of Common Shares by (i) the undersigned Limited Partner or Assignee and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the undersigned Limited Partner or Assignee nor any Related Party will own Common Shares in excess of the Ownership Limit;
(2) A written representation that neither the undersigned Limited Partner or Assignee nor any Related Party has any intention to acquire any additional Common Shares prior to the closing of the Redemption contemplated hereby on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption contemplated hereby on the Specified Redemption Date, that either (a) the actual and constructive ownership of Common Shares by the undersigned Limited Partner or Assignee and any Related Party remain unchanged from that disclosed in the affidavit required by paragraph (1) above, or (b) after giving effect to the Redemption contemplated hereby, neither the undersigned Limited Partner or Assignee nor any Related Party shall own Common Shares in violation of the Ownership Limit.
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(c) directs that the certificate representing the Common Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of the Redemption contemplated hereby be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Preferred Units, free and clear of the rights or interests of any other person or entity;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Preferred Units as provided herein; and
(iii) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender.
Dated: ______________________
Name of Limited Partner or Assignee: |
|
|
(Signature of Limited Partner or Assignee) |
|
(Street Address) |
|
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:__________________________
Please insert social security or identifying number:__________________________
Signature Guaranteed by: |
|
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NOTICE: THE SIGNATURE OF THIS NOTICE OF REDEMPTION MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE FOR THE CLASS SIX PREFERRED UNITS WHICH ARE BEING REDEEMED IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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ANNEX II
TO EXHIBIT K
FORM OF UNIT CERTIFICATE
OF
CLASS SIX PARTNERSHIP PREFERRED UNITS
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION, THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that ______________________________________________________________
is the owner of ________________________________________________________________
CLASS SIX PARTNERSHIP PREFERRED UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Class Six Partnership Preferred Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership of AIMCO Properties, L.P., as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated: | ||||||
By |
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ASSIGNMENT
For Value Received, ________________________________ hereby sells, assigns and transfers unto ___________________________________ _______________________________ Class Six Partnership Preferred Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Class Six Partnership Preferred Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: _____________________ | ||||||
By: | ||||||
Name: | ||||||
Signature Guaranteed by: | ||||||
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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EXHIBIT L
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS SEVEN PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class Seven Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be three million (3,000,000).
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Assignee shall mean a Person to whom one or more Preferred Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Cash Amount shall mean, with respect to any Tendered Unit, cash in an amount equal to the Liquidation Preference of such Tendered Unit.
Class Seven Partnership Preferred Unit or Preferred Unit shall mean a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation.
Cut-Off Date shall mean the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Declination shall have the meaning set forth in Section 6(f) of this Partnership Unit Designation.
Distribution Payment Date shall have the meaning set forth of Section 4(b) of this Partnership Unit Designation.
Distribution Rate shall mean 9.5%, subject to adjustment as provided in Section 4(a) of this Partnership Unit Designation.
Dividend Yield shall mean, as of any calculation date and with respect to any class or series of capital stock, the quotient obtained by dividing (i) the aggregate dollar amount of dividends payable on one share of such class or series of capital stock, in accordance with its
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terms, for the 12 month period ending on the dividend payment date immediately preceding such calculation date, by (ii) the Market Value of one share of such stock as of such calculation date.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall have the meaning set forth in Section 5(a) of this Partnership Unit Designation.
Market Value shall mean, as of any calculation date and with respect to any share of stock, the average of the daily market prices for ten (10) consecutive trading days immediately preceding the calculation date. The market price for any such trading day shall be:
(i) if the shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
(ii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of such ten day period that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Notice of Redemption shall mean a Notice of Redemption in the form of Annex I to this Partnership Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
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Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Previous General Partner shall mean Apartment Income REIT Corp., a Maryland corporation.
Primary Offering Notice shall have the meaning set forth in Section 6(h)(4) of this Partnership Unit Designation.
Public Offering Funding shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Qualifying Preferred Stock shall mean any class or series of non-convertible perpetual preferred stock that (i) has been issued by a corporation that has elected to be taxed as a REIT, (ii) has a fixed rate of distributions or dividends, (iii) has a fixed liquidation preference (and which entitles the holder thereof to no payments other than the payment of distributions at a fixed rate and the payment of a fixed liquidation preference), (iv) is listed on the New York Stock Exchange, (v) cannot be redeemed at the option of the issuer for the first five years after issuance of such class or series of preferred stock and that, at the Reset Date (or, if applicable, as of the date the calculation of the Weighted Average of Preferred Stock Dividend Yields is being made for purposes hereof in respect of such Reset Date) cannot be so redeemed and (vi) is issued by an issuer the unsecured debt of which has an average rating from Moodys Investors Services, Inc., Standard & Poors Rating Services or Duff & Phelps Credit Rating Co. in a category that is one rating category below the average rating, as of such date, of the Previous General Partners unsecured debt.
Redemption shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Registrable Shares shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
REIT Shares Amount shall mean, with respect to any Tendered Units, a number of REIT Shares equal to the quotient obtained by dividing (i) the Cash Amount for such Tendered Units, by (ii) the Market Value of a REIT Share as of the fifth (5th) Business Day prior to the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units.
Reset Date shall mean November 9, 2005 and every fifth anniversary of such date that occurs thereafter.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Single Funding Notice shall have the meaning set forth in Section 6(f)(3) of this Partnership Unit Designation.
Specified Redemption Date shall mean, with respect to any Redemption, the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the
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Business Day next following the date of the closing of the Public Offering Funding; provided, however, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 6 hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Tendering Party shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Tendered Units shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Weighted Average of Preferred Stock Dividend Yields shall mean, as of any date of calculation, the average of the Dividend Yields, as of such date, of each Qualifying Preferred Stock (other than a Qualifying Preferred Stock issued by the Previous General Partner) that has been outstanding during the entire year immediately preceding the date of calculation. Each such class of Qualifying Preferred Stock (except Qualifying Preferred Stock of the Previous General Partner) shall be weighted for its total market value.
3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Seven Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Seven Partnership Preferred Units (the partnership units being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Seven Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Seven Partnership Preferred Units (i) if such class or series of partnership units shall be Class G Partnership Preferred Units, Class One Partnership Preferred Units, Class Two Partnership Preferred Units, Class Three Partnership Preferred Units, Class Four Partnership Preferred Units or Class Six Partnership Preferred Units or (ii) if the holders of such class or series of partnership units and the Class Seven Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid distributions per unit or other
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denomination or liquidation preferences, without preference or priority one over the other (the partnership units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Seven Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, (i) if such class or series of partnership units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) if the holders of Class Seven Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the partnership units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) The Quarterly Distribution Amount, as of any date, shall be equal to (i) the Distribution Rate then in effect, multiplied by (ii) $25, and divided by (iii) four. Holders of Preferred Units will be entitled to receive, when and as declared by the General Partner, quarterly cash distributions in an amount per Preferred Unit equal to the Quarterly Distribution Amount in effect as of the date such distribution is declared by the General Partner, and no more. On each Reset Date, the Distribution Rate thereafter in effect shall be adjusted by the General Partner to equal the lesser of (i) the Distribution Rate in effect immediately prior to such Reset Date or (ii) the Dividend Yield of the class of Qualifying Preferred Stock most recently issued by the Previous General Partner or, if there is no class of Qualifying Preferred Stock of the Previous General Partner outstanding as of any Reset Date, the Weighted Average of Preferred Stock Dividend Yields, calculated as of the end of the calendar quarter immediately preceding such Reset Date; provided, further, that if for any reason there are no classes of Qualifying Preferred Stock of the type described in the definition of Weighted Average of Preferred Stock Dividend Yields outstanding on any Reset Date and the reference to the Weighted Average of Preferred Stock Dividend Yields would otherwise be determinative of the calculation of the adjusted Distribution Rate on such Reset Date, the adjusted Distribution Rate for the succeeding five (5) year period shall be the Distribution Rate in effect immediately prior to such Reset Date. Upon any such adjustment of the Distribution Rate, the General Partner shall send a notice describing such adjustment to the holders of the Preferred Units at their respective addresses, as set forth on Exhibit A to the Agreement.
(b) Any such distributions will be cumulative from the date of original issue, whether or not in any distribution period or periods such distributions have been declared, and shall be payable quarterly on February 15, May 15, August 15 and November 15 of each year (or, if not a Business Day, the next succeeding Business Day) (each a Distribution Payment Date), commencing on the first such date occurring after the date of original issue. If the Preferred Units are issued on any day other than a Distribution Payment Date, the first distribution payable on such Preferred Units will be prorated for the portion of the quarterly period that such Preferred Units are outstanding on the basis of twelve 30-day months and a 360-day year. Distributions will be payable in arrears to holders of record as they appear on the records of the Partnership at the close of business on the February 1, May 1, August 1 or November 1, as the case may be, immediately preceding each Distribution Payment Date. If the
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Preferred Units are issued other than on a record date for the payment of distributions to the holders of Preferred Units, the Quarterly Distribution Amount shall, for any quarter in which the Distribution Rate changes on any Reset Date, be appropriately prorated based on the portions of such quarter during which the different Distribution Rates were in effect, on the basis of twelve 30-day months and a 360-day year. Holders of Preferred Units will not be entitled to receive any distributions in excess of cumulative distributions on the Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Preferred Units that may be in arrears. Holders of any Preferred Units that are issued after the date of original issuance will be entitled to receive the same distributions as holders of any Preferred Units issued on the date of original issuance.
(c) When distributions are not paid in full upon the Preferred Units or any Parity Partnership Units, or a sum sufficient for such payment is not set apart, all distributions declared upon the Preferred Units and any Parity Partnership Units shall be declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Preferred Units and accumulated and unpaid on such Parity Partnership Units. Except as set forth in the preceding sentence, unless distributions on the Preferred Units equal to the full amount of accumulated and unpaid distributions have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past distribution periods, no distributions shall be declared or paid or set apart for payment by the Partnership with respect to any Parity Partnership Units.
(d) Unless full cumulative distributions (including all accumulated, accrued and unpaid distributions) on the Preferred Units have been declared and paid, or declared and set apart for payment, for all past distribution periods, no distributions (other than distributions paid in Junior Partnership Units or options, warrants or rights to subscribe for or purchase Junior Partnership Units) may be declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property may be declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (except for a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Partnership or any affiliate thereof, including, without limitation, Previous General Partner and its affiliates) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Junior Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of Junior Partnership Units.
(e) Notwithstanding the foregoing provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain the Previous General Partners qualification as a REIT.
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5. | Liquidation Preference. |
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any allocation of income or gain by the Partnership shall be made to or set apart for the holders of any Junior Partnership Units, to the extent possible, the holders of Preferred Units shall be entitled to be allocated income and gain to the extent necessary to enable them to receive a liquidation preference (the Liquidation Preference) per Preferred Unit equal to the sum of (i) $25 plus (ii) any accumulated, accrued and unpaid distributions (whether or not earned or declared) to the date of final distribution to such holders; but such holders will not be entitled to any further payment or allocation. Until all holders of the Preferred Units have been paid the Liquidation Preference in full, no allocation of income or gain will be made to any holder of Junior Partnership Units upon the liquidation, dissolution or winding up of the Partnership.
(b) If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Preferred Units shall be insufficient to pay in full the Liquidation Preference and liquidating payments on any Parity Partnership Units, then following appropriate allocations of Partnership income, gain, deduction and loss, such assets, or the proceeds thereof, shall be distributed among the holders of Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Preferred Units and any such Parity Partnership Units if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the Partnership will not include a consolidation or merger of the Partnership with one or more partnerships, corporations or other entities, or a sale or transfer of all or substantially all of the Partnerships assets.
(d) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, after all allocations shall have been made in full to the holders of Preferred Units and any Parity Partnership Units to the extent necessary to enable them to receive their respective liquidation preferences, any Junior Partnership Units shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
6. | Redemption. |
(a) Except as set forth in Section 6(l) hereof, the Preferred Units may not be redeemed at the option of the Partnership, and will not be required to be redeemed or repurchased by the Partnership or the Previous General Partner except if a holder of a Preferred Unit effects a Redemption, as provided for in Section 6(b) hereof. The Partnership or the Previous General Partner may purchase Preferred Units from time to time in the open market, by tender or exchange offer, in privately negotiated purchases or otherwise.
(b) On or after the first (1st) anniversary of becoming a holder of Preferred Units, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Preferred Units held by such
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Qualifying Party (such Preferred Units being hereafter Tendered Units) in exchange (a Redemption) for REIT Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party).
(c) If the Partnership elects to redeem Tendered Units for REIT Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such REIT Shares to the Tendering Party pursuant to the terms set forth in this Section 6, in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for Federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for REIT Shares. In making such election to cause the Previous General Partner to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Tendering Parties over another nor discriminates against a group or class of Tendering Parties. If the Partnership elects to redeem any number of Tendered Units for REIT Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for a number of REIT Shares equal to the REIT Shares Amount for such number of the Tendered Units. The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The REIT Shares shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and accessible REIT Shares, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 6, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such REIT Shares are issued pursuant to this Section 6, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such REIT Shares for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. REIT Shares issued upon an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6 may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
(d) The Partnership shall have no obligation to effect any redemption unless and until a Tendering Party has given the Partnership a Notice of Redemption. Each Notice of
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Redemption shall be sent by hand delivery or by first class mail, postage prepaid, to AIMCO Properties, L.P., c/o AIMCO-GP, Inc., 4582 South Ulster Street, Suites 1100, Denver, Colorado 80237, Attention: Investor Relations, or to such other address as the Partnership shall specify in writing by delivery to the holders of the Preferred Units in the same manner as that set forth above for delivery of the Notice of Redemption. At any time prior to the Specified Redemption Date for any Redemption, any holder may revoke its Notice of Redemption.
(e) A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the record date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem any number of Tendered Units for cash, the Cash Amount for such number of Tendered Units shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
(f) In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for REIT Shares pursuant to this Section 6 following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the Previous General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous General Partner of a number of REIT Shares (Registrable Shares) equal to the REIT Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding Preferred Units and having Redemption rights pursuant to this Section 6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Preferred Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Preferred Units to be made subject thereon in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the next twelve months; provided, however, that the Previous General Partner shall not be required to acquire Preferred Units pursuant to this Section 6(f) more than twice within any twelve-month period.
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Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
(g) Notwithstanding the provisions of this Section 6, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for REIT Shares if such exchange would be prohibited under the Charter.
(h) Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 6:
(1) All Preferred Units acquired by the Previous General Partner pursuant to this Section 6 hereof shall be contributed by the Previous General Partner to any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine. Any Preferred Units so contributed to the General Partner shall automatically, and without further action required, be converted into and deemed to be a General Partner Interest comprised of an equal number of Partnership Common Units. Any Preferred Units so contributed to the Special Limited Partners shall be converted into Partnership Common Units.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Preferred Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Preferred Units, all of the Preferred Units held by such Tendering Party.
(3) No Tendering Party may (a) effect a Redemption more than once in any fiscal quarter of a Twelve-Month Period or (b) effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the Previous General Partner for a distribution to its shareholders of some or all of its portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to this Section 6, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in Section 6(f) hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
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(5) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
(6) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 of the Agreement) all Preferred Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Preferred Units for all purposes of the Agreement, until such Preferred Units are either paid for by the Partnership pursuant to this Section 6 or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the REIT Shares, pursuant to this Section 6 on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6, the Tendering Party shall have no rights as a shareholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 6(h), all Partnership Common Units and Partnership Preferred Units, including Preferred Units, beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
(i) In connection with an exercise of Redemption rights pursuant to this Section 6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares and any other classes or shares of the Previous General Partner by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares or any other class of shares of the Previous General Partner prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares or any other class of shares of the Previous General Partner by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 6(i)(1) or (b) after giving effect to the Redemption, neither the
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Tendering Party nor any Related Party shall own REIT Shares or other shares of the Previous General Partner in violation of the Ownership Limit.
(j) On or after the Specific Redemption Date, each holder of Preferred Units shall surrender to the Partnership the certificate evidencing such holders Preferred Units, at the address to which a Notice of Redemption is required to be sent. Upon such surrender of a certificate, the Partnership shall thereupon pay the former holder thereof the applicable Cash Amount and/or deliver REIT Shares for the Preferred Units evidenced thereby. From and after the Specific Redemption Date (i) distributions with respect to the Preferred Units shall cease to accumulate, (ii) the Preferred Units shall no longer be deemed outstanding, (iii) the holders thereof shall cease to be Partners to the extent of their interest in such Preferred Units, and (iv) all rights whatsoever with respect to the Preferred Units shall terminate, except the right of the holders of the Preferred Units to receive Cash Amount and/or REIT Shares therefor, without interest or any sum of money in lieu of interest thereon, upon surrender of their certificates therefor.
(k) Notwithstanding the provisions of this Section 6, the Tendering Parties (i) shall not be entitled to elect or effect a Redemption where the Redemption would consist of less than all the Preferred Units held by Partners and, to the extent that the aggregate Percentage Interests of the Limited Partners would be reduced, as a result of the Redemption, to less than one percent (1%) and (ii) shall have no rights under the Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 6(k), it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in REIT Shares otherwise issuable by the Previous General Partner hereunder.
(l) Notwithstanding any other provision of the Agreement, on and after the date on which the aggregate Percentage Interests of the Limited Partners (other than the Special Limited Partners) are less than one percent (1%), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner Interests (other than the Special Limited Partners Limited Partner Interest) by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to this Section 6 for the amount of Preferred Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 6(l). Such notice given by the General Partner to a Limited Partner pursuant to this Section 6(l) shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 6(l), (a) any Limited Partner (whether or not eligible to be a Tendering Party) may, in the General Partners sole and absolute discretion, be treated as a Tendering Party and (b) the provisions of Sections 6(f)(1), 6(h)(2), 6(h)(3) and 6(h)(5) hereof shall not apply, but the remainder of this Section shall apply, mutatis mutandis.
7. | Status of Reacquired Units. |
All Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
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8. | General. |
The ownership of the Preferred Units shall be evidenced by one or more certificates in the form of Annex II hereto. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the Class Seven Partnership Preferred Units.
9. | Allocations of Income and Loss. |
Subject to the terms of Section 5 hereof, for each taxable year, (i) each holder of Preferred Units will be allocated, to the extent possible, net income of the Partnership in an amount equal to the distributions made on such holders Preferred Units during such taxable year, and (ii) each holder of Preferred Units will be allocated its pro rata share, based on the portion of outstanding Preferred Units held by it, of any net loss of the Partnership that is not allocated to holders of Partnership Common Units or other interests in the Partnership.
10. | Voting Rights. |
Except as otherwise required by applicable law or in the Agreement, the holders of the Preferred Units will have the same voting rights as holders of the Partnership Common Units. As long as any Preferred Units are outstanding, in addition to any other vote or consent of partners required by law or by the Agreement, the affirmative vote or consent of holders of at least 50% of the outstanding Preferred Units will be necessary for effecting any amendment of any of the provisions of the Partnership Unit Designation of the Preferred Units that materially and adversely affects the rights or preferences of the holders of the Preferred Units. The creation or issuance of any class or series of Partnership units, including, without limitation, any Partnership units that may have rights junior to, on a parity with, or senior or superior to the Preferred Units, will not be deemed to have a material adverse effect on the rights or preferences of the holders of Preferred Units. With respect to the exercise of the above described voting rights, each Preferred Unit will have one (1) vote per Preferred Unit.
11. | Restrictions on Transfer. |
Preferred Units are subject to the same restrictions on transfer as are, and the holders of Preferred Units shall be entitled to the same rights of transfer as are, applicable to Common Units as set forth in the Agreement.
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ANNEX I
TO EXHIBIT L
NOTICE OF REDEMPTION
To: | AIMCO Properties, L.P. |
c/o AIMCO-GP, Inc.
4582 South Ulster Street
Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned Limited Partner or Assignee hereby tenders for redemption Class Seven Partnership Preferred Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the Class Seven Partnership Preferred Units. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Class Seven Partnership Preferred Units for REIT Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Class Seven Partnership Preferred Units;
(b) undertakes (i) to surrender such Class Seven Partnership Preferred Units and any certificate therefor at the closing of the Redemption contemplated hereby and (ii) to furnish to Previous General Partner, prior to the Specified Redemption Date:
(1) A written affidavit, dated the same date as this Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) the undersigned Limited Partner or Assignee and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the undersigned Limited Partner or Assignee nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the undersigned Limited Partner or Assignee nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption contemplated hereby on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption contemplated hereby on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by the undersigned Limited Partner or Assignee and any Related Party remain unchanged from that disclosed in the affidavit required by paragraph (1) above, or (b) after giving effect to the Redemption contemplated hereby, neither the undersigned Limited Partner or Assignee nor any Related Party shall own REIT Shares in violation of the Ownership Limit.
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(c) directs that the certificate representing the REIT Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of the Redemption contemplated hereby be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Preferred Units, free and clear of the rights or interests of any other person or entity;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Preferred Units as provided herein; and
(iii) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender.
Dated: ______________________
Name of Limited Partner or Assignee: |
|
|
(Signature of Limited Partner or Assignee) |
|
(Street Address) |
|
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:__________________________
Please insert social security or identifying number:__________________________
Signature Guaranteed by: |
|
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NOTICE: THE SIGNATURE OF THIS NOTICE OF REDEMPTION MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE FOR THE CLASS SEVEN PREFERRED UNITS WHICH ARE BEING REDEEMED IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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ANNEX II
TO EXHIBIT L
FORM OF UNIT CERTIFICATE
OF
CLASS SEVEN PARTNERSHIP PREFERRED UNITS
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION, THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, AS IT MAY BE AMENDED AND/OR SUPPLEMENTED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that ______________________________________________________________
is the owner of ________________________________________________________________
CLASS SEVEN PARTNERSHIP PREFERRED UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Class Seven Partnership Preferred Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership of AIMCO Properties, L.P., as the same may be amended and/or supplemented from time to time.
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IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated:
By |
ASSIGNMENT
For Value Received, ________________________________ hereby sells, assigns and transfers unto ___________________________________ _______________________________ Class Seven Partnership Preferred Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Class Seven Partnership Preferred Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: ________________
By: | ||
Name: |
Signature Guaranteed by: |
|
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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EXHIBIT M
[RESERVED]
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EXHIBIT N
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS NINE PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class Nine Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be one million (1,000,000).
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Assignee shall mean a Person to whom one or more Preferred Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Cash Amount shall mean, with respect to any Tendered Unit, cash in an amount equal to the Liquidation Preference of such Tendered Unit.
Class Nine Partnership Preferred Unit or Preferred Unit shall mean a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation.
Conversion Ratio shall mean, as of any date, the quotient obtained by dividing the Liquidation Preference by the Market Value of a REIT Share as of such date.
Cut-Off Date shall mean the fifth (5th) Business Day after the General Partners receipt of a Notice of Redemption.
Declination shall have the meaning set forth in Section 6(f) of this Partnership Unit Designation.
Distribution Payment Date shall have the meaning set forth of Section 4(b) of this Partnership Unit Designation.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
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Liquidation Preference shall have the meaning set forth in Section 5(a) of this Partnership Unit Designation.
Market Value shall mean, as of any calculation date and with respect to any share of stock, the average of the daily market prices for ten (10) consecutive trading days immediately preceding the calculation date. The market price for any such trading day shall be:
(i) if the shares are listed or admitted to trading on any securities exchange, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system,
(ii) if the shares are not listed or admitted to trading on any securities exchange, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or
(iii) if the shares are not listed or admitted to trading on any securities exchange, and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after the commencement of such ten day period that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Notice of Redemption shall mean a Notice of Redemption in the form of Annex I to this Partnership Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Previous General Partner shall mean Apartment Income REIT Corp., a Maryland corporation.
Primary Offering Notice shall have the meaning set forth in Section 6(h)(4) of this Partnership Unit Designation.
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Public Offering Funding shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
Redemption shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Registrable Shares shall have the meaning set forth in Section 6(f)(2) of this Partnership Unit Designation.
REIT Shares shall mean a share of the Previous General Partners Class A Common Stock.
REIT Shares Amount shall mean, with respect to any Tendered Units, a number of REIT Shares equal to the quotient obtained by dividing (i) the Cash Amount for such Tendered Units, by (ii) the Market Value of a REIT Share as of the fifth (5th) Business Day prior to the date of receipt by the General Partner of a Notice of Redemption for such Tendered Units.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
Shares shall mean REIT Shares.
Single Funding Notice shall have the meaning set forth in Section 6(f)(3) of this Partnership Unit Designation.
Specified Redemption Date shall mean, with respect to any Redemption, the later of (a) the tenth (10th) Business Day after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the Business Day next following the date of the closing of the Public Offering Funding; provided, however, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the Previous General Partner pursuant to Section 6 hereof, on any Specified Redemption Date, may be deferred, in the General Partners sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state blue sky or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature.
Tendering Party shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Tendered Units shall have the meaning set forth in Section 6(b) of this Partnership Unit Designation.
Transaction shall have the meaning set forth in Section 7(d) of this Partnership Unit Designation.
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3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Nine Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Nine Partnership Preferred Units (the partnership units being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Nine Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Nine Partnership Preferred Units (i) if such class or series of partnership units shall be Class One Partnership Preferred Units, Class Two Partnership Preferred Units, Class Three Partnership Preferred Units, or Class Four Partnership Preferred Units, or (ii) if the holders of such class or series of partnership units and the Class Nine Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority one over the other (the partnership units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Nine Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, (i) if such class or series of partnership units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) if the holders of Class Nine Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the partnership units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) Holders of Preferred Units will be entitled to receive, when and as declared by the General Partner out of Available Cash, quarterly cash distributions in an amount per Preferred Unit equal to $0.375, and no more.
(b) Any such distributions will be cumulative from the date of original issue, whether or not in any distribution period or periods such distributions have been declared, and shall be payable quarterly on February 15, May 15, August 15 and November 15 of each year (or, if not a Business Day, the next succeeding Business Day) (each a Distribution Payment Date), commencing on the first such date occurring after the date of original issue. If the Preferred Units are issued on any day other than a Distribution Payment Date, the first distribution payable on such Preferred Units will be prorated for the portion of the quarterly
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period that such Preferred Units are outstanding on the basis of twelve 30-day months and a 360-day year. Distributions will be payable in arrears to holders of record as they appear on the records of the Partnership at the close of business on the February 1, May 1, August 1 or November 1, as the case may be, immediately preceding each Distribution Payment Date. Holders of Preferred Units will not be entitled to receive any distributions in excess of cumulative distributions on the Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Preferred Units that may be in arrears. Holders of any Preferred Units that are issued after the date of original issuance will be entitled to receive the same distributions as holders of any Preferred Units issued on the date of original issuance.
(c) When distributions are not paid in full upon the Preferred Units or any Parity Partnership Units, or a sum sufficient for such payment is not set apart, all distributions declared upon the Preferred Units and any Parity Partnership Units shall be declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Preferred Units and accumulated and unpaid on such Parity Partnership Units. Except as set forth in the preceding sentence, unless distributions on the Preferred Units equal to the full amount of accumulated and unpaid distributions have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past distribution periods, no distributions shall be declared or paid or set apart for payment by the Partnership with respect to any Parity Partnership Units.
(d) Unless full cumulative distributions (including all accumulated, accrued and unpaid distributions) on the Preferred Units have been declared and paid, or declared and set apart for payment, for all past distribution periods, no distributions (other than distributions paid in Junior Partnership Units or options, warrants or rights to subscribe for or purchase Junior Partnership Units) may be declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property may be declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (except for a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Partnership or any affiliate thereof, including, without limitation, Previous General Partner and its affiliates) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Junior Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of Junior Partnership Units.
(e) Notwithstanding the foregoing provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain the Previous General Partners qualification as a REIT.
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5. | Liquidation Preference. |
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, before any allocation of income or gain by the Partnership shall be made to or set apart for the holders of any Junior Partnership Units, to the extent possible, the holders of Preferred Units shall be entitled to be allocated income and gain to the extent necessary to enable them to receive a liquidation preference (the Liquidation Preference) per Preferred Unit equal to the sum of (i) $25 plus (ii) any accumulated, accrued and unpaid distributions (whether or not earned or declared) to the date of final distribution to such holders; but such holders will not be entitled to any further payment or allocation. Until all holders of the Preferred Units have been paid the Liquidation Preference in full, no allocation of income or gain will be made to any holder of Junior Partnership Units upon the liquidation, dissolution or winding up of the Partnership.
(b) If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Preferred Units shall be insufficient to pay in full the Liquidation Preference and liquidating payments on any Parity Partnership Units, then following appropriate allocations of Partnership income, gain, deduction and loss, such assets, or the proceeds thereof, shall be distributed among the holders of Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Preferred Units and any such Parity Partnership Units if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the Partnership will not include a consolidation or merger of the Partnership with one or more partnerships, corporations or other entities, or a sale or transfer of all or substantially all of the Partnerships assets.
(d) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, after all allocations shall have been made in full to the holders of Preferred Units and any Parity Partnership Units to the extent necessary to enable them to receive their respective liquidation preferences, any Junior Partnership Units shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
6. | Redemption. |
(a) Except as set forth in Section 6(l) hereof, the Preferred Units may not be redeemed at the option of the Partnership, and will not be required to be redeemed or repurchased by the Partnership or the Previous General Partner except if a holder of a Preferred Unit effects a Redemption, as provided for in Section 6(b) hereof. The Partnership or the Previous General Partner may purchase Preferred Units from time to time in the open market, by tender or exchange offer, in privately negotiated purchases or otherwise.
(b) On or after the first (1st) anniversary of becoming a holder of Preferred Units, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Preferred Units held by such
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Qualifying Party (such Preferred Units being hereafter Tendered Units) in exchange (a Redemption) for Shares issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the Partnership in its sole discretion. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the Tendering Party).
(c) If the Partnership elects to redeem Tendered Units for Shares rather than cash, then the Partnership shall direct the Previous General Partner to issue and deliver such Shares to the Tendering Party pursuant to the terms set forth in this Section 6, in which case, (i) the Previous General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Partys exercise of its Redemption right, and (ii) such transaction shall be treated, for Federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the Previous General Partner in exchange for Shares. If the Partnership elects to redeem any number of Tendered Units for Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the Previous General Partner in exchange for in the case of REIT Shares, a number of REIT Shares equal to the REIT Shares Amount for such number of the Tendered Units. The Tendering Party shall submit (i) such information, certification or affidavit as the Previous General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the Previous General Partners view, to effect compliance with the Securities Act. The Shares shall be delivered by the Previous General Partner as duly authorized, validly issued, fully paid and accessible Shares, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the Previous General Partner, the Securities Act and relevant state securities or blue sky laws. Neither any Tendering Party whose Tendered Units are acquired by the Previous General Partner pursuant to this Section 6, any Partner, any Assignee nor any other interested Person shall have any right to require or cause the Previous General Partner or the General Partner to register, qualify or list any Shares owned or held by such Person, whether or not such Shares are issued pursuant to this Section 6, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the Previous General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such Shares for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. Shares issued upon an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6 may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the Previous General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws.
(d) The Partnership shall have no obligation to effect any redemption unless and until a Tendering Party has given the Partnership a Notice of Redemption. Each Notice of Redemption shall be sent by hand delivery or by first class mail, postage prepaid, to AIMCO Properties, L.P., c/o AIMCO-GP, Inc., 4582 South Ulster Street, Suite 1700, Denver, Colorado 80237, Attention: Investor Relations, or to such other address as the Partnership shall specify in
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writing by delivery to the holders of the Preferred Units in the same manner as that set forth above for delivery of the Notice of Redemption. At any time prior to the Specified Redemption Date for any Redemption, any holder may revoke its Notice of Redemption.
(e) A Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the record date for such distribution precedes or coincides with such delivery of the Notice of Redemption. If the Partnership elects to redeem any number of Tendered Units for cash, the Cash Amount for such number of Tendered Units shall be delivered as a certified check payable to the Tendering Party or, in the General Partners sole and absolute discretion, in immediately available funds.
(f) In the event that the Partnership declines to cause the Previous General Partner to acquire all of the Tendered Units from the Tendering Party in exchange for Shares pursuant to this Section 6 following receipt of a Notice of Redemption (a Declination):
(1) The Previous General Partner or the General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the Previous General Partner contribute such funds from the proceeds of a registered public offering (a Public Offering Funding) by the Previous General Partner of a number of REIT Shares (Registrable Shares) equal to the REIT Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership.
(3) Promptly upon the General Partners receipt of the Notice of Redemption and the Previous General Partner or the General Partner giving notice of the Partnerships Declination, the General Partner shall give notice (a Single Funding Notice) to all Qualifying Parties then holding Preferred Units and having Redemption rights pursuant to this Section 6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Preferred Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Preferred Units to be made subject thereon in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the next twelve months; provided, however, that the Previous General Partner shall not be required to acquire Preferred Units pursuant to this Section 6(f) more than twice within any twelve-month period.
Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the Previous General Partner and/or the General Partner. The General Partner and/or the Special Limited Partners shall make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest and/or Limited Partner Interest. Any such
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contribution shall entitle the General Partner and the Special Limited Partners, as the case may be, to an equitable Percentage Interest adjustment.
(g) Notwithstanding the provisions of this Section 6, the Previous General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for Shares if such exchange would be prohibited under the Charter.
(h) Notwithstanding anything herein to the contrary, with respect to any Redemption pursuant to this Section 6:
(1) All Preferred Units acquired by the Previous General Partner pursuant to this Section 6 hereof shall be contributed by the Previous General Partner to any or all of the General Partner and the Special Limited Partners in such proportions as the Previous General Partner, the General Partner and the Special Limited Partners shall determine. Any Preferred Units so contributed to the General Partner shall automatically, and without further action required, be converted into and deemed to be a General Partner Interest comprised of an equal number of Partnership Common Units. Any Preferred Units so contributed to the Special Limited Partners shall be converted into Partnership Common Units.
(2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Preferred Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Preferred Units, all of the Preferred Units held by such Tendering Party.
(3) No Tendering Party may (a) effect a Redemption more than once in any fiscal quarter of a Twelve-Month Period or (b) effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the Previous General Partner for a distribution to its stockholders of some or all of its portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the Previous General Partner pursuant to this Section 6, in the event that the Previous General Partner or the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a Primary Offering Notice) that the Previous General Partner desires to effect a primary offering of its equity securities then, unless the Previous General Partner and the General Partner otherwise consent, commencement of the actions denoted in Section 6(f) hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice.
(5) Without the Consent of the Previous General Partner, no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding.
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(6) The consummation of such Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provision of Section 11.5 of the Agreement) all Preferred Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect to such Preferred Units for all purposes of the Agreement, until such Preferred Units are either paid for by the Partnership pursuant to this Section 6 or transferred to the Previous General Partner (or directly to the General Partner or Special Limited Partners) and paid for, by the issuance of the Shares, pursuant to this Section 6 on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the Previous General Partner pursuant to this Section 6, the Tendering Party shall have no rights as a stockholder of the Previous General Partner with respect to the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this Section 6(h), all Partnership Common Units and Partnership Preferred Units, including Preferred Units, beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party.
(i) In connection with an exercise of Redemption rights pursuant to this Section 6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares and any other classes or shares of the Previous General Partner by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own REIT Shares or other shares of the Previous General Partner in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares or any other class of shares of the Previous General Partner prior to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares or any other class of shares of the Previous General Partner by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 6(i)(1), or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own REIT Shares or other shares of the Previous General Partner in violation of the Ownership Limit.
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(j) On or after the Specified Redemption Date, each holder of Preferred Units shall surrender to the Partnership the certificate evidencing such holders Preferred Units, at the address to which a Notice of Redemption is required to be sent. Upon such surrender of a certificate, the Partnership shall thereupon pay the former holder thereof the applicable Cash Amount and/or deliver Shares for the Preferred Units evidenced thereby. From and after the Specified Redemption Date (i) distributions with respect to the Preferred Units shall cease to accumulate, (ii) the Preferred Units shall no longer be deemed outstanding, (iii) the holders thereof shall cease to be Partners to the extent of their interest in such Preferred Units, and (iv) all rights whatsoever with respect to the Preferred Units shall terminate, except the right of the holders of the Preferred Units to receive Cash Amount and/or Shares therefor, without interest or any sum of money in lieu of interest thereon, upon surrender of their certificates therefor.
(k) Notwithstanding the provisions of this Section 6, the Tendering Parties shall have no rights under the Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption would be in violation of this Section 6(k), it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in REIT Shares otherwise issuable by the Previous General Partner hereunder.
(l) Notwithstanding any other provision of the Agreement, on and after the third anniversary of the date of original issuance of the Preferred Units, the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Preferred Units by treating any holder of Preferred Units as a Tendering Party who has delivered a Notice of Redemption pursuant to this Section 6 for the amount of Preferred Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such holder that the Partnership has elected to exercise its rights under this Section 6(l). Such notice given by the General Partner to a holder of Preferred Units pursuant to this Section 6(l) shall be treated as if it were a Notice of Redemption delivered to the General Partner by such holder. For purposes of this Section 6(l), (a) any holder of Preferred Units (whether or not eligible to be a Tendering Party) may, in the General Partners sole and absolute discretion, be treated as a Tendering Party and (b) the provisions of Sections 6(f)(1), 6(h)(2), 6(h)(3) and 6(h)(5) hereof shall not apply, but the remainder of this Section shall apply, mutatis mutandis.
7. | Conversion. |
(a) At any time and from time to time after the third anniversary of the date of initial issuance of the Preferred Units, the Partnership shall have the right, but not the obligation, to cause any Preferred Units to be converted into the number of Partnership Common Units obtained by multiplying the number of Preferred Units converted by the Conversion Ratio on the date provided for in subparagraph (b)(4) of this Section 7. In order to exercise the conversion right, the Partnership shall send notice of such conversion to each holder of record of Preferred Units to be converted. Such notice shall be provided by facsimile or, if facsimile is not available, then by first class mail, postage prepaid, at such holders address as the same appears on the records of the Partnership. Any notice which was transmitted or mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date received by the holder. Each such notice shall state, as appropriate: (1) the date of conversion, which date may be any date within twenty (20) Business Days following the date on which the notice is
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transmitted or mailed; and (2) the number of units of Preferred Units to be converted and, if fewer than all such units held by such holder are to be converted, the number of such units to be converted. Upon receiving such notice of conversion, each such holder shall promptly surrender the certificates representing such Preferred Units as are being converted on the conversion date, duly endorsed or assigned to the Partnership or in blank, at the office of the Transfer Agent; provided, however, that the failure to so surrender any such certificates shall not in any way affect the validity of the conversion of the underlying Preferred Units into Partnership Common Units.
(b) (i) The Partnership Common Units issuable on conversion shall be issued in the same name as the name in which such Preferred Units are registered.
(ii) The Partnership shall make no payment or allowance for unpaid distributions, whether or not in arrears, on converted units, except that a holder of Preferred Units that are converted shall be entitled to receive a cash payment on the Dividend Payment Date for any distribution on such units that has been declared and for which the record date precedes the conversion date.
(iii) As promptly as practicable after the surrender of certificates for Preferred Units as aforesaid, and in any event no later than five (5) Business Days after the date of such surrender, the Partnership shall issue and deliver at such office to such holder, or send on such holders written order, a certificate or certificates for the number of full Partnership Common Units issuable upon the conversion of such Preferred Units in accordance with the provisions of this Section 7, and any fractional interest in respect of a Partnership Common Unit arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7.
(iv) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date identified as the conversion date in the notice of conversion sent by the Partnership pursuant to subparagraph (a) of this Section 7; and the person or persons in whose name or names any certificate or certificates for Partnership Common Units shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the units represented thereby at such time on such date, and such conversion shall be at the Conversion Ratio in effect at such time on such date, unless the transfer books of the Partnership shall be closed on that date, in which event such person or persons shall be deemed to become such holder or holders of record at the close of business on the next succeeding day on which such transfer books are open, but such conversion shall be at the Conversion Ratio in effect on the date in the notice of conversion sent by the Partnership as aforesaid.
(c) No fractional Partnership Common Units or scrip representing fractions of a Partnership Common Unit shall be issued upon conversion of the Preferred Units. Instead of any fractional interest in a Partnership Common Unit that would otherwise be deliverable upon the conversion of Preferred Units, the Partnership shall pay to the holder of such units an amount of cash equal to the product of (i) such fraction and (ii) the Market Value of a REIT Share as of the date of conversion. If more than one of any holders units shall be converted at one time, the number of full Partnership Common Units issuable upon conversion thereof shall be computed on the basis of the aggregate number of Preferred Units so converted.
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(d) If the Partnership shall be a party to any transaction (including with limitation a merger, consolidation, statutory exchange, sale of all or substantially all of the Partnerships assets or recapitalization of the Partnership Common Units) (each of the foregoing being referred to herein as a Transaction), in each case, as a result of which Partnership Common Units shall be converted into the right to receive securities or other property (including cash or any combination thereof), each Preferred Unit which is not converted into the right to receive securities or other property in connection with such Transaction shall thereupon be convertible into the kind and amount of securities and other property (including cash or any combination thereof) receivable upon such consummation by a holder of that number of Partnership Common Units into which Preferred Units were convertible immediately prior to such Transaction. The provisions of this paragraph (d) shall apply to successive Transactions.
(e) The Partnership will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Partnership Common Units or other securities or property on conversion of Preferred Units pursuant hereto; provided, however, that the Partnership shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of Partnership Common Units or other securities or property in a name other than that of the holder of the Preferred Units 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 Partnership the amount of any such tax or established, to the reasonable satisfaction of the Partnership, that such tax has been paid.
(f) For purposes of the definition of Twelve-Month Period in the Agreement, any holder of Preferred Units that have been converted to Partnership Common Units shall be deemed to have acquired such Partnership Common Units when such Units were acquired.
8. | Status of Reacquired Units. |
All Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
9. | General. |
The ownership of the Preferred Units shall be evidenced by one or more certificates in the form of Annex II hereto. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the Class Nine Partnership Preferred Units.
10. | Allocations of Income and Loss. |
Subject to the terms of Section 5 hereof, for each taxable year, (i) each holder of Preferred Units will be allocated, to the extent possible, net income of the Partnership in an amount equal to the distributions made on such holders Preferred Units during such taxable year, and (ii) each holder of Preferred Units will be allocated its pro rata share, based on the portion of outstanding Preferred Units held by it, of any net loss of the Partnership that is not allocated to holders of Partnership Common Units or other interests in the Partnership.
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11. | Voting Rights. |
The holders of the Preferred Units will not have any voting or approval rights, except (a) as required by applicable law or in the Agreement, and (b) as long as any Preferred Units are outstanding, in addition to any other vote or consent of partners required by law or by the Agreement, the affirmative vote or consent of holders of at least 50% of the outstanding Preferred Units will be necessary for effecting any amendment of any of the provisions of this Partnership Unit Designation that materially and adversely affects the rights or preferences of the holders of the Preferred Units. The creation or issuance of any class or series of Partnership units, including, without limitation, any Partnership units that may have rights junior to, on a parity with, or senior or superior to the Preferred Units, will not be deemed to have a material adverse effect on the rights or preferences of the holders of Preferred Units. With respect to the exercise of the above described voting rights, each Preferred Unit will have one (1) vote per Preferred Unit.
12. | Restrictions on Transfer. |
Preferred Units are subject to the same restrictions on transfer as are, and the holders of Preferred Units shall be entitled to the same rights of transfer as are, applicable to Common Units as set forth in the Agreement.
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ANNEX I
TO EXHIBIT N
NOTICE OF REDEMPTION
To: | AIMCO Properties, L.P. |
c/o AIMCO-GP, Inc.
4582 South Ulster Street
Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned Limited Partner or Assignee hereby tenders for redemption Class Nine Partnership Preferred Units in AIMCO Properties, L.P. in accordance with the terms of the Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the Class Nine Partnership Preferred Units. The undersigned Limited Partner or Assignee:
(a) if the Partnership elects to redeem such Class Nine Partnership Preferred Units for REIT Shares rather than cash, hereby irrevocably transfers, assigns, contributes and sets over to Previous General Partner all of the undersigned Limited Partners or Assignees right, title and interest in and to such Class Nine Partnership Preferred Units;
(b) undertakes (i) to surrender such Class Nine Partnership Preferred Units and any certificate therefor at the closing of the Redemption contemplated hereby and (ii) to furnish to Previous General Partner, prior to the Specified Redemption Date:
(1) A written affidavit, dated the same date as this Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) the undersigned Limited Partner or Assignee and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the undersigned Limited Partner or Assignee nor any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the undersigned Limited Partner or Assignee nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption contemplated hereby on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of the Redemption contemplated hereby on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by the undersigned Limited Partner or Assignee and any Related Party remain unchanged from that disclosed in the affidavit required by paragraph (1) above, or (b) after giving effect to the Redemption contemplated hereby, neither the undersigned Limited Partner or Assignee nor any Related Party shall own REIT Shares in violation of the Ownership Limit.
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(c) directs that the certificate representing the REIT Shares, or the certified check representing the Cash Amount, in either case, deliverable upon the closing of the Redemption contemplated hereby be delivered to the address specified below;
(d) represents, warrants, certifies and agrees that:
(i) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Preferred Units, free and clear of the rights or interests of any other person or entity;
(ii) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Preferred Units as provided herein; and
(iii) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender.
Dated: ______________________
Name of Limited Partner or Assignee: |
|
(Signature of Limited Partner or Assignee) |
(Street Address) |
(City) (State) (Zip Code) |
Issue check payable to or Certificates in the name of:__________________________
Please insert social security or identifying number:__________________________
Signature Guaranteed by: |
|
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NOTICE: THE SIGNATURE OF THIS NOTICE OF REDEMPTION MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE FOR THE CLASS NINE PREFERRED UNITS WHICH ARE BEING REDEEMED IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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ANNEX II
TO EXHIBIT N
FORM OF UNIT CERTIFICATE
OF
CLASS NINE PARTNERSHIP PREFERRED UNITS
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. IN ADDITION, THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., DATED AS OF DECEMBER 14, 2020, A COPY OF WHICH MAY BE OBTAINED FROM AIMCO-GP, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE.
Certificate Number ________
AIMCO PROPERTIES, L.P.
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that______________________________________________________________________________________________
is the owner of________________________________________________________________________________________________
CLASS NINE PARTNERSHIP PREFERRED UNITS
OF
AIMCO PROPERTIES, L.P.,
transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Class Nine Partnership Preferred Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership of AIMCO Properties, L.P., as the same may be amended and/or supplemented from time to time.
IN WITNESS WHEREOF, the undersigned has signed this Certificate.
Dated:
By |
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ASSIGNMENT
For Value Received, ________________________________ hereby sells, assigns and transfers unto ___________________________________ _______________________________ Class Nine Partnership Preferred Unit(s) represented by the within Certificate, and does hereby irrevocably constitute and appoint the General Partner of AIMCO Properties, L.P. as its Attorney to transfer said Class Nine Partnership Preferred Unit(s) on the books of AIMCO Properties, L.P. with full power of substitution in the premises.
Dated: ________________
By: | ||
Name: |
Signature Guaranteed by: |
|
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17AD-15.
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EXHIBIT O
[RESERVED]
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EXHIBIT P
PARTNERSHIP UNIT DESIGNATION OF
THE LTIP UNITS OF
AIMCO PROPERTIES, L.P.
1. | Issuance and Designation. |
A class of Partnership Units is hereby designated as LTIP Units, and the number of LTIP Units that may be issued is not limited by the Agreement. From time to time, the General Partner is authorized to issue LTIP Units to Persons providing services to or for the benefit of the Partnership for such consideration or for no consideration as the General Partner may determine to be appropriate and on such terms and conditions as shall be established by the General Partner, and admit such Persons as Limited Partners. LTIP Units may be issued in one or more classes, or one or more series of any such classes, bearing such relationship to one another as to allocations, distributions and other rights as the General Partner shall determine in its sole and absolute discretion subject to Delaware law and the Agreement. Except to the extent that a capital contribution is made with respect to an LTIP Unit, each LTIP Unit is intended to qualify as a profits interests in the Partnership within the meaning of the Code, the Regulations, and any published guidance by the Internal Revenue Service with respect thereto. A Person (other than an existing Partner) who is issued LTIP Units in exchange for no consideration shall be admitted to the Partnership as an additional Limited Partner upon the satisfactory completion of the requirements for admission of an Additional Limited Partner pursuant to Section 12.2.A(i) through (iii) of the Agreement.
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Adjustment Events has the meaning set forth in Section 8 hereof.
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Assignee shall mean a Person to whom one or more LTIP Units have been Transferred in a manner permitted under the Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 of the Agreement.
Capital Account Limitation has the meaning set forth in Section 7(b) hereof.
Catch-Up Date means, for any LTIP Unit that initially has a Sharing Percentage that is less than 100%, the date (if any) on which such Sharing Percentage increases to 100%.
Catch-Up Year means, for any LTIP Unit that initially has a Sharing Percentage that is less than 100%, the Fiscal Year in which its Catch-Up Date occurs; provided, however, that if the Catch-Up Date occurs after the end of any Fiscal Year but prior to the distribution of
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Available Cash for the fourth quarter of such Fiscal Year, the Catch-Up Year shall be such Fiscal Year.
Constituent Person has the meaning set forth in Section 7(f) hereof.
Conversion Date has the meaning set forth in Section 7(b) hereof.
Conversion Notice means a notice in the form attached hereto as Annex I.
Conversion Right has the meaning set forth in Section 7(a) hereof.
Economic Capital Account Balance means, with respect to a holder of LTIP Units, its Capital Account balance, plus the amount of its share of any Partner Minimum Gain or Partnership Minimum Gain, in either case, to the extent attributable to its ownership of LTIP Units.
Eligible Unit means, as of the time any Liquidating Gain is available to be allocated to an LTIP Unit, an LTIP Unit to the extent, since the date of issuance of such LTIP Unit, such Liquidating Gain when aggregated with other Liquidating Gains realized since the date of issuance of such LTIP Unit exceeds Liquidating Losses realized since the date of issuance of such LTIP Unit.
Equity Plan means any stock or other equity-based compensation plan now or hereafter adopted by the Partnership or the Previous General Partner, including the Plan.
Forced Conversion has the meaning set forth in Section 7(c) hereof.
Forced Conversion Notice has the meaning set forth in Section 7(c) hereof.
Liquidating Gains means any net gain realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership (including upon liquidation of the Partnership), including but not limited to Net Income realized in connection with an adjustment of Gross Asset Value of any Partnership asset pursuant to subsection (b) of the definition of Gross Asset Value in the Agreement.
Liquidating Losses means any net loss realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership (including upon liquidation of the Partnership), including but not limited to Net Loss realized in connection with an adjustment of Gross Asset Value of any Partnership asset pursuant to subsection (b) of the definition of Gross Asset Value in the Agreement.
LTIP Agreement means a Vesting Agreement, the Plan or any applicable Equity Plan or other compensatory arrangement or incentive program pursuant to which LTIP Units are issued.
LTIP Unit shall mean a Partnership Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Partnership Unit Designation, and any LTIP Agreement applicable thereto.
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Market Value shall mean, as of any determination date and with respect to any share of stock:
(i) if the shares are listed or admitted to trading on any securities exchange, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system;
(ii) if the shares are not listed or admitted to trading on any securities exchange, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner; or
(iii) if the shares are not listed or admitted to trading on any securities exchange, and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; provided, further, that the General Partner is authorized to adjust the market price for any trading day as may be necessary, in its judgment, to reflect an event that occurs at any time after such day that would unfairly distort the Market Value, including, without limitation, a stock dividend, split, subdivision, reverse stock split, or share combination.
Partnership shall mean AIMCO Properties, L.P., a Delaware limited partnership.
Partnership Common Unit shall mean a Partnership Common Unit held by a Non-AIR Holder.
Plan means the Apartment Income REIT Corp. 2020 Stock Award and Incentive Plan, as amended from time to time.
Previous General Partner shall mean Apartment Income REIT Corp., a Maryland corporation.
Proposed Section 83 Safe Harbor Regulation has the meaning set forth in Section 13 hereof.
Redemption Threshold means a threshold that will be met with respect to one or more LTIP Units if, when and to the extent such LTIP Units have satisfied the Capital Account Limitation.
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REIT Share Economic Target means, as of any date, the Market Value of a REIT Share on such date, multiplied by the Adjustment Factor.
Section 83 Safe Harbor has the meaning set forth in Section 13 hereof.
Sharing Percentage means, with respect to any LTIP Unit, such percentage, if any, that is specified as such in the Vesting Agreement or other documentation pursuant to which such LTIP Unit was issued.
Transaction has the meaning set forth in Section 7(f) hereof.
Undetermined LTIP Units means any LTIP Unit which has a performance-based vesting condition that has not been met. For the avoidance of doubt, an LTIP Unit will not be an Undetermined LTIP Unit even if it is still an Unvested LTIP Unit if the only remaining vesting condition is a time-based condition.
Unvested LTIP Units has the meaning set forth in Section 3(a) hereof.
Vested LTIP Units has the meaning set forth in Section 3(a) hereof.
Vesting Agreement has the meaning set forth in Section 3(a) hereof.
3. | Vesting. |
(a) Vesting, Generally. LTIP Units may, in the sole discretion of the General Partner, be issued subject to vesting, forfeiture and additional restrictions on Transfer pursuant to the terms of an award, vesting or other similar agreement (a Vesting Agreement). The terms of any Vesting Agreement may be modified by the General Partner from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Plan or any other Equity Plan, if applicable. LTIP Units that were fully vested when issued, or that have vested and are no longer subject to forfeiture under the terms of a Vesting Agreement, are referred to as Vested LTIP Units; all other LTIP Units are referred to as Unvested LTIP Units.
(b) Forfeiture. Unless otherwise specified in the relevant LTIP Agreement, upon the occurrence of any event specified in such LTIP Agreement as resulting in either the right of the Partnership to repurchase LTIP Units at a specified purchase price or the forfeiture of any LTIP Units, if the Partnership exercises such right to repurchase or upon the occurrence of the event causing forfeiture in accordance with the applicable LTIP Agreement, then the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the applicable LTIP Agreement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions payable to holders of such LTIP Units as of a record date prior to the effective date of the forfeiture. Except as otherwise provided in the Agreement (including without limitation Section 4(d) hereof) or any LTIP Agreement, in connection with the repurchase or forfeiture of any holders LTIP Units, the balance of such holders Capital Account that is attributable to such holders LTIP Units shall be reduced by the
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amount, if any, by which it exceeds the target balance contemplated by Section 4(c) hereof, calculated with respect to such holders remaining LTIP Units, if any.
4. | Allocations |
(a) General. Except as otherwise provided in the Agreement or the relevant LTIP Agreement, Holders of LTIP Units shall be allocated Net Income, Net Loss and depreciation and amortization expenses of the Partnership in amounts per LTIP Unit determined in the same manner as amounts allocated per Partnership Common Unit are determined; provided, however, that for any LTIP Unit that initially has a Sharing Percentage that is less than 100%, until the Catch-Up Year (if any) for such LTIP Unit, the amounts so allocated with respect to such LTIP Unit pursuant to Section 6.2A(3) or Section 6.2B of the Agreement shall be equal to the product of such Sharing Percentage and the amount that would otherwise be allocable with respect to such LTIP Unit pursuant to this Section 4(a). The allocations provided by the preceding sentence shall be subject to Section 6.3B of the Agreement and any special allocations required by Section 4(b) or Section 4(c) hereof. The General Partner is authorized in its discretion to delay or accelerate the participation of the LTIP Units in allocations of Net Income, Net Loss and depreciation and amortization expenses of the Partnership under this Section 4(a), or to adjust the allocations made under this Section 4(a), so that the ratio of (i) the total amount of Net Income, Net Loss and depreciation and amortization expenses of the Partnership allocated with respect to each LTIP Unit in any taxable year, to (ii) the total amount distributed with respect to that LTIP Unit for such taxable year, is more nearly equal to the ratio of (i) the Net Income, Net Loss and depreciation and amortization expenses of the Partnership allocated with respect to the Partnership Common Units for such taxable year, to (ii) the amounts distributed with respect to the Partnership Common Units for such taxable year.
(b) Special Allocations with Respect to LTIP Units in a Catch-Up Year. In the Catch-Up Year (if any) for any LTIP Unit that initially has a Sharing Percentage that is less than 100%, (i) Net Income, Net Loss and depreciation and amortization expenses of the Partnership allocable under Article 6 of the Agreement to holders of Partnership Common Units and LTIP Units not subject to this Section 4(b) shall be recomputed after giving effect to the special allocations with respect to such LTIP Unit under clause (ii) of this Section 4(b), and (ii) the holder of such LTIP Unit shall be specially allocated an amount of Net Income, Net Loss and depreciation and amortization expenses of the Partnership equal to the excess of (x) the respective cumulative amounts that would have been allocated with respect to such LTIP Unit had such LTIP Unit been a Partnership Common Unit during the period from the date of issuance of such LTIP Unit through the end of the Fiscal Year immediately prior to the Catch-Up Year, over (y) the respective cumulative amounts actually allocated with respect to such LTIP Unit during such period. Such special allocation shall be in addition to any amounts allocated to the holder of such LTIP Unit pursuant to Section 4(a).
(c) Special Allocations of Liquidating Gains with Respect to LTIP Units. If Liquidating Gains are allocated under this Section 4(c) or losses are allocated under this Section 4(c), Net Income, Net Loss and depreciation and amortization expenses of the Partnership allocable under Article 6 of the Agreement to holders of Partnership Common Units and LTIP Units not subject to this Section 4(c) shall be recomputed without regard to the items so allocated. After giving effect to the special allocations set forth in Section 6.3.B of
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the Agreement and Section 4(d) hereof, and notwithstanding the provisions of Section 6.2 of the Agreement, any Liquidating Gains shall first be allocated to the holders of Eligible Units until the Economic Capital Account Balance of each such holder, to the extent attributable to such holders ownership of Eligible Units, is equal to (i) the REIT Share Economic Target, multiplied by (ii) the number of such holders Eligible Units, it being understood that Liquidating Gains will be so allocated only to the extent each such Eligible Unit is eligible to be allocated Liquidating Gains; provided that no Liquidating Gains shall be allocated under this Section 4(c) to any LTIP Unit while it is an Undetermined LTIP Unit; provided, further, that (x) any loss in connection with an actual or hypothetical sale (directly or indirectly) of a Partnership asset for which gain had previously been allocated to an Undetermined LTIP Unit shall first be allocated to such Undetermined LTIP Units (to the extent such LTIP Units remain Undetermined LTIP Units at the time of such sale) up to the amount of gain previously allocated to such Undetermined LTIP Unit pursuant to this Section 4(c) with respect to such asset and (y) for 2020, additional special allocations shall be made if necessary such that no net taxable income or gain is allocated to Undetermined LTIP Units in excess of distributions made with respect to Undetermined LTIPs during 2020 pursuant to Section 5(a). Except as otherwise provided in any LTIP Agreement, any such allocations shall be made among the holders of Eligible Units in proportion to the amounts eligible to be allocated to each under this Section 4(c). The parties agree that the intent of this Section 4(c) is to make the Capital Account balances of the holders of LTIP Units, to the extent attributable to their LTIP Units, economically equivalent (on a per-unit basis) to the Market Value of a REIT Share on the date as of which such special allocation pursuant to this Section 4(c) is being made, multiplied by the Conversion Factor, but only to the extent the Partnership has recognized cumulative net gains with respect to its assets since the issuance of the relevant LTIP Unit. The allocations set forth in this Section 4(c) shall be taken into account for determining the Capital Account of each Partner, including for purposes of Section 6.3.C of the Agreement.
(d) Forfeiture Allocations. Upon a forfeiture of any Unvested LTIP Units by any Partner, gross items of income, gain, loss or deduction shall be allocated to such Partner if and to the extent required by final Regulations promulgated after January 31, 2017 to ensure that allocations made with respect to all unvested Partnership Interests are recognized under Code Section 704(b).
5. | Distributions. |
(a) Operating Distributions. Except as otherwise provided in the Agreement or the relevant LTIP Agreement, holders of LTIP Units shall be entitled to receive, if, when and as authorized by the General Partner out of funds or other property legally available for the payment of distributions, regular, special, extraordinary or other distributions (other than distributions upon or pursuant to the liquidation of the Partnership) which may be made from time to time, in an amount per LTIP Unit equal to the amount of any such distributions that would have been payable to such holders if the LTIP Units had been Partnership Common Units (if applicable, assuming such LTIP Units were held for the entire period to which such distributions relate); provided, that if any LTIP Unit has a Sharing Percentage then in effect that is less than 100%, the holder of such LTIP Unit will only be entitled to receive such distributions in an amount equal to the product of the Sharing Percentage for such LTIP Unit and the amount
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that would otherwise be distributable with respect to such LTIP Unit pursuant to this Section 5(a).
(b) Liquidating Distributions. Each holder of LTIP Units shall also be entitled to receive, if, when and as authorized by the General Partner out of funds or other property legally available for the payment of distributions, distributions upon liquidation of the Partnership in an amount equal to the positive balance of such holders Capital Account as of the date of liquidation (after taking into account any allocations pursuant to the liquidation) to the extent attributable to the ownership of such LTIP Units as set forth in Section 13.2 of the Agreement.
(c) Distributions Generally. Distributions on the LTIP Units, if authorized, shall be payable on such dates and in such manner as may be authorized by the General Partner. Absent a contrary determination by the General Partner, the payment and record dates for distributions on LTIP Units shall be the same as the payment and record dates for the corresponding distribution on the Partnership Common Units. A holder of LTIP Units will only be entitled to distributions with respect to an LTIP Unit as set forth in this Exhibit P and, in making distributions pursuant to Section 5.1 of the Agreement, the General Partner of the Partnership shall take into account the provisions of this Section 5.
6. | Redemption. |
Holders of LTIP Units shall not be entitled to the Redemption right provided for in Section 8.6 of the Agreement, unless, until and to the extent such LTIP Units have been converted into Partnership Common Units.
7. | Conversion to Partnership Common Units. |
(a) A holder of LTIP Units that is a Qualifying Party shall have the right (the Conversion Right), at such holders option, at any time to convert all or a portion of such holders Vested LTIP Units into Partnership Common Units, taking into account all adjustments (if any) made pursuant to Section 8 hereof; provided, however, that a Qualifying Party may not exercise the Conversion Right for less than one thousand (1,000) Vested LTIP Units or, if such Qualifying Party holds less than one thousand (1,000) Vested LTIP Units, all of the Vested LTIP Units held by such Qualifying Party that are not subject to the limitation on conversion under Section 7(b) hereof. Qualifying Parties shall not have the right to convert Unvested LTIP Units into Partnership Common Units until they become Vested LTIP Units; provided, however, that when a Qualifying Party is notified of the expected occurrence of an event that will cause his or her Unvested LTIP Units to become Vested LTIP Units, such Qualifying Party may give the Partnership a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the Qualifying Party, shall be accepted by the Partnership subject to such condition. In all cases, the conversion of any LTIP Units into Partnership Common Units shall be subject to the conditions and procedures set forth in this Section 7.
(b) A Qualifying Party may convert Vested LTIP Units into an equal number of Partnership Common Units, giving effect to all adjustments (if any) made pursuant to
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Section 8 hereof; provided, however, that in no event may a Qualifying Party convert a number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such Qualifying Party that is attributable to such Qualifying Partys ownership of LTIP Units, divided by (y) the REIT Share Economic Target, in each case, determined as of a date on which satisfaction of the Redemption Threshold is being determined (the Capital Account Limitation). In order to exercise the Conversion Right, a Qualifying Party shall deliver a Conversion Notice to the Partnership not less than three (3) nor more than ten (10) days prior to the date of conversion (the Conversion Date) specified in such Conversion Notice; provided, however, that if the General Partner has not given to the Qualifying Party notice of a proposed or upcoming Transaction at least thirty (30) days prior to the effective date of such Transaction, then the Qualifying Party shall have the right to deliver a Conversion Notice until the earlier of (x) the tenth (10th) day after such notice from the General Partner of a Transaction or (y) the third (3rd) Business Day immediately preceding the effective date of such Transaction. A Conversion Notice shall be provided in the manner provided in Section 15.1 of the Agreement. Each Qualifying Party seeking to convert Vested LTIP Units covenants and agrees with the Partnership that all Vested LTIP Units to be converted pursuant to this Section 7 shall be free and clear of all liens. For purposes of the definition of Twelve-Month Period in the Agreement, any holder of LTIP Units that have been converted to Partnership Common Units shall be deemed to have acquired such Partnership Common Units when such LTIP Units were acquired. A holder of LTIP Units that is a Qualifying Party may deliver a Notice of Redemption pursuant to Section 8.6 of the Agreement relating to the Partnership Common Units to be received upon conversion of LTIP Units in advance of the Conversion Date; provided, however, that the Redemption of such Partnership Common Units shall not take place until on or after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to enable a Qualifying Party that satisfies the Twelve-Month Period to effect a Redemption of the Partnership Common Units received upon conversion of Vested LTIP Units simultaneously with such conversion, with the further consequence that, if the Previous General Partner elects to assume the Partnerships redemption obligation with respect to such Partnership Common Units under Section 8.6 of the Agreement by delivering to such Qualifying Party REIT Shares rather than cash, then such Qualifying Party can receive such REIT Shares simultaneously with the conversion of such Vested LTIP Units into Partnership Common Units. The General Partner shall cooperate with a Qualifying Party to coordinate the timing of the different events described in the foregoing sentence.
(c) The Partnership, at any time at the election of the General Partner, may cause any number of Vested LTIP Units to be converted (a Forced Conversion) into an equal number of Partnership Common Units, giving effect to all adjustments (if any) made pursuant to Section 8 hereof; provided, however, that the Partnership may not cause a Forced Conversion of any LTIP Units that would not at the time be eligible for conversion at the option of the holder thereof pursuant to Section 7(b) hereof. In order to exercise its right of Forced Conversion, the Partnership shall deliver a written notice of such Forced Conversion (a Forced Conversion Notice) to the applicable holder of LTIP Units specifying the number of LTIP Units subject to the Forced Conversion, which notice shall be given not less than ten (10) nor more than sixty (60) days prior to the Conversion Date specified in such notice. A Forced Conversion Notice shall be provided in the manner provided in Section 15.1 of the Agreement.
(d) A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice, or the Partnership has given a Forced Conversion Notice, shall occur
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automatically after the close of business on the applicable Conversion Date without any action on the part of such holder of LTIP Units, as of which time such holder of LTIP Units shall be credited on the books and records of the Partnership as of the opening of business on the next day with the number of Partnership Common Units into which such LTIP Units were converted. After the conversion of LTIP Units as aforesaid, the Partnership shall deliver to such holder of LTIP Units, upon his or her written request, a certificate of the General Partner certifying the number of Partnership Common Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 7 and such Limited Partner shall be bound by the exercise of such rights by the Assignee.
(e) For purposes of making future allocations under Section 4(c) hereof and applying the Capital Account Limitation, if any LTIP Units are converted into Partnership Common Units, the portion of the Economic Capital Account Balance of the holder of such LTIP Units that is treated as attributable to such holders LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the REIT Share Economic Target, determined as of the relevant Conversion Date.
(f) If the Partnership or the Previous General Partner shall be a party to any transaction (including without limitation a merger, consolidation, statutory exchange, sale of all or substantially all of the Partnerships assets or other business combination or reorganization, but excluding any Adjustment Event, in each case, as a result of which Partnership Common Units shall be exchanged for or converted into the right, or the holders shall otherwise be entitled, to receive cash, securities or other property or any combination thereof (each of the foregoing being referred to herein as a Transaction)), then the General Partner shall, immediately prior to the Transaction, exercise its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Transaction or that would occur in connection with the Transaction if the assets of the Partnership were sold at the Transaction price or the portion thereof attributable to the Partnership, as determined by the General Partner in good faith, or if applicable, at a value for the Partnership assets determined by the General Partner in good faith using the value attributed to the Partnership Common Units in the context of the Transaction (in which case the Conversion Date shall be the effective date of the Transaction and the conversion shall occur immediately prior to the effectiveness of the Transaction). In anticipation of such Forced Conversion and the consummation of the Transaction, the Partnership shall use commercially reasonable efforts to cause each holder of LTIP Units to be afforded the right to receive in connection with such Transaction in consideration for the Partnership Common Units into which his or her LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Transaction by a holder of the same number of Partnership Common Units, assuming such holder is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a Constituent Person), or an affiliate of a Constituent Person. In the event that holders of Partnership Common Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Transaction, prior to such Transaction, the General Partner shall give prompt written notice to each holder of LTIP Units of such opportunity, and shall use commercially reasonable efforts to afford each holder of LTIP Units
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the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Partnership Common Units in connection with such Transaction. If a holder of LTIP Units fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held by him or her (or by any of his or her transferees) the same kind and amount of consideration that a holder of Partnership Common Units would receive if such holder of Partnership Common Units failed to make such an election. Subject to the rights of the Partnership and the General Partner under any LTIP Agreement, the Partnership shall use commercially reasonable efforts to cause the terms of any Transaction to be consistent with the provisions of this Section 7(f) and to enter into an agreement with the successor or acquiring entity, as the case may be, for the benefit of any holder of LTIP Units that will not be converted into Partnership Common Units in connection with the Transaction that will (i) contain provisions enabling the Qualifying Parties that remain outstanding after such Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the Partnership Common Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in the Agreement, including this Exhibit P, for the benefit of the holder of LTIP Units.
(g) No conversion of LTIP Units into Partnership Common Units may be made by a Person if, based on the advice of the Partnerships counsel or accounting firm, the Partnership believes there is a material risk that such conversion could (i) result in the Partnerships being treated as an association taxable as a corporation, (ii) adversely affect the ability of the Previous General Partner to continue to qualify as a REIT or subject the Previous General Partner to any additional taxes under Section 857 or Section 4981 of the Code, or (iii) be effectuated through an established securities market or a secondary market (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code or cause the Partnership to fail to qualify for a safe harbor from such treatment which the Partnership desires to preserve.
8. | Adjustments. |
The Partnership shall maintain at all times a one-to-one correspondence between LTIP Units and Partnership Common Units for conversion, distributions, allocations and other purposes, including without limitation complying with the following procedures; provided, that the foregoing is not intended to alter (a) differences as a result of a Sharing Percentage that is less than 100%, (b) the special allocations pursuant to Section 4 hereof, or (c) differences between distributions to be made with respect to LTIP Units and Partnership Common Units pursuant to Section 13.2 of the Agreement and Section 5(b) hereof in the event that the Capital Accounts attributable to the LTIP Units are less than those attributable to Partnership Common Units due to insufficient special allocations pursuant to Section 4(c) hereof or related provisions. If an Adjustment Event (as defined below) occurs, then the General Partner shall take any action reasonably necessary, including any amendment to the Agreement or update Exhibit A to the Agreement adjusting the number of outstanding LTIP Units or subdividing or combining outstanding LTIP Units, to maintain a one-for-one conversion and economic equivalence ratio between Partnership Common Units and LTIP Units. The following shall be Adjustment Events: (i) the Partnership makes a distribution on all outstanding Partnership Common Units in Partnership Units, (ii) the Partnership subdivides the outstanding Partnership Common Units into a greater number of units or combines the outstanding Partnership Common Units into a smaller
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number of units, or (iii) the Partnership issues any Partnership Units in exchange for its outstanding Partnership Common Units by way of a reclassification or recapitalization of its Partnership Common Units. If more than one Adjustment Event occurs, any adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Partnership Units in a financing, reorganization, acquisition or other similar business transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan, or (z) the issuance of any Partnership Units to the General Partner in respect of a capital contribution to the Partnership. If the Partnership takes an action affecting the Partnership Common Units other than actions specifically described above as Adjustment Events, and in the opinion of the General Partner such action would require an action to maintain the one-to-one correspondence described above, the General Partner shall have the right to take such action, to the extent permitted by law, the Plan and by any other applicable Equity Plan or other compensatory arrangement or incentive program pursuant to which LTIP Units are issued, in such manner and at such time as the General Partner, in its sole discretion, may determine to be reasonably appropriate under the circumstances. If an amendment is made to the Agreement adjusting the number of outstanding LTIP Units as herein provided, the Partnership shall promptly file in the books and records of the Partnership an officers certificate 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 the filing of such certificate, the Partnership shall mail a notice to each holder of LTIP Units setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment. Any adjustment to the number of outstanding LTIP Units pursuant to this Section 8 shall be binding on the Partnership and every Limited Partner.
9. | Status of Reacquired Units. |
All LTIP Units that have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding.
10. | General. |
The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent redemption, or any other event having an effect on the ownership of, the LTIP Units. Unless the General Partner determines otherwise, LTIP Units shall not be certificated.
11. | Voting Rights. |
Limited Partners holding LTIP Units shall have the same voting rights as Limited Partners holding Partnership Common Units, with the LTIP Units voting together as a single class with the Partnership Common Units and having one vote per LTIP Unit, and holders of LTIP Units shall not be entitled to approve, vote on or consent to any other matter.
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12. | Restrictions on Transfer. |
Subject to the terms of any Vesting Agreement, LTIP Units are subject to the same restrictions on transfer, and the holders of LTIP Units shall be entitled to the same rights of transfer, as are applicable to Partnership Common Units as set forth in the Agreement.
13. | Section 83 Safe Harbor. |
Each Partner authorizes the General Partner to elect to apply the safe harbor (the Section 83 Safe Harbor) set forth in proposed Regulations Section 1.83-3(l) and proposed Internal Revenue Service Revenue Procedure published in Notice 2005-43 (together, the Proposed Section 83 Safe Harbor Regulation) (under which the fair market value of a Partnership Interest that is Transferred in connection with the performance of services is treated as being equal to the liquidation value of the interest), or in similar Regulations or guidance, if such Proposed Section 83 Safe Harbor Regulation or similar Regulations are promulgated as final or temporary Regulations. If the General Partner determines that the Partnership should make such election, the General Partner is hereby authorized to amend the Agreement without the consent of any other Partner to provide that (i) the Partnership is authorized and directed to elect the Section 83 Safe Harbor, (ii) the Partnership and each of its Partners (including any Person to whom a Partnership Interest, including an LTIP Unit, is Transferred in connection with the performance of services) will comply with all requirements of the Section 83 Safe Harbor with respect to all Partnership Interests Transferred in connection with the performance of services while such election remains in effect, and (iii) the Partnership and each of its Partners will take all actions necessary, including providing the Partnership with any required information, to permit the Partnership to comply with the requirements set forth or referred to in the applicable Regulations for such election to be effective until such time (if any) as the General Partner determines, in its sole discretion, that the Partnership should terminate such election. The General Partner is further authorized to amend the Agreement to modify Article 6 of the Agreement to the extent the General Partner determines in its discretion that such modification is necessary or desirable as a result of the issuance of any applicable law, Regulations, notice or ruling relating to the tax treatment of the transfer of Partnership Interests in connection with the performance of services. Notwithstanding anything to the contrary in the Agreement, each Partner expressly confirms that it will be legally bound by any such amendment.
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ANNEX I
TO EXHIBIT P
NOTICE OF CONVERSION OF LTIP UNITS
To: | AIMCO Properties, L.P. |
c/o AIMCO-GP, Inc.
4582 South Ulster Street, Suite 1700
Denver, Colorado 80237
Attention: Investor Relations
The undersigned holder of LTIP Units hereby irrevocably elects to convert the number of LTIP Units in AIMCO Properties, L.P. (the Partnership) set forth below into Partnership Common Units in accordance with the terms of the Sixth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 14, 2020, as it may be amended and supplemented from time to time (the Agreement). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Partnership Unit Designation of the LTIP Units. The undersigned hereby represents, warrants, and agrees that: (i) the undersigned holder of LTIP Units has, and at the Conversion Date will have, good, marketable and unencumbered title to such LTIP Units, free and clear of the rights or interests of any other person or entity; (ii) the undersigned holder of LTIP Units has, and at the Conversion Date will have, the full right, power and authority to convert such LTIP Units as provided herein; and (iii) the undersigned holder of LTIP Units has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such conversion.
Name of Holder: _____________
Dated: ____________
Number of LTIP Units to be converted: _________
Conversion Date:
(Signature of Holder) | ||
(Street Address) | ||
(City) (State) (Zip Code) |
Medallion Guarantee:
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
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CREDIT UNIONS), WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.
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EXHIBIT Q
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS ELEVEN PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. | Number of Units and Designation. |
A class of Partnership Preferred Units is hereby designated as Class Eleven Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be twenty (20).
2. | Definitions. |
Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Agreement shall mean the Agreement of Limited Partnership of the Partnership, as amended, supplemented or restated from time to time.
Affiliate of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. For purposes of this definition, control, as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
Annual Distribution Rate shall have the meaning set forth in Section 4 of this Partnership Unit Designation.
Business Day shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.
Change of Control shall mean the occurrence of one or more of the following events: (a) any sale, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Partnership and its subsidiaries, taken as a whole, to any person or group (as such terms are defined in Sections 13(d) and 14(d)(2) of the Exchange Act), (other than to the Partnership or its subsidiaries); (b) a person or group (as such terms are defined in Sections 13(d) and 14(d)(2) of the Exchange Act), becomes the ultimate beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of the Voting Units of the Partnership on a fully diluted basis; or (c) a change of control or similar event occurs under the terms of any other series of Partnership Units.
Notwithstanding the foregoing: (i) any holding company, all or substantially all of the assets of which are comprised of the Partnership or any 100% direct or indirect parent company
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of the Partnership, shall not itself be considered a person or group; (ii) the transfer of assets between or among the Partnerships subsidiaries and the Partnership shall not itself constitute a Change of Control; (iii) the term Change of Control shall not include a merger or consolidation of the Partnership with or the sale, assignment, conveyance, transfer or other disposition of all or substantially all of the Partnerships assets to, an Affiliate incorporated or organized solely for the purpose of reorganizing the Partnership in another jurisdiction and/or into another type or form or entity and/or for the sole purpose of forming or collapsing a holding company structure; (iv) a person or group shall not be deemed to have beneficial ownership of securities subject to a stock or asset purchase agreement, merger agreement or similar agreement (or voting or option or similar agreement related thereto) until the consummation of the transactions contemplated by such agreement; and (v) the Spin-Off and any transactions related thereto, including any and all restructuring steps undertaken in connection therewith, shall not constitute a Change of Control.
Class Eleven Partnership Preferred Unit shall have the meaning set forth in Section 1 of this Partnership Unit Designation.
Distribution Payment Date shall mean February 28, May 29, August 29, and November 29 of each year; provided, that if any Distribution Payment Date falls on any day other than a Business Day, the distribution payment payable on such Distribution Payment Date shall be paid on the Business Day immediately following such Distribution Payment Date and no interest shall accrue on such distribution from such date to such Distribution Payment Date.
Distribution Periods shall mean the Initial Distribution Period and each subsequent quarterly Distribution Period commencing on and including February 28, May 29, August 29, and November 29 of each year and ending on and including the day preceding the first day of the next succeeding Distribution Period, other than the Distribution Period during which any Class Eleven Partnership Preferred Units shall be redeemed pursuant to Section 7 of this Partnership Unit Designation, which shall end on and include the Redemption Date with respect to the Class Eleven Partnership Preferred Units being redeemed.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Initial Distribution Period shall mean the period commencing on and including the Issue Date and ending on and including February 28, 2021.
Issue Date shall mean December 14, 2020.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall mean one-hundred thousand dollars ($100,000) per Class Eleven Partnership Preferred Unit.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
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Person shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Record Date shall have the meaning set forth in Section 4(a) of this Partnership Unit Designation.
Redemption Date shall mean, in the case of any redemption of any Class Eleven Partnership Preferred Units, the date fixed for redemption of such units.
Redemption Price shall mean, with respect to Class Eleven Partnership Preferred Unit to be redeemed, 100% of the Liquidation Preference thereof, plus (except as provided in Section 7(c) of this Partnership Unit Designation) all accumulated, accrued and unpaid distributions thereon, if any, to, but excluding, the Redemption Date.
REIT shall mean a real estate investment trust, as defined in Section 856 of the Code.
Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
set apart for payment shall be deemed to include, without any action other than the following, the recording by the Partnership in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of distributions or other distribution by the General Partner, the allocation of funds to be so paid on any series or class of Partnership Units; provided, however, that if any funds for any class or series of Junior Partnership Units or any class or series of Parity Partnership Units are placed in a separate account of the Partnership or delivered to a disbursing, paying or other similar agent, then set apart for payment with respect to the Class Eleven Partnership Preferred Units shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.
Spin-Off shall mean the distribution by Apartment Investment and Management Company to the holders of Apartment Investment and Management Companys common stock on a pro rata basis of substantially all of the outstanding shares of the Previous General Partners common stock.
3. | Ranking. |
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Eleven Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Eleven Partnership Preferred Units (the partnership units being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Eleven Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or
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winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Eleven Partnership Preferred Units, if the holders of such class or series of partnership units and the Class Eleven Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accumulated, accrued and unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority of one over the other (the partnership units referred to in this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Eleven Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of partnership units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class Eleven Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units, and such class or series shall not, in either case, rank prior to the Class Eleven Partnership Preferred Units (the partnership units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. | Quarterly Cash Distributions. |
(a) The holders of Class Eleven Partnership Preferred Units shall be entitled to receive, if, when and as authorized and declared by the General Partner, out of funds legally available for that purpose, cash distributions on the Class Eleven Partnership Preferred Units in an amount per unit equal to $8,500 per annum (the Annual Distribution Rate) (equivalent to a rate of 8.5% per annum of the Liquidation Preference), and no more; provided that the Annual Distribution Rate shall increase to (1) $9,000 per annum (equivalent to a rate of 9.0% per annum of the Liquidation Preference) beginning at the start of the 5th year after the date hereof, (2) $9,500 per annum (equivalent to a rate of 9.5% per annum of the Liquidation Preference) beginning at the start of the 6th year after the date hereof , (3) $10,000 per annum (equivalent to a rate of 10.0% per annum of the Liquidation Preference) beginning at the start of the 7th year after the date hereof, and (4) beginning at the start of the 7th year after the date hereof, and continuing at the start of each year after the date hereof thereafter through the start of the 27th year after the date hereof, an amount equal to the per annum amount in the prior year plus $250 (equivalent to an annual increase of 25 bps) (e.g., at the start of the 8th year after the date hereof the Annual Distribution Rate shall equal $10,250 per annum (equivalent to a rate of 10.25% per annum of the Liquidation Preference, and at the start of the 27th year after the date hereof, the Annual Distribution Rate shall equal $15,000 (equivalent to a rate of 15% per annum of the Liquidation Preference) (and, for the avoidance of doubt, the Annual Distribution Rate shall remain $15,000 per annum thereafter))). Such distributions (i) shall accrue and be cumulative from and including the Issue Date, whether or not in any Distribution Period or Periods (x) the Partnership has earnings, (y) such distributions shall be authorized and declared or (z) there shall be funds of the Partnership legally available for the payment of such distributions, and (ii) shall be payable in cash quarterly, if, when and as authorized and declared by the General Partner, in arrears on each Distribution Payment Date, commencing on February 28, 2021. Each such distribution shall be payable in arrears to the holders of record of the Class Eleven Partnership
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Preferred Units, as they appear on the records of the Partnership at the close of business on February 15, May 15, August 15 or November 15 (each a Record Date), as the case may be, immediately preceding such Distribution Payment Date. Accumulated, accrued and unpaid distributions for any past Distribution Periods may be declared and paid at any time, without reference to any regular Distribution Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the General Partner.
(b) The amount of distributions payable per Class Eleven Partnership Preferred Unit for each full Distribution Period shall be computed by dividing the Annual Distribution Rate by four (4). The amount of distributions payable per Class Eleven Partnership Preferred Unit for the Initial Distribution Period, or any period shorter than a full Distribution Period, shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Class Eleven Partnership Preferred Units shall not be entitled to any distributions, whether payable in cash, property or stock, in excess of cumulative distributions, as herein provided, on the Class Eleven Partnership Preferred Units. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Class Eleven Partnership Preferred Units that may be in arrears.
(c) So long as any Class Eleven Partnership Preferred Units are outstanding, except as described in the immediately following sentence, no distributions shall be authorized and declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property shall be authorized and declared or made, directly or indirectly, by the Partnership with respect to any class or series of Parity Partnership Units for any period unless distributions equal to the full amount of accumulated, accrued and unpaid distributions have been or contemporaneously are authorized and declared and paid, or authorized and declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, on the Class Eleven Partnership Preferred Units for all Distribution Periods terminating on or prior to the date such distribution or distribution is authorized and declared, paid, set apart for payment or made, as the case may be, with respect to such class or series of Parity Partnership Units. When distributions are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all distributions authorized and declared upon the Class Eleven Partnership Preferred Units and all distributions authorized and declared upon any other class or series of Parity Partnership Units shall be authorized and declared ratably in proportion to the respective amounts of distributions accumulated, accrued and unpaid on the Class Eleven Partnership Preferred Units and accumulated, accrued and unpaid on such Parity Partnership Units.
(d) So long as any Class Eleven Partnership Preferred Units are outstanding, no distributions (other than distributions or distributions paid solely in Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units) shall be authorized and declared or paid or set apart for payment by the Partnership and no other distribution of cash or other property shall be authorized and declared or made, directly or indirectly, by the Partnership with respect to any Junior Partnership Units, nor shall any Junior Partnership Units be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Partnership Common Units made for purposes of an employee incentive or benefit plan of the Previous General Partner or any subsidiary or as permitted under
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Article IV of the Articles of Amendment and Restatement for the Previous General Partner for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any units) directly or indirectly by the Partnership (except by conversion into or exchange for Junior Partnership Units, or options, warrants or rights to subscribe for or purchase Junior Partnership Units), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of Junior Partnership Units in respect thereof, directly or indirectly, by the Partnership unless, in each case, distributions equal to the full amount of all accumulated, accrued and unpaid distributions on all outstanding Class Eleven Partnership Preferred Units and any other Parity Partnership Units shall have been authorized and declared and paid, or such distributions have been authorized and declared and a sum sufficient for the payment thereof has been set apart for such payment, on all outstanding Class Eleven Partnership Preferred Units and any other Parity Partnership Units for all past dividend periods with respect to the Class Eleven Partnership Preferred Units and all past Distribution Periods with respect to such Parity Partnership Units ending on or prior to the date such distribution or distribution is authorized and declared, paid, set apart for payment or made with respect to such Junior Partnership Units, or the date such Junior Partnership Units are redeemed, purchased or otherwise acquired or monies paid to or made available for any sinking fund for such redemption, or the date any such cash or other property is paid or distributed to or for the benefit of any holders of Junior Partnership Units in respect thereof, as the case may be.
Notwithstanding the provisions of this Section 4, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution or distribution on any Parity Partnership Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Partnership Units, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Previous General Partner as a REIT under Section 856 of the Code.
5. | Liquidation Preference. |
(a) In the event of any liquidation, dissolution or winding up of the Partnership, whether voluntary or involuntary, before any payment or distribution by the Partnership (whether of capital, surplus or otherwise) shall be made to or set apart for the holders of any Junior Partnership Units, the holders of Class Eleven Partnership Preferred Units shall be entitled to receive, for each Class Eleven Partnership Preferred Unit, the Liquidation Preference thereof, plus all accumulated, accrued and unpaid distributions thereon, if any, to, but excluding, the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class Eleven Partnership Preferred Units have been paid the Liquidation Preference in full, plus all accumulated, accrued and unpaid distributions thereon, if any, to, but excluding, the date of final distribution to such holders, no payment will be made to any holder of Junior Partnership Units upon the liquidation, dissolution or winding up of the Partnership. If, upon any liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, legally available for distribution among the holders of Class Eleven Partnership Preferred Units shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other units of any class or series of Parity Partnership Units, then such assets, or the proceeds thereof, shall be distributed among the holders of Class Eleven Partnership Preferred Units and any such other Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Class Eleven
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Partnership Preferred Units and any such other Parity Partnership Units if all amounts payable thereon were paid in full. For the purposes of this Section 5, (i) a consolidation or merger of the Partnership with one or more entities, (ii) a sale or transfer of all or substantially all of the Partnerships assets, and (iii) a statutory unit exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Partnership.
(b) Upon any liquidation, dissolution or winding up of the Partnership, after payment shall have been made in full to the holders of Class Eleven Partnership Preferred Units and any Parity Partnership Units, as provided in Section 5(a) any series or class or classes of Junior Partnership Units shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class Eleven Partnership Preferred Units and any Parity Partnership Units shall not be entitled to share therein.
(c) In determining whether a distribution (other than upon voluntary or involuntary liquidation, dissolution or winding up of the Partnership) by distribution, redemption or other acquisition of units of the Partnership or otherwise is permitted under the Act, no effect shall be given to amounts that would be needed, if the Partnership were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of the Partnership Units whose preferential rights upon dissolution are superior or prior to those receiving the distribution.
6. | Redemption. |
(a) Optional Redemption. The Partnership may, at its option, redeem Class Eleven Partnership Preferred Units at any time on or after the fifth anniversary of the Issue Date (but not prior to such date), in whole, or from time to time in part, at a redemption price payable in cash equal to the Redemption Price applicable thereto.
(b) Mandatory Redemption. Substantially concurrently with the occurrence of a Change of Control, the Partnership shall redeem all outstanding Class Eleven Partnership Preferred Units at a redemption price payable in cash equal to the Redemption Price.
(c) Anything herein to the contrary notwithstanding, and except as otherwise required by law, the Persons who are holders of record of Class Eleven Partnership Preferred Units at the close of business on a Record Date will be entitled to receive the distribution payable on the corresponding Distribution Payment Date notwithstanding the redemption of those units after such Record Date and on or prior to such Distribution Payment Date or the default by the Partnership in the payment of the distribution due on that Distribution Payment Date, in which case the Redemption Price payable upon redemption of such Class Eleven Partnership Preferred Units will not include such distribution, and the full amount of the distribution payable for the applicable Distribution Period shall instead be paid on such Distribution Payment Date to the holders of record at the close of business on such Record Date as aforesaid.
(d) The Redemption Date shall be selected by the Partnership, and shall be specified in a notice of redemption which will be given not less than three (3) days nor more than sixty (60) days prior to the Redemption Date, to the holders of record of the Class Eleven Partnership Preferred Units to be redeemed at their addresses as they appear on the records of the
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Partnership. No failure to give such notice or any defect therein or in the giving thereof shall affect the validity of the proceedings for the redemption of any Class Eleven Partnership Preferred Units except as to, and to the extent adversely affecting, any such holder to whom notice was defective or not given. Any notice given in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed or otherwise sent or given whether or not the holder receives the notice. Each notice shall state: (i) the Redemption Date; (ii) the number of Class Eleven Partnership Preferred Units to be redeemed; (iii) the Redemption Price and whether or not accumulated, accrued and unpaid distributions will be payable as part of the Redemption Price, or payable on the next Distribution Payment Date to the Persons who were holders of record at the close of business on the relevant Record Date; (iv) the procedures that the holders of Class Eleven Partnership Preferred Units must follow to receive payment of the Redemption Price; (v) that distributions on the units to be redeemed will cease to accumulate on such Redemption Date unless the Partnership fails to make available the funds necessary for such redemption; and (vi) whether such redemption is being made pursuant to Section 6(a) or Section 6(b). If fewer than all of the Class Eleven Partnership Preferred Units held by any holder are to be redeemed, the notice given to such holder shall also specify the number of Class Eleven Partnership Preferred Units to be redeemed from such holder.
(e) If notice of redemption of any Class Eleven Partnership Preferred Units has been given (unless the Partnership fails to make available the funds necessary for such redemption), then from and after the Redemption Date, distributions will cease to accumulate on such Class Eleven Partnership Preferred Units, such Class Eleven Partnership Preferred Units shall no longer be deemed outstanding and all rights of the holders of such units will terminate, except the right to receive the Redemption Price payable upon redemption (and any distribution payable pursuant to Section 6(c)). The Partnerships obligation to make available the funds necessary to effect a redemption in accordance with the preceding sentence shall be deemed fulfilled if, on or before the applicable Redemption Date, the Partnership shall irrevocably deposit in trust with a bank or trust company (which may not be an Affiliate of the Partnership) that has, or is an Affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption plus, if such Redemption Date occurs after any Record Date and on or prior to the related Distribution Payment Date, such amount of cash as is necessary to pay the distribution payable on such Distribution Payment Date in respect of such Class Eleven Partnership Preferred Units called for redemption, with irrevocable instructions that such cash be applied to the redemption of the Class Eleven Partnership Preferred Units so called for redemption and, if applicable, the payment of such distribution. No interest shall accrue for the benefit of the holders of Class Eleven Partnership Preferred Units to be redeemed on any cash so set aside by the Partnership. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Partnership, after which reversion the holders of Class Eleven Partnership Preferred Units so called for redemption shall look only to the general funds of the Partnership for the payment of such cash. In the event that any Redemption Date shall not be a Business Day, then payment of the Redemption Price payable upon redemption need not be made on such Redemption Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Redemption Date and no interest, additional distributions or other sums shall accrue on the amount so payable for the period from and after such Redemption Date to such next succeeding Business Day. Solely in respect of any optional redemption pursuant to clause (a) above, if less than all of the outstanding Class Eleven
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Partnership Preferred Units are to be redeemed, the Class Eleven Partnership Preferred Units to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional units) or by lot.
(f) Upon delivery of any Class Eleven Partnership Preferred Units to be so redeemed, in accordance with the notice of redemption and the procedures of the depositary, such Class Eleven Partnership Preferred Units shall be redeemed by the Partnership at the Redemption Price.
(g) Unless full cumulative distributions for all past Distribution Periods on all outstanding Class Eleven Partnership Preferred Units and for all past Distribution Periods on any other series or class of Parity Partnership Units have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment, (i) no Class Eleven Partnership Preferred Units or any Parity Partnership Units shall be redeemed unless all outstanding Class Eleven Partnership Preferred Units are simultaneously redeemed, and (ii) the Partnership shall not purchase or otherwise acquire, directly or indirectly, any Class Eleven Partnership Preferred Units or any Parity Partnership Units (except by conversion into or exchange for Junior Partnership Units); provided, however, that the foregoing shall not prevent the purchase or acquisition by the Partnership of Class Eleven Partnership Preferred Units or any Parity Partnership Units pursuant to Section 11 of this Partnership Unit Designation in order to preserve the qualification of the Previous General Partner as a REIT for federal and/or state income tax purposes or pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding Class Eleven Partnership Preferred Units. Subject to the limitations set forth in this Partnership Unit Designation (including these terms of the Class Eleven Partnership Preferred Units), the Partnership shall be entitled at any time and from time to time to repurchase Class Eleven Partnership Preferred Units in open-market transactions, by tender or by private agreement, in each case, as duly authorized by the General Partner and effected in compliance with applicable laws.
7. | Conversion. |
(a) The Class Eleven Partnership Preferred Units are not convertible into or exchangeable for any other property or securities of the Partnership.
8. | Status of Reacquired Units. |
All Class Eleven Partnership Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled and no longer outstanding, but may be issued by the General Partner from time to time in its discretion.
9. | Allocations of Income and Loss. |
Subject to the terms of Section 5 hereof, for each taxable year, (i) each holder of Preferred Units will be allocated, to the extent possible, net income of the Partnership in an amount equal to the distributions made on such holders Preferred Units during such taxable year, and (ii) each holder of Preferred Units will be allocated its pro rata share, based on the portion of outstanding Preferred Units held by it, of any net loss of the Partnership that is not allocated to holders of Partnership Common Units or other interests in the Partnership.
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10. | Voting Rights. |
(a) Holders of the Class Eleven Partnership Preferred Units shall not have any voting rights either general or special, except as set forth in Section 10(b) below.
(b) So long as any Class Eleven Partnership Preferred Units are outstanding, in addition to any other vote or consent of stockholders required by law or by the Agreement, the affirmative vote of at least 66-2/3% of the votes entitled to be cast by the holders of the Class Eleven Partnership Preferred Units voting as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) any amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, the Agreement, including this Preferred Unit Designation, whether by merger, consolidation or otherwise, that would materially and adversely affect the rights or preferences of the holders of the Class Eleven Partnership Preferred Units; provided, however, that (x) the amendment of the provisions of the Agreement so as to authorize or create, or to increase or decrease the authorized amount of, or issue any Junior Partnership Units, Class Eleven Partnership Preferred Units or any class of Parity Partnership Units, shall not be deemed to materially and adversely affect the rights or preferences of the holders of Class Eleven Partnership Preferred Units; and (y) with respect to any such amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, the Agreement, including this Preferred Unit Designation, whether by merger, consolidation or otherwise, so long as the Class Eleven Partnership Preferred Units remains outstanding with the terms thereof materially unchanged, taking into account that, upon the occurrence of such event, the Partnership may not be the surviving entity and such surviving entity may thereafter be the issuer of the Class Eleven Partnership Preferred Units, the occurrence of any such event shall not be deemed to materially and adversely affect the voting powers, rights, or preferences of the Class Eleven Partnership Preferred Units; or
(ii) the authorization, creation of, increase in the authorized amount of, or issuance of any class or series of Senior Partnership Units or any security convertible into any class or series of Senior Partnership Units (whether or not such class or series of Senior Partnership Units is currently authorized);
provided, however, that no such vote of the holders of Class Eleven Partnership Preferred Units shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such Senior Partnership Units or convertible or exchangeable security is to be made, as the case may be, provision is made for the redemption of all Class Eleven Partnership Preferred Units at the time outstanding.
For purposes of the foregoing provisions and all other voting rights under this Preferred Unit Designation, each Class Eleven Partnership Preferred Unit shall have one (1) vote per unit. Except as otherwise required by applicable law or as set forth herein or in the Agreement, the Class Eleven Partnership Preferred Units shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action.
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11. | Restrictions on Transfer. |
The Class Eleven Partnership Preferred Units constitutes Preferred Units, and Preferred Units constitutes the Partnership Units. Therefore, the Class Eleven Partnership Preferred Units, being Partnership Units, is governed by and issued subject to all the limitations, terms and conditions of the Agreement applicable to Partnership Units generally. The foregoing sentence shall not be construed to limit the applicability to the Class Eleven Partnership Preferred Units of any other term or provision of the Agreement.
12. | Maturity. |
The Class Eleven Partnership Preferred Units shall be perpetual unless redeemed or reacquired by the Partnership in accordance with this Preferred Unit Designation.
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EXHIBIT R
PARTNERSHIP UNIT DESIGNATION OF
THE CLASS TWELVE PARTNERSHIP PREFERRED UNITS OF
AIMCO PROPERTIES, L.P.
1. Number of Units and Designation. A class of Partnership Preferred Units is hereby designated as Class Twelve Partnership Preferred Units, and the number of Partnership Preferred Units constituting such class shall be two hundred and fifty (250).
2. Definitions. Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned thereto in the Agreement, as modified by this Partnership Unit Designation and the defined terms used herein. For purposes of this Partnership Unit Designation, the following terms shall have the respective meanings ascribed below:
Class Twelve Partnership Preferred Units shall have the meaning set forth in Section 1 of this Preferred Unit Designation.
Initial Issue Date shall have the meaning set forth in Section 4(a) of this Preferred Unit Designation.
Junior Partnership Units shall have the meaning set forth in Section 3(c) of this Partnership Unit Designation.
Liquidation Preference shall have the meaning set forth in Section 5(a) of this Preferred Unit Designation.
Parity Partnership Units shall have the meaning set forth in Section 3(b) of this Partnership Unit Designation.
Preferred Distribution Payment Date shall have the meaning set forth in Section 4(a) of this Preferred Unit Designation.
Preferred Distribution Period shall have the meaning set forth in Section 4(a) of this Preferred Unit Designation.
Preferred Distribution Record Date shall have the meaning set forth in Section 4(a) of this Preferred Unit Designation.
Redemption Date shall have the meaning set forth in Section 6(a) of this Preferred Unit Designation.
Redemption Premium shall have the meaning set forth in Section 6(a) of this Preferred Unit Designation.
Redemption Price shall have the meaning set forth in Section 6(a) of this Preferred Unit Designation.
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Senior Partnership Units shall have the meaning set forth in Section 3(a) of this Partnership Unit Designation.
3. Ranking.
Any class or series of Partnership Units of the Partnership shall be deemed to rank:
(a) prior or senior to the Class Twelve Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class Twelve Partnership Preferred Units (the partnership units being hereinafter referred to, collectively, as Senior Partnership Units);
(b) on a parity with the Class Twelve Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class Twelve Partnership Preferred Units, if the holders of such class or series of partnership units and the Class Twelve Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accumulated, accrued and unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority of one over the other (the partnership units referred to in this paragraph being hereinafter referred to, collectively, as Parity Partnership Units); and
(c) junior to the Class Twelve Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of partnership units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class Twelve Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units, and such class or series shall not, in either case, rank prior to the Class Twelve Partnership Preferred Units (the partnership units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as Junior Partnership Units).
4. Distributions.
(a) Each holder of the then outstanding Class Twelve Partnership Preferred Units shall be entitled to receive cumulative preferential cash distributions, when and as authorized by the General Partner, out of funds legally available for the payment of distributions, at the rate of 12% per annum of the total of (i) $1,000 per Class Twelve Partnership Preferred Unit plus (ii) any accumulated but unpaid distributions from past Preferred Distribution Payment Dates. Such distributions shall accumulate on a daily basis and be cumulative from the first date on which any Class Twelve Partnership Preferred Units are issued (the Initial Issue Date), and shall be payable semi-annually in arrears on June 30 and December 31 of each year (each, a Preferred Distribution Payment Date); provided, however, that if any Preferred Distribution Payment Date is not a
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business day, the Preferred Distribution Payment may be paid on the preceding business day or the following business day with the same force and effect as if paid on such Preferred Distribution Payment Date. Any distribution payable on the Class Twelve Partnership Preferred Units for any partial Preferred Distribution Period (as defined below) will be computed on the basis of a 360-day year consisting of twelve 30-day months. The term Preferred Distribution Period shall mean, with respect to the first Preferred Distribution Period, the period from and including the Initial Issue Date to and including the first Preferred Distribution Payment Date, and with respect to each subsequent Preferred Distribution Period, the period from but excluding a Preferred Distribution Payment Date to and including the next succeeding Preferred Distribution Payment Date or other date as of which accumulated distributions are to be calculated. Distributions shall be paid to holders of record of the Class Twelve Partnership Preferred Units as their names appear in the records of the Partnership at the close of business on the applicable record date, which shall be the 15th day of the calendar month in which the applicable Preferred Distribution Payment Date falls or on such other date designated by the General Partner of the Partnership for the payment of distributions that is not more than 30 nor less than 10 days prior to such Preferred Distribution Payment Date (each, a Preferred Distribution Record Date). Distributions in respect of any past Preferred Distribution Periods that are in arrears may be authorized and paid at any time to holders of record on the Preferred Distribution Record Date related to each such Preferred Distribution Period.
(b) No distributions on the Class Twelve Partnership Preferred Units shall be authorized by the General Partner of the Partnership or paid or set apart for payment by the Partnership at such time as the terms and provisions of any written agreement between the Partnership and any party that is not an affiliate of the Partnership, including any agreement relating to its indebtedness, prohibit such authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law. For purposes of this Partnership Unit Designation, affiliate shall mean any party that controls, is controlled by or is under common control with the Partnership.
(c) Notwithstanding the foregoing, distributions on the Class Twelve Partnership Preferred Units shall accumulate as of the Preferred Distribution Payment Date on which they first become payable whether or not the terms and provisions set forth in Section 4(b) hereof at any time prohibit the current payment of distributions, whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. Furthermore, distributions will be authorized and paid when due in all events to the fullest extent permitted by law and, if revaluation of the Partnership or its assets would permit payment of distributions which would otherwise be prohibited, then such revaluation shall be done.
(d) Unless full cumulative distributions on all outstanding Class Twelve Partnership Preferred Units have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof is set apart for payment for all past Preferred Distribution Periods (such amounts not to include, for the avoidance of doubt, any amounts accumulating during the current Preferred Distribution Period), no distributions (other than in Partnership Units ranking junior to the Class Twelve Partnership Preferred Units as to distributions and upon liquidation) shall be authorized or paid or set aside for payment nor shall any other
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distribution be authorized or made upon any Partnership Units ranking junior to the Class Twelve Partnership Preferred Units as to distributions or upon liquidation, nor shall any Partnership Units ranking junior to the Class Twelve Partnership Preferred Units as to distributions or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such units) by the Partnership (except by conversion into or exchange for other Partnership Units ranking junior to the Class Twelve Partnership Preferred Units as to distributions and upon liquidation). Any distribution payment made on the Class Twelve Partnership Preferred Units shall be first credited against the earliest accumulated but unpaid distribution due with respect to such units which remains payable.
(e) When distributions are not paid in full (or a sum sufficient for such full payment is not set apart) upon the Class Twelve Partnership Preferred Units, all distributions authorized and paid upon the Class Twelve Partnership Preferred Units shall be pro rata based on the number of Class Twelve Partnership Preferred Units then outstanding.
(f) Holders of the Class Twelve Partnership Preferred Units shall not be entitled to any distribution, whether payable in cash, property or securities, in excess of the full cumulative distributions on the Class Twelve Partnership Preferred Units as described above.
5. Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership, the holders of the Class Twelve Partnership Preferred Units then outstanding are entitled to receive out of the assets of the Partnership legally available for distribution to its members or equity holders however denominated a liquidation preference equal to the sum of the following (collectively, the Liquidation Preference): (i) $1,000 per Class Twelve Partnership Preferred Unit, (ii) all accumulated but unpaid distributions thereon through and including the date of payment, and (iii) if applicable, the Redemption Premium (as defined below) then in effect, before any distribution of assets is made to holders of any other class or series of Partnership Units that ranks junior to the Class Twelve Partnership Preferred Units as to liquidation rights.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the legally available assets of the Partnership are insufficient to pay the full amount of the Liquidation Preference on all outstanding Class Twelve Partnership Preferred Units, then the holders of the Class Twelve Partnership Preferred Units shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
(c) After payment of the full amount of the Liquidation Preference to which they are entitled, the holders of the Class Twelve Partnership Preferred Units will have no right or claim to any of the remaining assets of the Partnership.
(d) Upon the Partnerships provision of written notice as to the effective date of any such liquidation, dissolution or winding up of the Partnership, accompanied by a check or wire transfer of immediately available funds in the amount of the full Liquidation Preference to
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which each record holder of the Class Twelve Partnership Preferred Units is entitled, the Class Twelve Partnership Preferred Units shall no longer be deemed outstanding Partnership Units and all rights of the holders of the Class Twelve Partnership Preferred Units will terminate.
(e) The consolidation or merger of the Partnership with or into any other business enterprise or of any other business enterprise with or into the Partnership, or the sale, lease or conveyance of all or substantially all of the assets or business of the Partnership, shall not be deemed to constitute a liquidation, dissolution or winding up of the Partnership.
6. Redemption.
(a) Right of Optional Redemption. The Partnership, at its option, may redeem the Class Twelve Partnership Preferred Units, in whole or in part, at any time or from time to time, for cash at a redemption price (the Redemption Price) equal to $1,000 per Class Twelve Partnership Preferred Unit, plus all accumulated and unpaid distributions thereon to and including the date fixed for redemption (except as provided in Section 6(c) below), plus a redemption premium per Class Twelve Partnership Preferred Unit (each, a Redemption Premium) calculated as follows based on the date fixed for redemption (the Redemption Date):
Period |
Redemption Premium |
|||
Issuance date until and including December 31, 2022 |
$ | 50 | ||
Thereafter |
0 |
If less than all of the outstanding Class Twelve Partnership Preferred Units are to be redeemed, the Class Twelve Partnership Preferred Units to be redeemed shall be selected by any equitable method determined by the Partnership provided that such method does not result in fractional units.
(b) Limitations on Redemption. Unless full cumulative distributions on all of the Class Twelve Partnership Preferred Units have been or contemporaneously are authorized and paid or authorized and a sum sufficient for the payment thereof set apart for payment for all past Preferred Distribution Periods (such amounts not to include, for the avoidance of doubt, any amounts accumulating during the current Preferred Distribution Period), no Class Twelve Partnership Preferred Units shall be redeemed or otherwise acquired, directly or indirectly, by the Partnership unless all outstanding Class Twelve Partnership Preferred Units are simultaneously redeemed or acquired, and the Partnership shall not purchase or otherwise acquire, directly or indirectly, any of the Class Twelve Partnership Preferred Units (except by exchange for Partnership Units ranking junior to the Class Twelve Partnership Preferred Units as to distributions and upon liquidation); provided, however, that the foregoing shall not prevent the purchase or acquisition of the Class Twelve Partnership Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Class Twelve Partnership Preferred Units or any such purchase or acquisition made in order to ensure that the Previous General Partner remains qualified as a real estate investment trust (a REIT) within the meaning of section 856 of the Internal Revenue Code of 1986, as amended (the Code) for federal income tax purposes.
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(c) Rights to Distributions on Units Called for Redemption. Immediately prior to or upon any redemption of the Class Twelve Partnership Preferred Units, the Partnership shall pay, in cash, any accumulated and unpaid distributions to and including the Redemption Date, unless a Redemption Date falls after a Preferred Distribution Record Date and prior to the corresponding Preferred Distribution Payment Date, in which case, each holder of the Class Twelve Partnership Preferred Units at the close of business on such Preferred Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Preferred Distribution Payment Date notwithstanding the redemption of such units before such Preferred Distribution Payment Date.
(d) Procedures for Redemption.
(i) Upon the Partnerships provision of notice as to the Redemption Date, accompanied by payment in the amount of the full Redemption Price, plus a Redemption Premium, if any, through such effective date to which each record holder of the Class Twelve Partnership Preferred Units is entitled, the Class Twelve Partnership Preferred Units shall be redeemed and shall no longer be deemed outstanding Partnership Units and all rights of the holders of the Class Twelve Partnership Preferred Units will terminate. No failure to give such notice or any defect therein or in the sending thereof shall affect the validity of the proceedings for the redemption of any of the Class Twelve Partnership Preferred Units except as to the holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the applicable rules of any exchange upon which the Class Twelve Partnership Preferred Units may be listed or admitted to trading, such notice shall state: (A) the Redemption Date; (B) the Redemption Price; (C) the Redemption Premium, if any; (D) the number of Class Twelve Partnership Preferred Units to be redeemed; and (E) that distributions on the Class Twelve Partnership Preferred Units to be redeemed will cease to accumulate on such Redemption Date. If less than all of the Class Twelve Partnership Preferred Units held by any holder are to be redeemed, the notice sent to such holder shall also specify the number of Class Twelve Partnership Preferred Units held by such holder to be redeemed.
(iii) If notice of redemption of any of the Class Twelve Partnership Preferred Units has been given and if the funds necessary for such redemption have been set aside by the Partnership for the benefit of the holders of any of the Class Twelve Partnership Preferred Units so called for redemption, then, from and after the Redemption Date, distributions will cease to accumulate on such Class Twelve Partnership Preferred Units, such Class Twelve Partnership Preferred Units shall no longer be deemed outstanding and all rights of the holders of such Class Twelve Partnership Preferred Units will terminate, except the right to receive the Redemption Price, and the Redemption Premium, if any.
(iv) The deposit of funds with a bank or trust company for the purpose of redeeming the Class Twelve Partnership Preferred Units shall be irrevocable except that:
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(A) The Partnership shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any Class Twelve Partnership Preferred Units redeemed shall have no claim to such interest or other earnings; and
(B) Any balance of money so deposited by the Partnership and unclaimed by the holders of the Class Twelve Partnership Preferred Units entitled thereto at the expiration of two years from the applicable Redemption Date shall be repaid, together with any interest or other earnings thereon, to the Partnership, and after any such repayment, the holders of the Class Twelve Partnership Preferred Units entitled to the funds so repaid to the Partnership shall look only to the Partnership for payment without interest or other earnings.
(e) Status of Redeemed Units. Any Class Twelve Partnership Preferred Units that shall at any time have been redeemed or otherwise acquired by the Partnership shall, after such redemption or acquisition, be deemed cancelled and no longer outstanding, but may be issued by the General Partner from time to time in its discretion.
7. Conversion. The Class Twelve Partnership Preferred Units are not convertible into or exchangeable for any other property or securities of the Partnership.
8. Dissenters Rights. Holders of the Class Twelve Partnership Preferred Units shall have no dissenters rights.
9. Allocations of Income and Loss. Subject to the terms of Section 5 hereof, for each taxable year, (i) each holder of Preferred Units will be allocated, to the extent possible, net income of the Partnership in an amount equal to the distributions made on such holders Preferred Units during such taxable year, and (ii) each holder of Preferred Units will be allocated its pro rata share, based on the portion of outstanding Preferred Units held by it, of any net loss of the Partnership that is not allocated to holders of Partnership Common Units or other interests in the Partnership.
10. Voting Rights. Except (a) as provided in this Section or (b) where a vote by class is required in the Agreement or by law, the holders of the Class Twelve Partnership Preferred Units shall not be entitled to vote on any matter submitted to partners or equity holders of the Partnership however denominated for a vote. Notwithstanding the foregoing, the consent of the holders of a majority of the outstanding Class Twelve Partnership Preferred Units (excluding any Class Twelve Partnership Preferred Units owned by any holder that is an affiliate of the, controlled by, or under common control with, the Partnership), voting as a separate class, shall be required for (a) authorization or issuance of any equity security of the Partnership senior to or on a parity with the Class Twelve Partnership Preferred Units, (b) any amendment to the Agreement which has a material adverse effect on the rights and preferences of the Class Twelve Partnership Preferred Units or which increases the number of authorized or issued Class Twelve Partnership Preferred Units, or (c) any reclassification of the Class Twelve Partnership Preferred Units.
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11. Notice. All notices to be given to the holders of the Class Twelve Partnership Preferred Units shall be given by (i) mail, postage prepaid, (ii) overnight delivery courier service, (iii) facsimile transmission, (iv) electronic mail or (v) personal delivery, to the holders of record, addressed to the address or sent to the facsimile number shown by the records of the Partnership.
12. Restriction on Ownership and Transfer. The Class Twelve Partnership Preferred Units are freely transferable, subject to the following sentences of this Section 12. Transfers must be (i) pursuant to an effective registration statement under the Securities Act of 1933 simultaneously with registration of the Class Twelve Partnership Preferred Units under Section 12 of the Securities Exchange Act of 1934; or (ii) in reliance upon an available exemption from the registration requirements of the Securities Act of 1933. Transfers under clauses (i) and (ii) shall be subject to the transferee agreeing to be bound by the same restrictions on transfer. Class Twelve Partnership Preferred Units also are subject to the provisions of the Agreement applicable to Partnership Units generally, including, without limitation, any applicable restrictions on transfer set forth therein.
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Exhibit 10.2
Execution Version
MASTER SERVICES AGREEMENT
This MASTER SERVICES AGREEMENT (this Agreement), dated as of December 15, 2020 (the Execution Date), is by and among, Apartment Investment and Management Company, a Maryland corporation ( DevCo), and Aimco OP, L.P., a Delaware limited partnership (DevCo OP, and together with DevCo, Recipient), on the one hand, and Apartment Investment REIT Corp., a Maryland corporation and a subsidiary of DevCo (SpinCo), and Aimco Properties, L.P., a Delaware limited partnership and a subsidiary of DevCo (SpinCo OP, and together with SpinCo, Provider), on the other hand. Provider and Recipient are referred to individually as a Party and collectively the Parties. Capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in the SDA (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Separation and Distribution Agreement, dated December 15, 2020, by and among DevCo, DevCo OP, SpinCo and SpinCo OP (the SDA), the Parties have agreed to undertake certain transactions, including the Restructuring;
WHEREAS, in connection with the transactions contemplated by the SDA, including the Restructuring, Recipient desires to receive certain services from Provider and Provider desires to provide such services to Recipient; and
WHEREAS, in connection with the transactions contemplated by the SDA, the Parties have agreed to enter into this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties, intending to be legally bound, agree as follows:
ARTICLE I
SERVICES
Section 1.1 Services. On the terms and subject to the conditions of this Agreement, Provider shall provide, or cause one or more of its Representatives or a third party to provide, to Recipient the services set forth in Annex A hereto (collectively, the Services). The Services shall be limited to those services described in Annex A unless specifically modified by amendment in accordance with Section 11.1. On the terms and subject to the conditions of this Agreement, Provider shall provide the Services in a manner consistent with the service levels set forth in Annex B.
Section 1.2 Commercial Unreasonableness; Other Service Interruption. Without limitation of Section 9.1, Provider shall not be required to provide any Service to the extent the performance of such Services would require Provider to violate any Laws or could reasonably be expected to result in the breach of any applicable contract, license, lease or other agreement due to a failure to obtain a third-party consent. In addition, without limiting Section 9.1, Provider will have the right to temporarily interrupt or suspend (a) the provision of Services
for emergency maintenance purposes or (b) the operation of the facilities or systems of Provider providing any Services if it is the commercially reasonable judgment of Provider that such action is necessary for maintenance or safety purposes. Provider will be relieved of its obligations to provide Services for the period of time that the relevant facilities or systems are shut down during maintenance. Upon becoming aware of the occurrence thereof, Provider shall use commercially reasonable efforts to provide Recipient reasonable notice of the occurrence of any event which would cause Provider to interrupt, suspend, curtail or cease providing any Service pursuant to this Section 1.2.
Section 1.3 Additional Resources. In providing the Services, Provider shall not be obligated to: (a) hire or train any additional employees; (b) maintain the employment of any specific employee; or (c) expand its facilities or incur long-term capital expenses.
Section 1.4 Additional Services.
(a) If, during the term of this Agreement, Recipient reasonably determines that additional services that are not set forth in Annex A and that are not Excluded Services (as defined below) are necessary to conduct the Recipients business substantially as conducted immediately prior to the Execution Date, and Recipient is not reasonably able to provide or procure, on commercially reasonable terms, such services (each such service, an Additional Service), then Recipient may, by written notice to Provider, request that Provider provide (or cause to be provided pursuant to Article VI) such Additional Service. Subject to applicable Law, upon receipt of such request by Provider, Provider will mutually discuss such request with Recipient, including duration, service levels, resource requirements and additional associated fees, expenses and other costs and Provider will not unreasonably withhold, delay or condition its consent to providing such Additional Service; provided, however, that to the extent Provider consents to so provide any Additional Services, Provider shall only be required to provide such Additional Services if and to the extent (i) such Additional Services were provided as of immediately prior to the Closing and (ii) Provider is able to provide, or cause to be provided, such Additional Services without unreasonable difficulty and without violation of Law or any applicable contract, license, lease or other agreement. In no event shall Provider provide or be deemed to provide any services described in Annex C (Excluded Services).
(b) With respect to any Additional Service that is to be provided hereunder, the Parties shall execute amendments to Annex A or Annex B (as described below) (if applicable) that set forth, among other things, (i) the time period during which such Additional Service shall be provided, (ii) a description of such Additional Service in reasonable detail and (iii) any additional terms and conditions specific to such Additional Service. At such time as any Additional Service is included on Annex A, such Additional Service shall be considered a Service for purposes of this Agreement.
Section 1.5 Title to Equipment; Management and Control; Intellectual Property and Data.
(a) All procedures, methods, systems, strategies, tools, equipment, facilities and other resources owned and used by Provider in connection with the provision of
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Services hereunder will remain the property of Provider and, except as otherwise expressly provided in this Agreement, will at all times be under the sole direction and control of Provider.
(b) Except as may otherwise be expressly provided in this Agreement, the management of, and control over, the provision of the Services by Provider shall reside solely with Provider. Without limiting the foregoing, all employees and Representatives of Provider will be deemed for purposes of all compensation and employee benefits to be employees or Representatives of Provider and not employees or Representatives of Recipient, and in performing the Services, such employees and Representatives of Provider will be under the direction, control and supervision of Provider, and not of Recipient. Nothing in this Agreement is intended to transfer the employment of employees engaged in the provision of any Service from one Party to another.
(c) Recipient acknowledges that neither it nor any of its Representatives will acquire any right, title or interest (including any license rights or rights of use) in any Intellectual Property (including software) of Provider or its Subsidiaries, Representatives or licensors, and the licenses therefor that are owned by Provider or its Subsidiaries, Representatives or licensors, by reason of the provision of the Services provided under this Agreement.
(d) Each Party shall retain ownership of its and its Representatives Intellectual Property and data existing as of the date of this Agreement. Unless otherwise expressly agreed by the Parties, each Party agrees that any Intellectual Property or data of the other Party or its Representatives or licensors made available to such Party in connection with the Services, and any derivative works, additions, modifications, translations or enhancements of such Intellectual Property or data created or developed by a Party or its Representatives pursuant to this Agreement (collectively, New Work), are and shall remain the sole property of the original owner of such Intellectual Property or data (the Original Owner). Each of the Parties hereby assigns all of its rights, title and interest in and to such New Works to the Original Owner, and agrees to execute and to cause its Representatives to execute all such further instruments and documents and to take all such further action as the other Party may reasonably require in order to effectuate the terms and purposes of this Agreement. Subject to and without limiting the foregoing, Provider shall be the sole and exclusive owner of, and nothing in this Agreement shall be deemed to grant Recipient or any of its Representatives any right, title, license, leasehold right or other interest in or to, any copyrights, patents, trade secrets, other intellectual property rights, ideas, concepts, techniques, inventions, processes, systems, works of authorship, resources, functionalities, interfaces, computer hardware or software, documentation or other work product developed, created, modified, improved, used or relied upon by Provider or its Representatives in connection with the Services or the performance of Providers obligations hereunder (Work Product), except that Recipient shall own all Work Product to the extent exclusively related to Recipients business. For the avoidance of doubt, no Work Product shall be considered a work made for hire within the meaning of Title 17 of the United States Code. Provider hereby assigns to Recipient all right, title and interest in and to the Work Product exclusively related to the Recipients business and Recipient hereby assigns to Provider all right, title and interest in and to any and all other Work Product.
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Section 1.6 Services Managers. Provider appoints and designates Lisa Cohn, and Recipient appoints and designates Jennifer Johnson, to act as their respective initial Services manager(s) and shall each designate alternative, successor or additional Services managers, as applicable, in the event that a designated Services manager is not available to perform such role hereunder (each such person in respect of a Party, a Services Manager). Each Services Manager will be directly responsible for coordinating and managing the delivery or receipt of the Services and will have the authority to act on such Partys behalf with respect to matters relating to this Agreement. Unless otherwise agreed in writing by the Parties, all communications relating to routine matters involving this Agreement and the Services, including the termination of any Service, will be directed to the applicable Services Manager or Services Managers of each Party, with copies delivered in accordance with Section 11.4.
Section 1.7 Obligations. The provision of Services under this Agreement is subject to the following:
(a) Neither Provider nor any of its Affiliates shall be liable for any action or inaction taken or omitted to be taken by it pursuant to, and in accordance with, instructions received from Recipient;
(b) Each Party may rely upon any written notice or other written or electronic communication of any nature with the other Party (whether or not such written notice or other written or electronic communication is made in a manner permitted or required by this Agreement), and neither Party shall have any duty to verify the identity or authority of the other Party signing or making any such notice or communication;
(c) Either Party may refuse to take any action requested by the other Party if it is not an action required to be taken under this Agreement;
(d) Provider shall not have any obligation to perform any Service to the extent that performing such Service is dependent upon, or otherwise requires, Recipient to perform some service, operation or function prior to Provider performing any such Service unless Recipient shall have, in fact, prior to when Provider is required to perform such Service, performed such other service, operation or function consistent with commercially reasonable business practices;
(e) Notwithstanding any other term of this Agreement (including the Annexes hereto), Provider shall have no obligation to provide Recipient with any Excluded Services; and
(f) Representatives of Recipient receiving the Services or working with Provider in connection with the provision of Services shall at all times be instructed to, and Recipient shall take commercially reasonable efforts to cause them to comply with, all generally-applicable, reasonable physical and technological security rules, policies and procedures of Provider or its Representatives provided in writing or made known or available to Recipient by Provider or its Representatives.
Section 1.8 Migration. The Parties acknowledge and agree that the Services to be provided under this Agreement are transitional in nature and are intended to provide Recipient with reasonable time to develop the internal resources and capacities (or to arrange for third-party providers) to provide such Services. Accordingly, Recipient will use commercially
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reasonable and diligent efforts to transition off of the Services as soon as reasonably practicable and in any event shall completely transition off of the Services no later than the end of the Term. At the reasonable request of Recipient, Provider shall provide reasonable assistance to the Recipient in connection with the transfer of the Services to Recipient or its designees; provided, however, that Provider will not be required to incur any obligation, expend any money, grant any accommodation (financial or otherwise) or otherwise incur any out-of-pocket or other material incremental cost in the provisions of such assistance.
ARTICLE II
FEES AND PAYMENT
Section 2.1 Fees and Expenses. The fees for the Services shall be Providers fully burdened costs (including allocations of internal costs consistent with past practice and United States generally accepted accounting principles (GAAP) and any and all third-party costs and expenses incurred by Provider or its Representatives in connection with the Services provided hereunder, including travel expenses and costs in obtaining third-party consents (including licenses)) (the Fees).
Section 2.2 Taxes. Recipient shall pay to Provider (or reimburse Provider for) amounts equal to any sales, use, excise, value added or other similar Taxes, however designated or levied, based upon any Fees or other amounts due under this Agreement, the provision of the Services or the provision or use of supplies or inventory provided under this Agreement, as provided to Recipient by Provider (such Taxes, Covered Taxes). The Parties agree that Covered Taxes shall not include any Taxes imposed on or measured by the gross or net income of Provider. If additional Covered Taxes are determined to be due and payable as a result of an audit by a Taxing Authority, Recipient agrees to reimburse Provider for such additional Covered Taxes to the extent that the Covered Taxes for which Provider seeks reimbursement are linked to Services invoices that are subject to the imposition by such Taxing Authority of Covered Taxes. All amounts under this Agreement are expressed exclusive of any Covered Taxes.
Section 2.3 Payment; Disputed Amounts.
(a) Providers invoices with respect to the Services shall be paid by Recipient within thirty (30) calendar days after Recipients receipt of each such invoice (the Due Date). If Recipient fails to make any payment by the Due Date (other than failure to make any payment in good faith disputed as not in accordance with this Agreement), Recipient shall be required to pay, in addition to the amount of any unpaid Fees and expenses, interest on such amount at (i) the rate per annum equal to the prime rate as published in the Wall Street Journal from time to time, measured as of the applicable Due Date, plus 2.0%, or (ii) if lower, the highest rate of interest permitted by applicable Law at such time, in each case compounded monthly from, and including, the relevant Due Date through, but excluding, the actual date of payment.
(b) Recipient shall promptly notify Provider in writing of any amounts billed to it that it disputes in good faith and reasonably detail the basis therefor. Upon receipt of such notice, Provider will research the items in question in a reasonably prompt manner and negotiate in good faith with Recipient to attempt to resolve any such dispute. The amount of invoiced Fees payable by Recipient shall be reduced by the amount of any Fees disputed in
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accordance with this Section 2.3(b), which disputed Fees shall be paid to Provider within thirty (30) calendar days after settlement of such dispute to the extent owed to Provider; provided that any undisputed portion of such amount shall be included in the calculation of the amount due and paid in accordance with Section 2.3(a). If the Parties are unable to resolve any disputed amounts under this Section 2.3(b) within thirty (30) calendar days after notice to Provider of the dispute, each Party is free to seek relief as otherwise set forth in this Agreement.
Section 2.4 No Right to Set-Off. Recipient shall pay to Provider the full amount of Fees and other amounts required to be paid by Recipient under this Agreement and shall not set-off, counterclaim or otherwise withhold any amount owed or claimed to be owed to Provider under this Agreement on account of any obligation owed by Provider, whether or not such obligation has been finally adjudicated, settled or otherwise agreed upon by the Parties in writing.
Section 2.5 REIT Requirements. Recipient acknowledges that: (1) Provider is indirectly owned by one or more entities that intends to qualify as a real estate investment trust (each, a Provider Parent REIT), within the meaning of Sections 856 through 860 of the Code; (b) Provider and the Provider Parent REITs are therefore subject to certain operating and other restrictions under the Code (the REIT Requirements). As determined by counsel or independent accountants for any Provider Parent REIT, any amounts paid to Provider pursuant to any provision of this Agreement in any tax year may not exceed the maximum amount that can be paid to Provider in such year without causing such Provider Parent REIT to fail to meet the REIT Requirements for such year. If the amount payable for any tax year under the preceding sentence is less than the amount that Recipient would otherwise be obligated to pay to Provider pursuant to this Agreement (the Excess Amount), then Recipient shall place the Excess Amount in escrow and shall not release any portion thereof to Provider, and Provider shall not be entitled to any such amount, unless and until Provider delivers to Recipient, at the sole option of the applicable Provider Parent REIT, (i) notice that it has received advice of such Provider Parent REITs tax counsel, (ii) a letter from the independent accountants of such Provider Parent REIT, or (iii) a private letter ruling issued by the Internal Revenue Service to the applicable Provider Parent REIT, in each case, indicating that the receipt of any Excess Amount hereunder would not cause such Provider Parent REIT to fail to satisfy the REIT Requirements. The obligation to pay any amount which is not paid as a result of this provision shall terminate five years from the original date such amount would have been payable without regard to this provision and Provider shall have no further right to receive any such amount.
ARTICLE III
STANDARD OF CARE; GENERAL OBLIGATIONS
Section 3.1 Provider Standard of Care. Subject to Section 1.2, Section 1.3 and Section 9.1 hereof, and any other terms and conditions of this Agreement, Provider shall perform, or have any Representative or third-party perform, the Services (a) at a relative level of service (in terms of quantity and quality, subject to increases consistent with the reasonably foreseeable natural growth of the Recipients business) substantially similar to the services provided during the twelve (12) months prior to the Closing and (b) in compliance with all applicable Law; provided, further, that notwithstanding the foregoing, the service levels set forth in Annex B shall apply with respect to the Services referenced therein.
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Section 3.2 Recipient Standard of Care. In connection with the receipt of the Services, Recipient shall follow and shall cause its Representatives to follow the generally applicable policies, procedures and practices of Provider in effect from time-to-time and communicated to Recipient in writing during the Term, including with respect to physical, technical and administrative measures to secure premises and computer systems (including computer networks). Recipient shall (a) provide instructions, information or documentation reasonably sufficient for Provider to perform, or cause to be performed, the Services as they were performed during such period prior to the Execution Date and (b) make available, as reasonably requested by Provider, sufficient access to personnel, locations, systems, resources, timely decisions, approvals and acceptances so that Provider may accomplish its obligations hereunder in a timely manner; provided that to the extent Recipient fails to fulfill its obligations set forth in the preceding clauses (a) and (b) in a timely manner, or at all, Provider will have no obligations to provide the corresponding Services in a timely manner, or at all, as the case may be. Recipient will pay any additional costs or expenses, including labor, resulting from any delay by Recipient in providing or making available the items set forth in the preceding clauses (a) and (b).
Section 3.3 Services Changes. The Parties acknowledge that, upon written notice to Recipient, Provider may modify, change or enhance the manner, methodology, systems or applications used in the performance of any Service to the extent Provider is making a similar change in the performance of such services for their respective businesses or to the extent such change does not have a material adverse effect on the standard of service set forth in Section 3.1.
Section 3.4 Performance Remedy. In the event Provider fails to provide a Service hereunder it is otherwise required to provide under this Agreement, or the quality of a Service is not in accordance with Section 3.1 above, in addition to any other remedies to which Recipient may be entitled, Recipient shall be entitled, at the option of Recipient, to (a) a refund of the amount paid to Provider and attributable to such defective Service in respect of the period the Service was defective, (b) reperformance (or performance, as the case may be) by Provider of such defective Service, or (c) performance of such Service by an alternative provider for such Service or by Recipient itself, in which case Provider shall be responsible for the reasonable, incremental costs (above that amount which Provider would charge for such Service hereunder) incurred by Recipient in respect of the period the Service was defective, in seeking and obtaining an alternative provider for such Service or in providing the Service itself.
Section 3.5 Good Faith Cooperation; Consents. During the Term and subject to the terms of this Agreement, the Parties shall, and shall cause each of their respective Affiliates and each of the Parties and the foregoing entities respective directors, officers, employees, agents or advisors (collectively, Representatives) to use good faith efforts to (a) cooperate with each other in all matters relating to the provision and receipt of the Services and (b) enable Provider to provide, or cause to be provided, the Services in accordance with this Agreement. Such cooperation shall include exchanging relevant information and using commercially reasonable efforts to obtain all third-party consents, licenses, sublicenses or approvals necessary (Consents) to permit each Party to perform its obligations hereunder; provided, however, that Provider shall not be required to pay any amounts to any third parties or to grant any accommodation, financial or otherwise, to obtain the same, unless such third party is a Subcontractor (as defined below) retained by Provider as provided in Section 6.1, in which
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case, if Provider chooses to engage a Subcontractor, the associated costs shall be paid by Provider unless otherwise mutually agreed in writing by Provider and Recipient. Recipient shall use commercially reasonable efforts to avoid taking any action that would interfere with or materially increase the unreimbursed cost of Provider providing the Services. For the avoidance of doubt, Recipient shall be permitted to delegate the receipt of Services or performance of its obligations to any of its Representatives hereunder, but Recipient shall not be relieved of any obligations hereunder by such delegation and Recipient shall be responsible for all acts or omissions of its Representatives in connection with this Agreement.
Section 3.6 Alternatives. If Provider reasonably believes it is unable to provide any Service because of inability to obtain necessary Consents in accordance with Section 3.5 hereof, the Parties shall reasonably cooperate to determine the best alternative approach for seeking to provide the impacted Services to Recipient. Until such alternative approach is agreed upon or the problem is otherwise resolved to the satisfaction of the Parties, Provider shall have no obligation to perform the related Services. To the extent an agreed upon alternative approach results in Provider incurring additional expense beyond what would otherwise have been incurred in connection with providing the underlying Service, Recipient shall make prompt payment to Provider in the amount of such additional expense in accordance with Section 2.3 hereof; provided that neither Party shall be required to pay any amounts to any third parties or to grant any accommodation, financial or otherwise, or to take any action or bring any claim against any third party, in connection with obtaining any necessary Consents or implementing any alternative approaches thereto.
ARTICLE IV
TERM AND TERMINATION
Section 4.1 Term. The term of this Agreement shall commence on the Execution Date and shall remain in effect until the date on which this Agreement is terminated in accordance with the terms of this Article IV (the Term); provided that with respect to any individual Service, (i) a limited term may be set forth on Annex A and if so set forth, the end of such term shall be the expiration date with respect only to that specific Service or (ii) such Service may be terminated pursuant to Section 4.2, and after such expiration or earlier termination of such Service, Provider shall no longer be required to provide such Service.
Section 4.2 Termination.
(a) Either Party may terminate this Agreement immediately upon written notice following the termination of any Property Management Agreement.
(b) Recipient may terminate this Agreement, either with respect to all or with respect to any one or more of the Services to be provided to Recipient hereunder, for any reason or for no reason, at any time upon not less than the longer of (i) sixty (60) calendar days prior written notice to Provider (a Termination Notice) or (ii) such other period as may be specified in Annex A. Within thirty (30) calendar days following receipt of a Termination Notice, Provider shall notify Recipient in writing as to whether the termination of any Service or Services that are the subject of the Termination Notice (x) will require termination or partial termination of any other Service or Services, or (y) will result in the imposition of any
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additional costs to Provider and, if so, a good faith estimate of the aggregate amount of such additional costs (an Early Termination Consequence Notice). If Provider delivers an Early Termination Consequence Notice to Recipient as provided in this Section 4.2(a), Recipient may withdraw its Termination Notice within seven (7) calendar days of such notification. If Recipient does not withdraw such Termination Notice within such seven (7)-calendar day period, termination of such Services will be final, including with respect to (A) the termination of any other Service or Services identified by Provider in its Early Termination Consequence Notice, and (B) Recipients obligation to pay the actual amount of any additional costs to Provider as a result of such early termination as identified by Provider in its Early Termination Consequence Notice (notwithstanding that such actual amount may be greater than the estimated amount). For the avoidance of doubt, Recipient shall not have the right to reinstitute any Service if such Service has been terminated.
(c) At any time after December 31, 2023, Provider may terminate this Agreement with respect to an individual Service, for any reason or for no reason, upon not less than sixty (60) calendar days prior written notice to Recipient.
(d) Either Party may terminate this Agreement with respect to an individual Service if the other Party breaches a material provision of this Agreement with regard to such Service and does not cure such breach within thirty (30) calendar days after being given written notice of the breach.
(e) Any Service, or this Agreement in its entirety, may be terminated by mutual consent of the Parties in writing at any time.
(f) Either Party may terminate this Agreement, effective immediately, if the other Party files, or has filed against it, a petition for voluntary or involuntary bankruptcy or pursuant to any other insolvency law or makes or seeks to make a general assignment for the benefit of its creditors or applies for or consents to the appointment of a trustee, receiver or custodian for it or a substantial part of its property.
Section 4.3 Survival. The following shall survive the termination of this Agreement: (a) Recipients obligations under Article VII, (b) the obligations of each Party under Article X; (c) Recipients obligation to make payment in accordance with Article II (including with respect to any Covered Taxes) for those Services rendered to Recipient prior to termination of this Agreement; (d) Section 1.5, Section 4.2(a), this Section 4.3, Article V, Article VIII and Article XI and (e) any provisions of Annex A or Annex B that expressly provide for continuing obligations after termination of such Service. Notwithstanding the foregoing, in the event of any termination with respect to one or more, but less than all, of the Services, this Agreement shall continue in full force and effect with respect to any Services not terminated under Section 4.1.
ARTICLE V
RELATIONSHIP BETWEEN THE PARTIES
Section 5.1 Relationship. Except as specifically provided in this Agreement, neither Party will (a) act or represent or hold itself out as having authority to act as an agent or partner of the other Party, or (b) in any way bind or commit the other Party to any obligations or
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agreement. Nothing contained in this Agreement will be construed as creating a partnership, joint venture, agency, trust, fiduciary relationship or other association of any kind, each Party being individually responsible only for its obligations as set forth in this Agreement. The Parties respective rights and obligations under this Agreement will be limited to the contractual rights and obligations expressly set forth in this Agreement on the terms and conditions set forth in this Agreement. Except as otherwise specifically provided for in this Agreement, each Party shall be responsible for compliance with all applicable Laws.
ARTICLE VI
SUBCONTRACTORS
Section 6.1 Subcontractors. Subject to Section 3.1 hereof, Provider shall have the right (but not the obligation), at its cost and expense, directly or indirectly through one or more of its Representatives, to hire or engage one or more subcontractors or other third parties that is not a Subsidiary or Affiliate of Provider (each, a Subcontractor) to perform all or any of its obligations under this Agreement, in each case, with the prior written consent of Recipient, which consent is not to be unreasonably withheld, conditioned or delayed; provided that Provider shall use reasonable care and prudence in the selection and monitoring of any such Subcontractor and shall remain responsible for the performance of such Subcontractor. Provider shall have the right to designate which of its personnel or permitted Subcontractors will furnish Services to Recipient, and may remove or replace any such personnel or permitted Subcontractor in its sole discretion (but, with respect to Subcontractors, subject to Recipients prior written consent pursuant to the first sentence of this Section 6.1). Without limiting the foregoing, Provider shall be permitted to delegate any of its rights or obligations hereunder to any of its Subsidiaries; provided that Provider shall remain responsible for the performance of its obligations hereunder and for all acts or omissions of any of its Subsidiaries in connection with this Agreement.
Section 6.2 Third-Party Non-Disclosure Agreements. To the extent that any third-party proprietor of information or software to be disclosed or made available to Recipient in connection with performance of the Services hereunder requires a specific form of non-disclosure agreement as a condition of such third-party proprietors consent to use of the same for the benefit of Recipient or to permit Recipient access to such information or software, Recipient will execute (and will cause Recipients employees to execute, if required) any such form (which shall not be unreasonably withheld or delayed). Should Recipient not execute any such form for which consent has not been reasonably withheld or delayed, Provider shall not be required to provide Services related to such information or software.
ARTICLE VII
CONFIDENTIALITY
Section 7.1 Confidentiality.
(a) The Party (a Receiving Party) receiving Confidential Information (as defined below) of the other Party (a Disclosing Party) shall, and shall cause each of its Representatives to, hold in strict confidence any Confidential Information of the Disclosing Party disclosed to the Receiving Party or its Representatives by reason of or in connection with this Agreement. The Receiving Party shall maintain the Confidential
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Information (and any information generated or developed while using such Confidential Information) in confidence using the same degree of care that it employs to protect similar information of its own.
(b) For the purposes of this Agreement, Confidential Information shall mean any information that derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use, and includes information of the Disclosing Party, its Affiliates and any Person with whom the Disclosing Party or any of its Affiliates does business; provided that Confidential Information shall not include (1) information that is or becomes available to the public generally without breach of Section 7.1(a), (2) information that becomes available to the Receiving Party on a non-confidential basis from a source other than the Disclosing Party or its Affiliates; provided that such source was not known by the Receiving Party to be bound by a confidentiality obligation to the Disclosing Party and its Affiliates or any other third party, (3) information that was already in the possession of the Receiving Party prior to the entering into of this Agreement on a non-confidential basis, (4) information that was or is independently developed by the Receiving Party without reliance on the Confidential Information or (5) in the case of information provided to Recipient in connection with the Services, information that would reasonably be expected to be used or disclosed on a non-confidential basis in the ordinary course of Recipients business. The Receiving Party agrees that it will use any Confidential Information received under this Agreement only as specifically provided herein and in furtherance of this Agreement. Notwithstanding anything to the contrary herein, the Receiving Party may disclose (1) information required to be disclosed by applicable Laws; (2) information required to be disclosed pursuant to an order, subpoena or legal process; and (3) information to Representatives of the Receiving Party; provided that such Persons have been informed of the confidential nature of the information and directed to keep such information confidential; provided, further, that any disclosure pursuant to the preceding clauses (1), (2) or (3) of this sentence shall be made only subject to such procedures the Receiving Party determines in good faith are reasonable and appropriate in the circumstances, taking into account the need to maintain the confidentiality of such information; and provided, further, that to the extent that the Receiving Party may become legally compelled to disclose any Confidential Information, it may only disclose such information if it will first have provided prompt notice to the Disclosing Party of such required disclosure and used commercially reasonable efforts to, and, if practicable, will have afforded the Disclosing Party the opportunity to, obtain an appropriate protective order or other satisfactory assurance of confidential treatment for the information required to be so disclosed, and if such protective order or other remedy is not obtained, or the Disclosing Party waives the Receiving Partys compliance with the provisions of this Section 7.1(b), the Receiving Party will only furnish that portion of the Confidential Information which is legally required to be so disclosed. Nothing contained in this Article VII shall limit or affect in any way the obligations of any Party to maintain the confidentiality of information pursuant to the SDA or any other applicable Ancillary Agreement.
Section 7.2 Duties Upon Termination. As soon as practicable, and in any event no later than thirty (30) calendar days after the termination or expiration of this Agreement, the Receiving Party shall return to the Disclosing Party in accordance with the Disclosing Partys instructions and at the Receiving Partys expense, all of the Disclosing Partys materials and
11
Confidential Information in its (or its Representatives) possession or control, including any copies thereof, and, if requested, the Receiving Party will confirm compliance with this requirement. The Receiving Party shall (and shall cause its Representatives to) also comply with this Section 7.2 upon the termination or expiration of any specific Service with respect to any materials and Confidential Information exclusively related to such Service.
ARTICLE VIII
DISCLAIMER AND LIMITATION OF LIABILITY
Section 8.1 DISCLAIMER OF WARRANTY. RECIPIENT ACKNOWLEDGES AND AGREES THAT, EXCEPT AND ONLY TO THE EXTENT PROVIDED IN SECTION 3.1 OR ANNEX B HERETO, THE SERVICES ARE PROVIDED AS IS, WITHOUT WARRANTY OF ANY KIND, AND THAT RECIPIENT ASSUMES ALL RISKS AND LIABILITIES ARISING FROM OR RELATING TO ITS AND RECIPIENT SUBSIDIARIES USE OF AND RELIANCE UPON THE SERVICES. ACCORDINGLY, SUBJECT TO SECTION 3.1 AND ANNEX B HERETO, NONE OF PROVIDER OR ITS REPRESENTATIVES MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN CONNECTION WITH OR WITH RESPECT TO ANY OF THE SERVICES, INCLUDING WITH RESPECT TO ANY REPRESENTATIONS OR WARRANTIES IN REGARD TO QUALITY, PERFORMANCE, NONINFRINGEMENT, COMMERCIAL UTILITY, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE. SUBJECT TO SECTION 3.1 AND ANNEX B HERETO, ALL SUCH REPRESENTATIONS AND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED; PROVIDED, THAT THIS AGREEMENT SHALL NOT IN ANY WAY LIMIT THE REPRESENTATIONS AND WARRANTIES OF ANY PERSON UNDER THE SDA.
Section 8.2 LIMITATION OF LIABILITY.
(a) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, EXCEPT WITH RESPECT TO ANY LIABILITY ARISING UNDER ARTICLE VII, ARTICLE X OR SECTION 11.7, NEITHER PARTY NOR ANY OF ITS REPRESENTATIVES SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY KIND (REGARDLESS OF WHETHER SUCH DAMAGES ARE FORESEEABLE), INCLUDING ANY SUCH DAMAGES OR LOSSES RESULTING FROM BUSINESS INTERRUPTION OR LOST PROFITS, ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT OR THE SERVICES TO BE PROVIDED HEREUNDER. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS REPRESENTATIVES BE LIABLE FOR ANY DAMAGES OR LOSSES CAUSED BY THE OTHER PARTYS FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT.
(b) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, EXCEPT WITH RESPECT TO ANY LIABILITY ARISING UNDER ARTICLE VII, ARTICLE X OR SECTION 11.7, THE AGGREGATE MAXIMUM LIABILITY OF PROVIDER (INCLUDING ANY LIABILITY FOR THE ACTS AND
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OMISSIONS OF ITS AFFILIATES, REPRESENTATIVES, SUBCONTRACTORS OR ITS OR THEIR RESPECTIVE REPRESENTATIVES) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED AN AMOUNT EQUAL TO THE AMOUNT ACTUALLY PAID OR PAYABLE TO PROVIDER FOR THE SERVICES IN THE TWELVE (12) MONTHS PRECEDING THE ACCRUAL OF THE CLAIMS GIVING RISE TO SUCH LIABILITY.
ARTICLE IX
FORCE MAJEURE
Section 9.1 Force Majeure. Neither Provider, its Representatives nor any Subcontractor providing any Services shall be required to perform or be liable for any interruption, delay or failure to fulfill any obligation under this Agreement, including, without limitation, any non-performance, interruption, delay or failure of any Service or the quality or quantity thereof if such non-performance, interruption, delay or failure results from causes beyond its reasonable control, including acts of God, acts of any public enemy, nuclear event, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by governmental, civil or military authorities, declaration, continuation, escalation or acts of war or terrorism, strike, walkout, lockout or other labor dispute, pandemic or epidemic (including in connection with SARS-CoV-2, Covid-19 or any similar virus or disease) or other similar events outside the control of Provider, its Representatives or any applicable Subcontractor (Force Majeure Event). Upon the occurrence of a Force Majeure Event, Provider shall take all reasonable steps to mitigate the impact of such Force Majeure Event on the Recipient, Provider shall provide notice to Recipient, the Services, solely while and to the extent materially and adversely affected by the Force Majeure Event (the Affected Services), will be suspended during the period of such Force Majeure Event, and Provider will have no obligation to perform or liability to Recipient or any other Party in connection with such Affected Services and Recipient will have no obligation to pay any Fees for such Affected Services. If the Force Majeure Event in question prevents performance for a continuous period in excess of three (3) months after the date on which the Force Majeure Event begins, Recipient shall be entitled to terminate the Affected Services by giving written notice to Provider. The notice to terminate must specify the termination date, which must be not less than ten (10) calendar days after the date on which the notice to terminate is given. Once a notice to terminate has been validly given, the Affected Services will terminate on the termination date set out in the notice. Neither Party shall have any liability to the other in respect of termination of the Affected Services due to a Force Majeure Event, but rights and liabilities which have accrued prior to termination shall not be affected thereby.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification.
(a) Without limitation of the Fee, Tax, and expense and other obligations of Recipient expressly set forth in other provisions of this Agreement, Recipient shall indemnify, defend and hold harmless Provider, its Affiliates, their respective successors and assigns and the Representatives of each of the foregoing (collectively, Provider
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Indemnitees) from and against any and all damages, losses, fines, penalties, costs and expenses, including reasonable attorneys fees and expenses incurred in investigating or defending a claim (Damages) arising from, relating to or in connection with the gross negligence or willful misconduct of Recipient or any of its Representatives in connection with this Agreement, except to the extent that such Damages were caused by the breach, gross negligence or willful misconduct of Provider or its Representatives, in which case, such Provider Indemnitee shall not be entitled to the benefits of this Section 10.1(a) to the extent that such Damages were caused by such breach, gross negligence or willful misconduct.
(b) Except as limited in this Agreement, including Article VIII, Provider shall indemnify, defend and hold harmless Recipient and its successors and assigns and the Representatives of each of the foregoing (collectively, Recipient Indemnitees) from and against any and all Damages arising from, relating to or in connection with the breach, gross negligence or willful misconduct of Provider or any of its Representatives in connection with this Agreement, except to the extent that such Damages were caused by the breach, gross negligence or willful misconduct of Recipient or its Representatives, in which case, such Recipient Indemnitee shall not be entitled to the benefits of this Section 10.1(b) to the extent that such Damages were caused by such breach, gross negligence or willful misconduct.
(c) Each Party agrees that it shall, in all circumstances, use commercially reasonable efforts to mitigate and otherwise minimize its and its Representatives Damages, whether direct or indirect, due to, resulting from or arising in connection with any matter for which the other Party is obligated to indemnify such Party and its Representatives pursuant to this Section 10.1.
(d) Promptly after receipt of written notice of the assertion or the commencement of a third-party claim asserted against a Party for which the other Party has an indemnification obligation under this Article X, the indemnified Party shall provide the indemnifying Party with written notice describing an indemnification claim (Claim) in reasonable detail in light of the circumstances then known and then providing the indemnifying Party with further notices to keep it reasonably informed with respect thereto; provided, however, that failure of the indemnified Party to provide timely notice or to keep the indemnifying Party reasonably informed as provided herein shall not relieve the indemnifying Party of its obligations hereunder except to the extent that the indemnified Party is materially prejudiced thereby. If any proceeding shall be commenced against any indemnified Party by a third party, the indemnifying Party shall be entitled to participate in such Claim and assume the defense thereof with counsel reasonably satisfactory to the indemnified Party, at the indemnifying Partys sole cost and expense, and the indemnified Party shall reasonably cooperate with the indemnifying Party, at the indemnifying Partys sole cost and expense, in the defense of any Claim and shall be entitled to participate in any proceeding at its expense, and the indemnifying Party shall not settle such proceeding unless the settlement shall include as an unconditional term thereof the giving by the claimant or the plaintiff of a full and unconditional release of the indemnified Party, from all liability with respect to the matters that are subject to such Claim, without the indemnified Partys prior written consent, which consent shall not be unreasonably withheld or delayed. The indemnified Party may participate in the defense of any claim with counsel reasonably acceptable to the indemnifying Party, at the indemnified Partys own expense.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments and Waivers.
(a) Subject to Section 4.2, this Agreement may not be amended except by an agreement in writing signed by all Parties.
(b) Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party entitled to the benefit thereof and any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized representative of such Party. No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that either Party would otherwise have.
Section 11.2 Entire Agreement. This Agreement and the Annexes referenced herein and attached hereto, constitute the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersede all prior negotiations, agreements, commitments, writings, courses of dealing and understandings with respect to the subject matter hereof.
Section 11.3 Third-Party Beneficiaries. Except as provided in Article X relating to Indemnitees, this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.
Section 11.4 Notices. All notices, requests, permissions, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) five (5) Business Days following sending by registered or certified mail, postage prepaid, (b) when sent, if sent by facsimile or email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, (c) when delivered, if delivered personally to the intended recipient, and (d) one (1) Business Day following sending by overnight delivery via a national courier service and, in each case, addressed to a Party at the following address for such Party (as updated from time to time by notice in writing to the other Party):
(a) If to DevCo or DevCo OP:
c/o Apartment Investment and Management Company 4582 S. Ulster St.
Suite 1450
Denver, CO 80237
Attention: General Counsel; Chief Financial Officer
15
(b) If to SpinCo or SpinCo OP:
c/o Apartment Income REIT Corp.
4582 S. Ulster St.
Suite 1700
Denver, CO 80237
Attention: General Counsel; Chief Financial Officer
Section 11.5 Counterparts; Electronic Delivery. This Agreement may be executed in multiple counterparts, each of which when executed shall be deemed to be an original, but all of which together shall constitute one and the same agreement. Execution and delivery of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic means shall be deemed to be, and shall have the same legal effect as, execution by an original signature and delivery in person.
Section 11.6 Severability. If any term or other provision of this Agreement or the Annexes attached hereto is determined by a nonappealable decision by a court, administrative agency or arbitrators to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the court, administrative agency or arbitrators shall interpret this Agreement so as to affect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the fullest extent possible. If any sentence in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.
Section 11.7 Assignability; Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns; provided, however, that neither this Agreement nor any of the rights or obligations of any Party under this Agreement shall be assignable, in whole or in part, directly or indirectly, whether by operation of law or otherwise, by such Party without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed) and any attempt to assign any rights or obligations under this Agreement without such consent shall be null and void. Notwithstanding the foregoing, either Party may assign its rights and obligations under this Agreement to any of their respective Affiliates; provided that no such assignment shall release such assigning Party from any liability or obligation under this Agreement.
Section 11.8 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive Laws of the State of Delaware, without regard to any conflicts of law provisions thereof that would result in the application of the Laws of any other jurisdiction.
Section 11.9 Dispute Resolution. Article X (Dispute Resolution) of the SDA shall govern dispute resolution under this Agreement, mutatis mutandis.
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Section 11.10 Construction. This Agreement shall be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation shall be applied against either Party. The Parties represent that this Agreement is entered into with full consideration of any and all rights which the Parties may have. The Parties have relied upon their own knowledge and judgment. The Parties have had access to independent legal advice, have conducted such investigations they thought appropriate, and have consulted with such other independent advisors as they deemed appropriate regarding this Agreement and their rights and asserted rights in connection therewith. The Parties are not relying upon any representations or statements made by the other Party, or such other Partys employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement. The Parties are not relying upon a legal duty, if one exists, on the part of the other Party (or such other Partys employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or their preparation, it being expressly understood that neither Party shall ever assert any failure to disclose information on the part of the other Party as a ground for challenging this Agreement.
Section 11.11 Performance. Each Party shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party.
Section 11.12 Title and Headings. Titles and headings to Sections and Articles are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
Section 11.13 Exhibits and Schedules. The Annexes attached hereto are incorporated herein by reference and shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.
Section 11.14 Interpretation. In this Agreement and the Ancillary Agreements, unless the context clearly indicates otherwise:
(a) words used in the singular include the plural and words used in the plural include the singular;
(b) the words include, includes and including shall be deemed to be followed by the words without limitation;
(c) the word or shall have the inclusive meaning represented by the phrase and/or;
(d) relative to the determination of any period of time, from means from and including, to means to but excluding and through means through and including;
(e) accounting terms used herein shall have the meanings historically ascribed to them by DevCo and its Subsidiaries in their internal accounting and financial policies and procedures in effect immediately prior to the date of this Agreement;
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(f) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;
(g) reference to any Law means such Law (including any and all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;
(h) references to any Person include such Persons successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement; a reference to such Persons Affiliates shall be deemed to mean such Persons Affiliates following the Distribution and any reference to a third party shall be deemed to mean a Person who is not a Party or an Affiliate of a Party;
(i) if there is any conflict between the provisions of the main body of this Agreement and the Annexes hereto, the provisions of the main body of this Agreement shall control unless explicitly stated otherwise in such Annex;
(j) any portion of this Agreement obligating a Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party shall also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective officers as of the date first set forth above.
APARTMENT INVESTMENT AND MANAGEMENT COMPANY | ||
By: | /s/ H. Lynn C. Stanfield | |
Name: H. Lynn C. Stanfield | ||
Title: Authorized Person | ||
APARTMENT INCOME REIT CORP. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person | ||
AIMCO PROPERTIES, L.P. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person | ||
AIMCO OP L.P. | ||
By: | /s/ H. Lynn C. Stanfield | |
Name: H. Lynn C. Stanfield | ||
Title: Authorized Person |
[Signature Page to Master Services Agreement]
ANNEX A
SERVICE SCHEDULE
The services that are material to the Recipients business substantially as conducted immediately prior to the Execution Date, in each case to the extent such services were provided by Provider to Recipient prior to the Execution Date and the assets, resources or personnel used in connection therewith are retained or otherwise possessed by Provider. For the avoidance of doubt, the Services include continued access to PeopleSoft and, notwithstanding Section 2.1 of this Agreement, Recipient shall pay as Fees for such Service 50% of the applicable annual depreciation.
A-1
ANNEX B
SERVICE LEVELS
Provider shall use commercially reasonable efforts to provide the Services in a manner, timeliness and at a level of quality generally consistent with that provided by Provider to Recipient prior to the Execution Date.
B-1
ANNEX C
EXCLUDED SERVICES
a) | Legal, financial, accounting, insurance, regulatory and tax advice. |
b) | Property management, construction services and other services of the type provided or required to be provided pursuant to the Property Management Agreements. |
C-1
Exhibit 10.3
EMPLOYEE MATTERS AGREEMENT
by and among
APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
AIMCO OP L.P.,
APARTMENT INCOME REIT CORP.
and
AIMCO PROPERTIES, L.P.
dated as of
December 15, 2020
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 |
General | |||||
Section 1.2 |
References; Interpretation | 8 | ||||
ARTICLE II | ||||||
GENERAL PRINCIPLES | ||||||
Section 2.1 |
Nature of Liabilities | 9 | ||||
Section 2.2 |
Transfers of Employees Generally | 9 | ||||
Section 2.3 |
Assumption and Retention of Liabilities Generally | 9 | ||||
Section 2.4 |
Service Recognition | 10 | ||||
Section 2.5 |
Collective Bargaining Agreements | 11 | ||||
Section 2.6 |
Information and Consultation | 11 | ||||
Section 2.7 |
WARN | 11 | ||||
ARTICLE III | ||||||
CERTAIN BENEFIT PLAN PROVISIONS | ||||||
Section 3.1 |
Benefits Generally | 11 | ||||
Section 3.2 |
Health and Welfare Benefit Plans | 12 | ||||
Section 3.3 |
Savings Plans | 12 | ||||
Section 3.4 |
Deferred Compensation Plan | 12 | ||||
Section 3.5 |
Executive Severance Policy | 12 | ||||
ARTICLE IV | ||||||
EQUITY INCENTIVE AWARDS | ||||||
Section 4.1 |
Treatment of DevCo Stock Options | 13 | ||||
Section 4.2 |
Treatment of DevCo Restricted Stock Awards | 14 | ||||
Section 4.3 |
Treatment of DevCo Performance Restricted Stock Awards | 14 | ||||
Section 4.4 |
Treatment of DevCo Restricted LTIP Units | 15 | ||||
Section 4.5 |
Treatment of DevCo Performance Restricted LTIP Unit Awards | 15 | ||||
Section 4.6 |
SpinCo Stock Plan | 15 | ||||
Section 4.7 |
General Terms | 15 | ||||
Section 4.8 |
Employee Stock Purchase Plan | 17 |
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ARTICLE V
ADDITIONAL MATTERS
Section 5.1 |
Cash Incentive Programs | 18 | ||||
Section 5.2 |
Time-Off Benefits | 18 | ||||
Section 5.3 |
COBRA Compliance | 19 | ||||
Section 5.4 |
Code Section 409A | 19 | ||||
Section 5.5 |
Payroll Taxes and Reporting | 19 | ||||
Section 5.6 |
Regulatory Filings | 19 | ||||
Section 5.7 |
Disability | 19 | ||||
Section 5.8 |
Certain Requirements | 20 | ||||
ARTICLE VI | ||||||
GENERAL AND ADMINISTRATIVE | ||||||
Section 6.1 |
Employer Rights | 21 | ||||
Section 6.2 |
Effect on Employment | 21 | ||||
Section 6.3 |
Consent of Third Parties | 21 | ||||
Section 6.4 |
Access to Employees | 22 | ||||
Section 6.5 |
Beneficiary Designation/Release of Information/Right to Reimbursement | 22 | ||||
Section 6.6 |
No Third-Party Beneficiaries | 22 | ||||
Section 6.7 |
No Acceleration of Benefits | 22 | ||||
Section 6.8 |
Employee Benefits Administration | 22 | ||||
ARTICLE VII | ||||||
MISCELLANEOUS | ||||||
Section 7.1 |
Entire Agreement | 22 | ||||
Section 7.2 |
Counterparts | 23 | ||||
Section 7.3 |
Survival of Agreements | 23 | ||||
Section 7.4 |
Notices | 23 | ||||
Section 7.5 |
Waivers | 23 | ||||
Section 7.6 |
Assignment | 24 | ||||
Section 7.7 |
Successors and Assigns | 24 | ||||
Section 7.8 |
Termination and Amendment | 24 | ||||
Section 7.9 |
Subsidiaries | 24 | ||||
Section 7.10 |
Title and Headings | 25 | ||||
Section 7.11 |
Governing Law | 25 | ||||
Section 7.12 |
Severability | 25 | ||||
Section 7.13 |
Interpretation | 25 | ||||
Section 7.14 |
No Duplication; No Double Recovery | 25 | ||||
Section 7.15 |
No Waiver | |||||
Section 7.16 |
No Admission of Liability |
ii
EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT (this Agreement), is entered into as of December 15, 2020, by and among Apartment Investment and Management Company, a Maryland corporation (DevCo), Aimco OP L.P., a Delaware limited partnership and a subsidiary of SpinCo OP (DevCo OP), Apartment Income REIT Corp., a Maryland corporation and a subsidiary of DevCo (SpinCo), and AIMCO Properties, L.P., a Delaware limited partnership and a subsidiary of SpinCo (SpinCo OP). DevCo, DevCo OP, SpinCo, and SpinCo OP are sometimes referred to herein individually as a Party, and collectively as the Parties. Capitalized terms used in this Agreement, but not otherwise defined in this Agreement or the Separation and Distribution Agreement by and between the Parties, dated as of December 15, 2020 (the Separation Agreement), shall have the meanings set forth in Section 1.1.
W I T N E S E T H:
WHEREAS, the DevCo Board has determined that it is advisable and in the best interests of DevCo and its stockholders to restructure the Assets and Liabilities of DevCo into two companies: (i) DevCo (together with DevCo OP) which, following consummation of the transactions contemplated under the Separation Agreement, will own and conduct the DevCo Business; and (ii) SpinCo (together with SpinCo OP) which, following consummation of the transactions contemplated under the Separation Agreement, will own and conduct the SpinCo Business, in the manner contemplated by the Separation Agreement;
WHEREAS, the Separation Agreement sets forth the terms and conditions applicable to the Restructuring and the Distribution; and
WHEREAS, pursuant to the Separation Agreement, DevCo and SpinCo have agreed to enter into this Agreement for the purpose of allocating Assets, Liabilities and responsibilities with respect to certain employee matters and employee compensation and benefit plans and programs between them and to address certain other employment-related matters.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 General. As used in this Agreement, the following terms shall have the following meanings:
Affiliate means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person.
Agreement shall have the meaning set forth in the Preamble.
Aimco Benefit Arrangement shall mean any Benefit Arrangement sponsored, maintained or contributed to by DevCo prior to the Effective Time.
Aimco 401(k) Plan shall have the meaning set forth in Section 3.3.
Applicable Exchange shall mean the securities exchange as may at the applicable time be the principal market for shares of DevCo Common Stock or shares of SpinCo Common Stock, as applicable.
Benefit Arrangement shall mean, with respect to an entity, each compensation or employee benefit plan, program, policy, agreement or other arrangement, whether or not employee benefit plans (within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA), including any benefit plan, program, policy, agreement or arrangement providing cash- or equity-based compensation or incentives, health, medical, dental, vision, disability, accident or life insurance benefits or vacation, paid or unpaid leave, severance, retention, change in control, termination, deferred compensation, individual employment, retirement, pension or savings benefits, supplemental income, retiree benefit or other fringe benefit (whether or not taxable), or employee loans, that are sponsored or maintained by such entity (or to which such entity contributes or is required to contribute or in which it participates), and excluding workers compensation plans, policies, programs and arrangements.
Code shall have the meaning set forth in Section 5.9(i).
Collective Bargaining Agreement shall mean all agreements with the collective bargaining representatives, employee representatives, trade unions, labor or management organizations, groups of employees, or works councils or similar representative bodies of Employees, including all national or sector specific collective agreements which are applicable to Employees that set forth terms and conditions of employment of Employees, and all modifications of, or amendments to, such agreements and any rules, procedures, awards or decisions of competent jurisdiction interpreting or applying such agreements.
DevCo shall have the meaning set forth in the Preamble.
DevCo Benefit Arrangement shall mean any Benefit Arrangement sponsored, maintained or contributed to by any member of the DevCo Group as of immediately following the Effective Time.
DevCo Deferred Compensation Plan shall mean the Apartment Investment and Management Company Deferred Compensation Plan.
DevCo Employee shall mean each individual identified on Schedule 1.1 hereto.
DevCo ESPP shall mean the Apartment Investment and Management Company 2020 Employee Stock Purchase Plan.
DevCo Excess Amount shall have the meaning set forth in Section 5.9(ii).
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DevCo Option shall mean an option to purchase shares of DevCo Common Stock granted pursuant to a DevCo Stock Plan.
DevCo Performance Restricted LTIP Unit Award shall mean an award granted by DevCo pursuant to the DevCo Stock Plans and the Partnership Unit Designation of the LTIP Units of Aimco Properties L.P. under the Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, that is subject to performance-based vesting.
DevCo Performance Restricted Stock Award shall mean an award granted by DevCo pursuant to a DevCo Stock Plan that was denominated as Performance Restricted Stock under the terms of such plan and the related award agreement.
DevCo Ratio shall mean the quotient obtained by dividing (a) the Post-Separation DevCo Stock Value by (b) the Pre-Separation DevCo Stock Value.
DevCo Alternate Ratio shall mean (i) the volume-weighted average per-share price of DevCo Common Stock trading during the period commencing on December 15, 2021 and continuing through and including December 17, 2021, divided by (ii) the sum of (A) the volume-weighted average per-share price of DevCo Common Stock trading during the period commencing on December 15, 2021 and continuing through and including December 17, 2021 plus (B) the volume-weighted average per-share price of SpinCo Shares trading during the period commencing on December 15, 2021 and continuing through and including December 17, 2021.
DevCo REIT shall have the meaning set forth in Section 5.9(ii).
DevCo Restricted LTIP Unit Award shall mean an award granted by DevCo pursuant to the DevCo Stock Plans and the Partnership Unit Designation of the LTIP Units of Aimco Properties L.P. under the Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, that is subject to solely time-based vesting.
DevCo Restricted Stock Award shall mean an award granted by DevCo pursuant to a DevCo Stock Plans, that was denominated as Restricted Stock under the terms of such plan and the related award agreement.
DevCo Stock Plans shall mean the DevCo Second Amended and Restated 2015 Stock Award and Incentive Plan (as amended and restated on February 22, 2018), the DevCo 2015 Stock Award and Incentive Plan (as amended and restated January 31, 2017) and the DevCo 2007 Stock Award and Incentive Plan.
DevCo Welfare Plans shall mean any Welfare Plan maintained by DevCo or any member of the DevCo Group.
Employee shall mean a DevCo Employee, SpinCo Employee, Terminating Employee or the Specified Employee.
Employee Representative shall mean any employee representative, trade union, labor or management organization, group of employees or similar representative body for Employees.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.
LTIP Unit shall have the meaning set forth under the DevCo Stock Plans.
Nonqualifying Income shall have the meaning set forth in Section 5.9(i).
Party and Parties shall have the meanings set forth in the Preamble.
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Person means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, a limited liability company, a union, an unincorporated organization or other legal entity, including a governmental entity or any department, agency or political subdivision thereof.
Plan Transition Date shall mean the date that is (i) the Distribution Date or (ii) such earlier date as agreed between the Parties.
Post-Separation DevCo Awards shall mean Post-Separation DevCo Option Awards, Post-Separation DevCo Restricted Stock Awards, Post-Separation DevCo Performance Restricted Stock Awards, Post-Separation DevCo Restricted LTIP Unit Awards and Post-Separation DevCo Performance Restricted LTIP Unit Awards, collectively.
Post-Separation DevCo Option Award shall mean a DevCo Option Award adjusted as of the Effective Time in accordance with Section 4.1.
Post-Separation DevCo Performance Restricted LTIP Unit Award shall mean a DevCo Performance Restricted LTIP Award adjusted as of the Effective Time in accordance with Section 4.5.
Post-Separation DevCo Performance Restricted Stock Award shall mean a DevCo Performance Restricted Stock Award adjusted as of the Effective Time in accordance with Section 4.3.
Post-Separation DevCo Restricted LTIP Unit Award shall mean a DevCo Restricted LTIP Unit Award adjusted as of the Effective Time in accordance with Section 4.4.
Post-Separation DevCo Restricted Stock Award shall mean a DevCo Restricted Stock Award adjusted as of the Effective Time in accordance with Section 4.2.
Post-Separation DevCo Stock Value shall mean the simple average of the volume-weighted average per-share price of DevCo Common Stock trading ex distribution on the Applicable Exchange during each of the last ten (10) full Trading Sessions, or such shorter number of Trading Sessions that the DevCo Common Stock is trading ex distribution, immediately prior to the Effective Time.
Pre-Separation DevCo Stock Value shall mean the simple average of the volume-weighted average per-share price of DevCo Common Stock trading regular way with due bills on the Applicable Exchange during each of the last ten (10) full Trading Sessions, or such shorter number of Trading Sessions that the DevCo Common Stock is trading regular way with due bills, immediately prior to the Effective Time.
REIT Requirements shall have the meaning set forth in Section 5.9(i).
Separation Agreement shall have the meaning set forth in the Recitals.
Specified Employee shall mean Terry Considine.
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SpinCo shall have the meaning set forth in the Preamble.
SpinCo Alternate Ratio shall mean (i) the volume-weighted average per-share price of SpinCo Shares trading during the period commencing on December 15, 2021 and continuing through and including December 17, 2021, divided by (ii) the sum of (A) the volume-weighted average per-share price of DevCo Common Stock trading during the period commencing on December 15, 2021 and continuing through and including December 17, 2021 plus (B) the volume-weighted average per-share price of SpinCo Shares trading during the period commencing on December 15, 2021 and continuing through and including December 17, 2021.
SpinCo Awards shall mean SpinCo Options, SpinCo Restricted Stock Awards, DevCo Performance Restricted Stock Awards, SpinCo Restricted LTIP Unit Awards and SpinCo Performance Restricted LTIP Unit Awards, collectively.
SpinCo Benefit Arrangement shall mean any Benefit Arrangement sponsored, maintained or contributed to exclusively by any member of the SpinCo Group other than a SpinCo Transferred Benefit Arrangement.
SpinCo Employee shall mean each individual who is an employee of DevCo or any of its Subsidiaries or Affiliates immediately prior to the Effective Time and who is not identified on Schedule 1.1 as a DevCo Employee and who is neither the Specified Employee nor a Terminating Employee.
SpinCo Excess Amount shall have the meaning set forth in Section 5.9(i).
SpinCo Option shall mean an award of options to purchase shares of SpinCo Common Stock assumed by SpinCo in accordance with Section 4.1.
SpinCo Performance Restricted Stock Award shall mean an award of shares of performance restricted stock of SpinCo assumed by SpinCo in accordance with Section 4.3.
SpinCo Performance Restricted LTIP Unit Award shall mean an award of performance LTIP Units assumed by SpinCo in accordance with Section 4.5.
SpinCo Ratio shall mean the quotient obtained by dividing (a) the SpinCo Stock Value by (b) the Pre-Separation DevCo Stock Value.
SpinCo REIT shall have the meaning set forth in Section 5.9(i).
SpinCo Restricted LTIP Unit Award shall mean an award of LTIP Units assumed by SpinCo in accordance with Section 4.4.
SpinCo Restricted Stock Award shall mean an award of shares of restricted stock of SpinCo assumed by SpinCo in accordance with Section 4.2.
SpinCo Stock Plan shall have the meaning set forth in Section 4.6.
SpinCo Stock Value shall mean the simple average of the volume-weighted average per-share price of SpinCo Shares trading as when issued on the Applicable Exchange during each of the first ten (10) full Trading Sessions, or such shorter number of Trading Sessions that the SpinCo Shares are trading as when issued, immediately prior to the Effective Time.
SpinCo Transferred Benefit Arrangement shall have the meaning set forth in Section 3.1(a).
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SpinCo Welfare Plans shall mean any Welfare Plan maintained by SpinCo or any member of the SpinCo Group.
Terminating Employee shall mean any employee of the DevCo Group whose employment is terminated prior to the Effective Time.
Trading Session shall mean the period of time during any given calendar day, commencing with the determination of the opening price on the Applicable Exchange and ending with the determination of the closing price on the Applicable Exchange, in which trading in shares of DevCo Common Stock or shares of SpinCo Common Stock Shares (as applicable) is permitted on the Applicable Exchange.
Welfare Plan shall mean, where applicable, a welfare plan (as defined in Section 3(1) of ERISA and in 29 C.F.R. §2510.3-1) or a cafeteria plan under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision and mental health and substance use disorder), disability benefits, or life, accidental death and disability, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, contribution funding toward a health savings account, flexible spending accounts, tuition reimbursement or adoption assistance programs or cashable credits.
Section 1.2 References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Unless the context otherwise requires, the words include, includes and including when used in this Agreement shall be deemed to be followed by the phrase without limitation. Unless the context otherwise requires, references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words hereof, hereby and herein and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. The words written request when used in this Agreement shall include email. Unless the context requires otherwise, references in this Agreement to DevCo shall also be deemed to refer to the applicable member of the DevCo Group, references to SpinCo shall also be deemed to refer to the applicable member of the SpinCo Group and, in connection therewith, any references to actions or omissions to be taken, or refrained from being taken, as the case may be, by DevCo or SpinCo shall be deemed to require DevCo or SpinCo, as the case may be, to cause the applicable members of the DevCo Group or the SpinCo Group, respectively, to take, or refrain from taking, any such action. In the event of any inconsistency or conflict which may arise in the application or interpretation of any of the definitions set forth in Section 1.1, for the purpose of determining what is and is not included in such definitions, any item explicitly included on a Schedule referred to in any such definition shall take priority over any provision of the text thereof.
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ARTICLE II
GENERAL PRINCIPLES
Section 2.1 Nature of Liabilities. All Liabilities assumed or retained by a member of the DevCo Group under this Agreement shall be DevCo Liabilities for purposes of the Separation Agreement. All Liabilities assumed or retained by a member of the SpinCo Group under this Agreement shall be SpinCo Liabilities for purposes of the Separation Agreement.
Section 2.2 Transfers of Employees Generally.
(a) Effective as of no later than the Effective Time and except as otherwise agreed by the Parties, (i) the applicable members of the DevCo Group and the SpinCo Group shall have taken such actions as are necessary to ensure that each SpinCo Employee is employed by a member of the SpinCo Group as of immediately following the Effective Time and (ii) the applicable member of the DevCo Group shall have taken such actions as are necessary to ensure that each individual who is intended to be a DevCo Employee as of immediately following the Effective Time is employed by a member of the DevCo Group as of the Effective Time.
(b) The DevCo Group and SpinCo Group agree to execute, and to seek to have the applicable SpinCo Employees execute, such documentation, if any, as may be necessary to reflect the transfer of employment described in this Section 2.2.
Section 2.3 Assumption and Retention of Liabilities Generally.
(a) Except as pursuant to this Agreement, in connection with the Restructuring and the Distribution, or, if applicable, from and after the Effective Time, DevCo shall, or shall cause one or more members of the DevCo Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill (i) all Liabilities with respect to the employment and termination of employment of all DevCo Employees and all Terminating Employees (and related Liabilities with respect to their respective dependents and beneficiaries), including Liabilities arising under any Aimco Benefit Arrangements (including SpinCo Transferred Benefit Arrangements) and DevCo Benefit Arrangements, whenever incurred; (ii) all Liabilities with respect to the employment, or termination of employment, of all SpinCo Employees (and related Liabilities with respect to their respective dependents and beneficiaries), including Liabilities arising under any Aimco Benefit Arrangements, solely to the extent incurred on or prior to the Distribution Date, provided that, SpinCo shall accept and assume Liabilities for any health claims and workers compensation claims incurred by SpinCo Employees, but not yet reported and recognized, as of the Distribution Date; (iii) all Liabilities with respect to the employment of the Specified Employee (and related Liabilities with respect to his dependents and beneficiaries, other than any such dependent or beneficiary who otherwise constitutes a SpinCo Employee), to the extent incurred on or prior to the Distribution Date or to the extent pursuant an arrangement entered into between a member of the DevCo Group and the Specified Employee effective as of the Distribution Date; and (iv) all other Liabilities or obligations expressly assigned to or assumed by member of DevCo Group under this Agreement.
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(b) Except as pursuant to this Agreement, in connection with the Restructuring and the Distribution, or, if applicable, from and after the Effective Time, SpinCo shall, or shall cause one or more members of the SpinCo Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill (i) all Liabilities under all SpinCo Benefit Arrangements, whenever incurred; (ii) all Liabilities with respect to the employment, or termination of employment of all SpinCo Employees and their respective dependents and beneficiaries, including under any Aimco Benefit Arrangements and SpinCo Transferred Benefit Arrangements, solely to the extent incurred following the Distribution Date provided that, SpinCo shall accept and assume Liabilities for any health claims and workers compensation claims incurred by SpinCo Employees, but not yet reported and recognized, as of the Distribution Date; (iii) all Liabilities with respect to the employment of the Specified Employee with SpinCo (and related Liabilities with respect to his dependents and beneficiaries, other than any such dependent or beneficiary who otherwise constitutes a SpinCo Employee), to the extent incurred following the Distribution Date or to the extent pursuant to an arrangement entered into between a member of the SpinCo Group and the Specified Employee effective as of the Distribution Date; and (iv) other Liabilities or obligations expressly assigned to or assumed by a member of the SpinCo Group under this Agreement.
(c) The Parties shall promptly reimburse one another, upon reasonable request of the Party requesting reimbursement and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the cost of any obligations or Liabilities satisfied or assumed by the Party requesting reimbursement or its Affiliates that are, or that have been made pursuant to this Agreement, the responsibility of the other Party or any of its Affiliates.
(d) Notwithstanding any provision of this Agreement or the Separation Agreement to the contrary, SpinCo shall, or shall cause one or more members of the SpinCo Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill all Liabilities that have been accepted, assumed or retained under this Agreement irrespective of whether accruals for such Liabilities have been transferred to SpinCo or a member of the SpinCo Group or included on a combined balance sheet of the SpinCo Business or whether any such accruals are sufficient to cover such Liabilities.
Section 2.4 Service Recognition.
(a) From and after the Effective Time, to the extent permitted by the terms of the applicable SpinCo Benefit Arrangement, SpinCo shall, and shall cause each member of the SpinCo Group to, give each SpinCo Employee full credit for purposes of eligibility, vesting and determination of level of benefits under any SpinCo Benefit Arrangement for such SpinCo Employees prior service with any member of the DevCo Group or SpinCo Group or any predecessor thereto, to the same extent such service was recognized by the applicable Aimco Benefit Arrangement; provided that, such service shall not be recognized to the extent it would result in the duplication of benefits.
(b) Except to the extent prohibited by applicable Law and to the extent permitted under the terms of the applicable SpinCo Benefit Arrangement, as soon as administratively practicable on or after the Plan Transition Date: (i) SpinCo shall waive or cause
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to be waived all limitations as to preexisting conditions or waiting periods with respect to participation and coverage requirements applicable to each SpinCo Employee under any SpinCo Welfare Plan in which SpinCo Employees participate (or are eligible to participate) to the same extent that such conditions and waiting periods were satisfied or waived under an analogous Aimco Benefit Arrangement, and (ii) SpinCo shall provide or cause each SpinCo Employee to be provided with credit for any co-payments, deductibles or other out-of-pocket amounts paid pursuant to an Aimco Benefit Arrangement during the plan year in which the SpinCo Employees become eligible to participate in the SpinCo Welfare Plans in satisfying any applicable co-payments, deductibles or other out-of-pocket requirements under any such plans for such plan year.
Section 2.5 Collective Bargaining Agreements. Notwithstanding anything in this Agreement to the contrary, DevCo and SpinCo shall take or cause to be taken all actions that are necessary (if any) for SpinCo or a member of the SpinCo Group to continue to maintain or to assume and honor any Collective Bargaining Agreements and any pre-existing collective bargaining relationships (in each case including obligations that arise in respect of the period both before and after the date Effective Time) in respect of any Employees, other than that certain Agreement with the Residential Division of Service Employees International Union, Local 1 (the Hyde Park CBA), all Liabilities under which will be assumed and retained by DevCo. Neither DevCo nor any member of the DevCo Group shall have, or shall be deemed to have, any Liability under any Collective Bargaining Agreement other than the Hyde Park CBA, and all Liabilities and any Liability under any Collective Bargaining Agreement, other than the Hyde Park CBA, whenever arising, shall be a SpinCo Liability. Neither SpinCo nor any member of the SpinCo Group shall have, or shall be deemed to have, any Liability under the Hyde Park CBA, and all Liabilities and any Liability under the Hyde Park CBA, whenever arising, shall be a DevCo Liability.
Section 2.6 Information and Consultation. The Parties shall comply with all requirements and obligations to inform, consult or otherwise notify any SpinCo Employees or DevCo Employees or Employee Representatives in relation to the transactions contemplated by this Agreement and the Separation Agreement, whether required pursuant to any Collective Bargaining Agreement or applicable Law.
Section 2.7 WARN. Notwithstanding anything set forth in this Agreement to the contrary, none of the transactions contemplated by or undertaken by this Agreement is intended to and shall not constitute or give rise to an employment loss or employment separation within the meaning of the federal Worker Adjustment and Retraining Notification (WARN) Act, or any other federal, state or local law or legal requirement addressing mass employment separations.
ARTICLE III
CERTAIN BENEFIT PLAN PROVISIONS
Section 3.1 Benefits Generally. Effective as of the Plan Transition Date, the DevCo Group shall have taken all necessary or appropriate actions to ensure that each Aimco Benefit Arrangement that is intended to be transferred to SpinCo, as set forth on Schedule 3.1 hereto
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(each, a SpinCo Transferred Benefit Arrangement), is transferred to a member of the SpinCo Group.
Section 3.2 Health and Welfare Benefit Plans. DevCo shall or shall cause a member of the DevCo Group to have in effect, no later than the Business Day immediately prior to the Plan Transition Date, DevCo Welfare Plans providing health and welfare benefits for the benefit of each DevCo Employee with terms that are, in the aggregate, substantially similar to those provided to the applicable DevCo Employee immediately prior to the date on which such DevCo Welfare Plans become effective.
Section 3.3 Savings Plans(a) . Effective no later than the Plan Transition Date, DevCo shall take all steps necessary or appropriate to cause (i) the Aimco 401(k) Retirement Plan and all applicable accounts, underlying Assets, and related trusts and agreements (collectively, the Aimco 401(k) Plan), and all Liabilities related thereto, to be transferred to a member of the SpinCo Group; (ii) a member of the SpinCo Group to assume and adopt the Aimco 401(k) Plan and all Liabilities related thereto; and (iii) DevCo to become a participating employer in the Aimco 401(k) Plan. Effective as of the Plan Transition Date, SpinCo Employees and DevCo Employees shall continue to be eligible to participate in the Aimco 401(k) Plan, as so transferred to, and assumed by, SpinCo.
Section 3.4 Deferred Compensation Plan. (i) Effective no later than the Plan Transition Date, DevCo shall take all steps necessary or appropriate to cause the DevCo Deferred Compensation Plan, and all applicable accounts, underlying Assets and related trusts and agreements (collectively, the DevCo Deferred Compensation Plan), and all Liabilities related thereto, to be transferred to a member of the SpinCo Group; and (ii) a member of the SpinCo Group to assume and adopt the DevCo Deferred Compensation Plan and all Liabilities related thereto. To the extent that any DevCo Employee has an account under the DevCo Deferred Compensation Plan as of the Effective Time, DevCo shall cause a member of the DevCo Group to adopt a deferred compensation plan with terms that are substantially similar to those under the DevCo Deferred Compensation Plan and the accounts, Assets and Liabilities with respect to such DevCo Employees under the DevCo Deferred Compensation Plan shall be , transferred in-kind to such new deferred compensation plan sponsored by a member of the DevCo Group, and DevCo hall fully pay, perform and discharge, all obligations thereunder. It is the intent of the Parties that no DevCo Employee or SpinCo Employee will experience a separation from service, as that term is defined in the DevCo Deferred Compensation Plan solely as a result of the Transaction or the transfer of SpinCo Employees to employment by a member of the SpinCo Group.
Section 3.5 Flexible Spending Account Plans. (i) Effective no later than the Distribution Date, DevCo shall take all steps necessary or appropriate to cause a member of the DevCo Group to have in effect a flexible spending plan providing flexible spending accounts for medical and dependent care expenses (the DevCo Flexible Spending Plan) with terms that are substantially similar to those provided to DevCo Employees under the DevCo flexible spending account plan that shall become a SpinCo Transferred Benefit Arrangement (the SpinCo Flexible Spending Plan), (ii) each DevCo Employee shall cease to participate in the DevCo flexible spending account plan effective upon the date on which such plan becomes a SpinCo Transferred Benefit Arrangement, (iii) as soon as practicable after the SpinCo Flexible Spending Plan
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becomes effective, SpinCo will transfer all of the obligations and Liabilities attributable to the DevCo Employees, including the account balances of DevCo Employees, to the DevCo Flexible Spending Plan, and the DevCo Flexible Spending Plan shall credit each such DevCo Employees flexible spending accounts with the full account balances (i.e., the amounts collected from participating DevCo Employees and not reimbursed) as of the Effective Time that were transferred from the SpinCo Flexible Spending Plan.
Section 3.6 Executive Severance Policy. (i) Effective no later than the Distribution Date, DevCo and SpinCo shall take all steps necessary or appropriate to cause a member of the SpinCo Group to have in effect an executive severance policy (the SpinCo Executive Severance Policy) with terms that are substantially similar to those provided to SpinCo Employees who were eligible under the DevCo Executive Severance Policy prior to the Distribution Date, (ii) each SpinCo Employee who is eligible under the DevCo Executive Severance Policy shall automatically cease to be eligible effective upon the date on which the SpinCo Executive Severance Policy becomes effective and (iii) effective as of date the SpinCo Executive Severance Policy becomes effective, SpinCo shall fully pay, perform and discharge, all obligations thereunder.
ARTICLE IV
EQUITY INCENTIVE AWARDS
Section 4.1 Treatment of DevCo Stock Options. Each DevCo Option that is outstanding immediately prior to the Distribution Date shall be converted, as of the Effective Time, into both a Post-Separation DevCo Option Award and a SpinCo Option Award and shall, except as otherwise provided in this Section 4.1, be subject to the same terms and conditions (including with respect to vesting and expiration) after the Effective Time as were applicable to such DevCo Option Award immediately prior to the Effective Time; provided, however, that from and after the Effective Time:
(a) the number of shares of DevCo Common Stock subject to such Post-Separation DevCo Option Award shall be equal to the number of shares of DevCo Common Stock subject to the corresponding DevCo Option Award immediately prior to the Effective Time;
(b) the number of shares of SpinCo Common Stock subject to such SpinCo Option Award shall be equal to the number of shares of DevCo Common Stock subject to the corresponding DevCo Option Award immediately prior to the Effective Time;
(c) the per share exercise price of such Post-Separation DevCo Option Award shall be equal to the product, rounded up to the nearest cent, obtained by multiplying (i) the per share exercise price of the corresponding DevCo Option Award immediately prior to the Effective Time by (ii) the DevCo Ratio; provided that if the Specified Employee and SpinCo board members Robert Miller and Thomas Keltner, determine that trading in SpinCo when issued markets during first ten (10) full Trading Sessions, or such shorter number of Trading Sessions that shares of DevCo Common Stock Shares are trading ex-distribution, immediately prior to the Effective Time, is not sufficiently robust to ensure that that applicable trading prices fairly represent how the general marketplace values DevCo post-Distribution, then subsection (ii) shall be the DevCo Alternate Ratio; and
(d) the per share exercise price of such SpinCo Option Award shall be equal to the product, rounded up to the nearest cent, obtained by multiplying (i) the per share
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exercise price of the corresponding DevCo Option Award immediately prior to the Effective Time by (ii) the SpinCo Ratio; provided that if the Specified Employee and SpinCo board members Robert Miller and Thomas Keltner, determine that trading in SpinCo when issued markets during first ten (10) full Trading Sessions, or such shorter number of Trading Sessions that the SpinCo Shares are trading as when issued, immediately prior to the Effective Time, is not sufficiently robust to ensure that applicable trading prices fairly represent how the general marketplace values SpinCo post-Distribution, then subsection (ii) shall be the SpinCo Alternate Ratio.
Notwithstanding anything to the contrary in this Section 4.01, the exercise price, the number of shares of DevCo Common Stock and shares of SpinCo Common Stock subject to each Post-Separation DevCo Option Award and SpinCo Option Award, as applicable, and the terms and conditions of exercise of such options, shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that, in the case of any DevCo Option Award to which Section 421 of the Code applies by reason of its qualification under Section 422 of the Code as of immediately prior to the Effective Time, the exercise price, the number of shares of DevCo Common Stock and shares of SpinCo Common Stock subject to such option award, and the terms and conditions of exercise of such option award shall be determined in a manner consistent with the requirements of Section 424(a) of the Code.
Section 4.2 Treatment of DevCo Restricted Stock Awards. Each DevCo Restricted Stock Award that is outstanding as of immediately prior to the Effective Time shall be converted, as of the Effective Time, into both a Post-Separation DevCo Restricted Stock Award and a SpinCo Restricted Stock Award and each such award shall, except as otherwise provided in this Section 4.2, be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as were applicable to such DevCo Restricted Stock Award prior to the Effective Time; provided, however, that from and after the Effective Time the number of shares subject to (i) the Post-Separation DevCo Restricted Stock Award shall be equal to the number of shares of DevCo Common Stock subject to the corresponding DevCo Restricted Stock Award immediately prior to the Effective Time and (ii) the SpinCo Restricted Stock Award shall be equal to the number of shares of DevCo Common Stock subject to the DevCo Restricted Stock Award immediately prior to the Effective Time.
Section 4.3 Treatment of DevCo Performance Restricted Stock Awards. Each DevCo Performance Restricted Stock Award that is outstanding immediately prior to the Effective Time shall be converted, as of the Effective Time, into both a Post-Separation DevCo Performance Restricted Stock Award and a SpinCo Performance Restricted Stock Award and each award shall, except as otherwise provided in this Section 4.3, be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as were applicable to such DevCo Performance Restricted Stock Award prior to the Effective Time; provided, however, that from and after the Effective Time the number of shares subject to (i) the Post-Separation DevCo Performance Restricted Stock Award shall be equal to the number of shares of DevCo Common Stock subject to the corresponding DevCo Performance Restricted Stock Award immediately prior to the Effective Time, and (ii) the SpinCo Performance Restricted Stock Award shall be equal to the number of shares of DevCo Common Stock subject to the DevCo Performance Restricted Stock Award immediately prior to the Effective Time; provided, further, that, in the case of (i) and (ii), the number of shares of DevCo Common Stock subject to any DevCo Performance Restricted Stock Award granted in calendar year 2018 (each, a 2018 Performance Award) and that is outstanding immediately prior to the Effective Time shall be determined by measuring actual performance of the applicable performance goals as of immediately prior to the Distribution Date, with the ending share price for purposes of determining TSR (as defined under the applicable 2018 Performance Award agreement) determined based on the nine day period commencing with December 3, 2020 and continuing up to and including December 11, 2020, and following the Effective Time, such Post-Separation DevCo Performance Restricted Stock Awards and the SpinCo Performance Restricted Stock Awards, in each case, with respect to such awards granted
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in calendar year 2018 shall be subject solely to time-based and service-based vesting through the vesting dates applicable to each such award.
Section 4.4 Treatment of DevCo Restricted LTIP Units. Each DevCo Restricted LTIP Unit Award that is outstanding as of immediately prior to the Effective Time shall be converted, as of the Effective Time, into both a Post-Separation DevCo LTIP Unit Award and a SpinCo Restricted LTIP Unit Award and each such award shall, except as otherwise provided in this Section 4.4, be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as were applicable to such DevCo Restricted LTIP Unit Award prior to the Effective Time; provided, however, that from and after the Effective Time the number of units subject to (i) the Post-Separation DevCo Restricted LTIP Unit Award shall be equal to the number of LTIP Units subject to the corresponding DevCo Restricted LTIP Unit Award immediately prior to the Effective Time and (ii) the SpinCo Restricted LTIP Unit Award shall be equal to the number of LTIP Units subject to the DevCo Restricted LTIP Unit Award immediately prior to the Effective Time.
Section 4.5 Treatment of DevCo Performance Restricted LTIP Unit Awards. Each DevCo Performance Restricted LTIP Unit Award that is outstanding immediately prior to the Effective Time shall be converted, as of the Effective Time, into both a Post-Separation DevCo Performance Restricted LTIP Unit Award and a SpinCo Performance Restricted LTIP Unit Award and each award shall, except as otherwise provided in this Section 4.5, be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as were applicable to such DevCo Performance Restricted LTIP Unit Award prior to the Effective Time; provided, however, that from and after the Effective Time the number of LTIP Units subject to (i) the Post-Separation DevCo Performance Restricted LTIP Unit Award shall be equal to the number of LTIP Units subject to the corresponding DevCo Performance Restricted LTIP Unit Award immediately prior to the Effective Time, and (ii) the SpinCo Performance Restricted LTIP Unit Award shall be equal to the number of LTIP Units subject to the DevCo Performance Restricted LTIP Unit Award immediately prior to the Effective Time; provided, further, that, in the case of (i) and (ii), the number of LTIP Units subject to any DevCo Performance Restricted LTIP Unit Award granted in calendar year 2018 (each, a 2018 Performance LTIP Award) and that is outstanding immediately prior to the Effective Time shall be determined by measuring actual performance of the applicable performance goals as of immediately prior to the Distribution Date, with the ending share price for purposes of determining TSR (as defined under the applicable 2018 Performance LTIP Award agreement) determined based on the nine day period commencing with December 3, 2020 and continuing up to and including December 11, 2020, and following the Effective Time, such Post-Separation DevCo Performance Restricted LTIP Unit Awards and SpinCo Performance Restricted LTIP Unit Awards, in each case, with respect to such awards granted in in calendar year 2018, shall be subject solely to time-based and service-based vesting through the vesting dates applicable to each such award.
Section 4.6 SpinCo Stock Plan. Effective as of the Effective Time, SpinCo shall have adopted the SpinCo Corporation 2020 Stock Award and Incentive Plan (the SpinCo Stock Plan), which shall permit the grant and issuance of equity incentive awards denominated in SpinCo Common Stock as described in this Article IV.
Section 4.7 General Terms.
(a) All of the adjustments described in this Article IV shall be effected in accordance with Sections 424 and 409A of the Code, in each case to the extent applicable.
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The Parties shall, prior to the Effective Time, take all actions, including obtaining appropriate resolutions of the DevCo Board and the SpinCo Board, and providing all notices and obtaining all consents, that are necessary or desirable to give effect to the transactions contemplated by this Article IV.
(b) With respect to Post-Separation DevCo Awards and SpinCo Awards, (A) employment with the DevCo Group shall be treated as employment with SpinCo with respect to SpinCo Awards held by a DevCo Employee who is employed by a member of the DevCo Group immediately following the Effective Time and (B) employment with the SpinCo Group shall be treated as employment with DevCo with respect to Post-Separation DevCo Awards held by a SpinCo Employee who is employed by a member of the SpinCo Group immediately following the Effective Time. In addition, none of the Restructuring, the Distribution or any employment transfer described in Section 2.2 shall constitute a termination of employment for any Employee for purposes of any DevCo Award, Post-Separation DevCo Award or any SpinCo Award, as applicable. After the Effective Time, for any award adjusted under this Article IV, any reference to a change in control, change of control or similar definition in an award agreement, employment agreement or DevCo Stock Plan applicable to such award (x) with respect to Post-Separation DevCo Awards, shall be deemed to refer to a change in control, change of control or similar definition as set forth in the applicable award agreement, employment agreement or DevCo Stock Plan (a DevCo Change in Control), and (y) with respect to SpinCo Awards, shall be deemed to refer to a Change in Control as defined in the SpinCo Stock Plan or applicable award agreement (a SpinCo Change in Control). Without limiting the foregoing, with respect to provisions related to vesting of awards, a DevCo Change in Control shall be treated as a SpinCo Change in Control for purposes of SpinCo Awards held by DevCo Employees, and a SpinCo Change in Control shall be treated as a DevCo Change in Control for purposes of Post-Separation DevCo Awards held by SpinCo Employees.
(c) Except as otherwise provided in this Section 4.8(c) or Article VI, after the Effective Time, Post-Separation DevCo Awards, regardless of by whom held, shall be settled by DevCo, and SpinCo Awards, regardless of by whom held, shall be settled by SpinCo. Upon the vesting, payment or settlement, as applicable, of SpinCo Awards, SpinCo shall be solely responsible for ensuring the satisfaction of all applicable tax withholding requirements on behalf of each SpinCo Employee and for ensuring the collection and remittance of applicable employee withholding Taxes to the DevCo Group with respect to each DevCo Employee (with DevCo Group being responsible for remittance of the applicable employee Taxes and payment and remittance of the applicable employer Taxes relating to DevCo Employees to the applicable Governmental Authority). Upon the vesting, payment or settlement, as applicable, of Post-Separation DevCo Awards, DevCo shall be solely responsible for ensuring the satisfaction of all applicable Tax withholding requirements on behalf of each DevCo Employee and for ensuring the collection and remittance of applicable employee withholding Taxes to the SpinCo Group with respect to each SpinCo Employee (with SpinCo Group being responsible for remittance of the applicable employee Taxes and payment and remittance of the applicable employer Taxes relating to SpinCo Employees to the applicable Governmental Authority). Following the Effective Time, DevCo shall be responsible for all income tax reporting in respect of Post-Separation DevCo Awards held by DevCo Employees and SpinCo shall be responsible for all income tax reporting in respect of SpinCo Awards held by SpinCo Employees.
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(d) SpinCo shall be responsible for the settlement of cash dividends on any Post-Separation DevCo Award or SpinCo Award held by a SpinCo Employee. Prior to the date any such settlement is due, DevCo shall pay SpinCo in cash amounts required to settle any dividends with respect to Post-Separation DevCo Awards. DevCo shall be responsible for the settlement of cash dividends on any Post-Separation DevCo Awards or SpinCo Awards held by a DevCo Employee. Prior to the date any such settlement is due, SpinCo shall pay DevCo in cash amounts required to settle any dividends accrued following the Effective Time with respect to SpinCo Awards.
(e) Following the Effective Time, if any Post-Separation DevCo Award shall fail to become vested, such Post-Separation DevCo Award shall be forfeited to DevCo, and if any SpinCo Award shall fail to become vested, such SpinCo Award shall be forfeited to SpinCo.
(f) Each of the Parties shall establish an appropriate administration system to administer, in an orderly manner, (i) exercises of vested Post-Separation DevCo Options and SpinCo Options, (ii) the vesting and forfeiture of unvested Post-Separation DevCo Awards and SpinCo Awards and (iii) the withholding and reporting requirements with respect to all awards. Each of the Parties shall work together to unify and consolidate all indicative data and payroll and employment information in order to make certain that each applicable Persons data and records in respect of the applicable equity awards are correct as of the Effective Time.
(g) The Parties shall use their reasonable best efforts to maintain effective registration statements with the Securities Exchange Commission with respect to the awards described in this Article IV, to the extent any such registration statement is required by applicable Law.
(h) The Parties hereby acknowledge that the provisions of this Article IV are intended to achieve certain tax, legal and accounting objectives and, in the event such objectives are not achieved, the Parties agree to negotiate in good faith regarding such other actions that may be necessary or appropriate to achieve such objectives.
Section 4.8 Employee Stock Purchase Plan. The administrator of the DevCo ESPP shall take all actions necessary and appropriate to (a) cease payroll deductions and other contributions by SpinCo Employees no later than the Effective Time; (b) cease payroll deductions and other contributions by DevCo Employees effective as of the end of the calendar quarter in which the Effective Time occurs; and (c) terminate the DevCo ESPP effective as of the end of the calendar quarter in which the Effective Time occurs. Prior to the Effective Time, SpinCo shall adopt an employee stock purchase plan in a form substantially similar to the DevCo ESPP (the SpinCo ESPP), and the SpinCo Employees shall be eligible to participate in the SpinCo ESPP effective no later than January 1, 2021.
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ARTICLE V
ADDITIONAL MATTERS
Section 5.1 Annual Bonus Programs; Additional Payments. Annual cash bonuses payable under any Aimco Benefit Arrangement that provides for payments of annual bonuses or other annual cash incentive awards in respect of the 2020 fiscal year (the 2020 Cash Bonuses) shall be determined following the Effective Time based on actual performance results and level of performance achieved in respect of the 2020 fiscal year measured against the applicable targets under the Aimco Benefit Arrangement and, if and to the extent earned, the 2020 Cash Bonuses shall be paid to the eligible DevCo Employees and SpinCo Employees at the time or times DevCo otherwise would pay such 2020 Cash Bonuses in the ordinary course of business. For purposes of such payments of 2020 Cash Bonuses that are payable to SpinCo Employees, DevCo shall make a cash payment to SpinCo equal to the amount determined to be payable to any SpinCo Employee pursuant to the terms of this Section 5.1, along with an additional amount relating to the employer portion of employment taxes required to paid with respect to such cash payments, and SpinCo shall pay such cash payments, less any amounts required to be withheld for Taxes, to SpinCo Employees (and shall timely pay such employment taxes and withholding taxes to the appropriate Governmental Authority) promptly upon receipt of such cash amounts from DevCo. DevCo or the applicable member of the DevCo Group shall reimburse SpinCo or the applicable member of the SpinCo Group for services provided to DevCo and any member of the DevCo Group by the Specified Employee, on the basis of the time and effort spent by the Specified Employee for the benefit of DevCo and the DevCo Group, in accordance with the principles set forth on Schedule 5.1.
Section 5.2 Time-Off Benefits. Unless otherwise required under applicable Law, (i) SpinCo shall (A) credit each SpinCo Employee with the amount of accrued but unused vacation time, paid time-off and other time-off benefits as such SpinCo Employee had with the DevCo Group as of immediately before the Distribution Date and (B) permit each such SpinCo Employee to use such accrued but unused vacation time, paid time off and other time-off benefits in the same manner and upon the same terms and conditions as the SpinCo Employee would have been so permitted under the terms and conditions of the applicable DevCo policies in effect for the year in which such Distribution Date occurs, up to and including full exhaustion of such transferred unused vacation time, paid-time off and other time-off benefits (if such full exhaustion would be permitted under the applicable DevCo policies in effect for that year in which the Distribution Date occurs) and (ii) DevCo shall (A) credit each DevCo Employee with the amount of accrued but unused vacation time, paid time-off and other time-off benefits as such DevCo Employee had with the DevCo Group as of immediately before the Distribution Date and (B) permit each DevCo Employee to use such accrued but unused vacation time, paid time off and other time-off benefits in the same manner and upon the same terms and conditions as the DevCo Employee would have been so permitted under the terms and conditions of the applicable DevCo Group policies in effect for the year in which the Distribution Date occurs, up to and including full exhaustion of such transferred unused vacation time, paid-time off and other time-off benefits (if such full exhaustion would be permitted under the applicable DevCo policies in effect for that year in which the Distribution Date occurs).
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Section 5.3 COBRA Compliance. Effective as of the Plan Transition Date, SpinCo shall assume and be responsible for administering compliance with the health care continuation requirements of COBRA, in accordance with the provisions of (i) the SpinCo Benefit Arrangements that are SpinCo Welfare Plans, with respect to SpinCo Employees and their covered dependents who incur a COBRA qualifying event or loss of coverage under the SpinCo Welfare Plans at any time after the Plan Transition Date and (ii) the SpinCo Transferred Benefit Arrangements with respect to Terminating Employees and their covered dependents who incur a COBRA qualifying event or loss of coverage under the SpinCo Transferred Benefit Arrangements at any time prior to the Plan Transition Date.
Section 5.4 Code Section 409A. Notwithstanding anything in this Agreement to the contrary, the Parties shall negotiate in good faith regarding the need for any treatment different from that otherwise provided herein with respect to the payment of compensation to ensure that the treatment of such compensation does not cause the imposition of a Tax under Section 409A of the Code. In no event, however, shall any Party be liable to another in respect of any Taxes imposed under, or any other costs or Liabilities relating to, Section 409A of the Code.
Section 5.5 Payroll Taxes and Reporting. The Parties shall (i) to the extent practicable, treat SpinCo (or the appropriate member of the SpinCo Group) and DevCo (or the appropriate member of the DevCo Group) as a successor employer or predecessor, as applicable, within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to SpinCo Employees and DevCo Employees for purposes of Taxes imposed under the United States Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act, and (ii) cooperate with each other to avoid, to the extent possible, the filing of more than one IRS Form W-2 with respect to each SpinCo Employee and DevCo Employee for the calendar year in which the Effective Time occurs.
Section 5.6 Regulatory Filings. Subject to applicable Law, DevCo shall retain responsibility for all employee-related regulatory filings for reporting periods ending at or prior to the Effective Time, except for Equal Employment Opportunity Commission EEO-1 reports and affirmative action program (AAP) reports and responses to Office of Federal Contract Compliance Programs (OFCCP) submissions, for which DevCo shall provide data and information (to the extent permitted by applicable Laws) to SpinCo, which shall be responsible for making such filings in respect of SpinCo Employees.
Section 5.7 Disability. To the extent any DevCo Employee is, as of the Plan Transition Date, receiving payments as part of any short-term disability program that is part of a DevCo Welfare Plan and that will become a SpinCo Transferred Benefit Arrangement as of the Plan Transition Date, such DevCo Employees rights to continued short-term disability benefits (a) will end under any such DevCo Welfare Plan as of the Plan Transition Date; and (b) all remaining rights will be recognized under a DevCo Benefit Arrangement as of the Plan Transition Date, and the remainder (if any) of such DevCo Employees short-term disability benefits will be paid by a DevCo Welfare Plan that is a DevCo Benefit Arrangement. In the event that any DevCo Employee described above shall have any dispute with the short-term disability benefits they are receiving under a DevCo Welfare Plan that is a DevCo Benefit Arrangement, any and all appeal rights of such employees shall be realized through such DevCo Welfare Plan (and any appeal rights such DevCo Employee may have under any such DevCo
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Welfare Plan will be limited to benefits received and time periods occurring prior to the Plan Transition Date).
Section 5.8 Certain Requirements. Notwithstanding anything in this Agreement to the contrary, if the terms of a Collective Bargaining Agreement or applicable Law require that any Assets or Liabilities be retained by the DevCo Group or transferred to or assumed by the SpinCo Group in a manner that is different from that set forth in this Agreement, such retention, transfer or assumption shall be made in accordance with the terms of such Collective Bargaining Agreement or applicable Law and shall not be made as otherwise set forth in this Agreement.
Section 5.9 REIT Protections.
(a) DevCo acknowledges that certain SpinCo Affiliates (each, a SpinCo REIT) have elected to be classified as real estate investment trusts (REITs) and, as a result, must comply with certain requirements, including, without limitation, the provisions of Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the Code) (the REIT Requirements). In the event that counsel or independent accountants for any SpinCo REIT determine that there exists a material risk that any amounts due to SpinCo or any SpinCo Affiliate pursuant to this Agreement would be treated as gross income not described in Section 856(c)(2) or 856(c)(3) of the Code (Nonqualifying Income), the amount paid to SpinCo or any SpinCo Affiliate under this Agreement in any tax year may not exceed the maximum amount that can be paid to SpinCo or the applicable SpinCo Affiliate in such year without causing any SpinCo REIT to fail to meet the REIT Requirements for such year, determined as if the payment of such amount were Nonqualifying Income. If the amount payable for any tax year under the preceding sentence is less than the amount that DevCo or its Affiliates would otherwise be obligated to pay to SpinCo pursuant to the Agreement (the SpinCo Excess Amount), then DevCo or the applicable DevCo Affiliate shall place the SpinCo Excess Amount in escrow and shall not release any portion thereof to SpinCo or the applicable SpinCo Affiliate, and neither SpinCo nor such Affiliate shall be entitled to any such amount, unless and until SpinCo or its Affiliate delivers to DevCo or its Affiliate at the sole option of the applicable SpinCo REIT, (A) notice that it has received advice of such SpinCo REITs tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income, (B) a letter from the independent accountants of such SpinCo REIT indicating the maximum amount that can be paid at that time to SpinCo or the SpinCo Affiliate without causing such SpinCo REIT to fail to meet the REIT Requirements for any relevant taxable year, in which case such maximum amount shall be paid to SpinCo or the applicable SpinCo Affiliate, or (C) a private letter ruling issued by the Internal Revenue Service to the applicable SpinCo REIT indicating that the receipt of any SpinCo Excess Amount hereunder would not cause such SpinCo REIT to fail to satisfy the REIT Requirements. The obligation to pay any amount which is not paid as a result of this provision shall terminate five years from the original date such amount would have been payable without regard to this provision and neither SpinCo nor any SpinCo Affiliate shall have any further right to receive any such amount.
(b) SpinCo acknowledges that certain DevCo Affiliates (each, a DevCo REIT) have elected to be classified as REITs and, as a result, must comply with the REIT Requirements. In the event that counsel or independent accountants for any DevCo REIT determine that there exists a material risk that any amounts due to DevCo or DevCo Affiliates
20
hereunder would be treated as Nonqualifying Income, the amount paid to DevCo or to any DevCo Affiliate under this Agreement in any tax year may not exceed the maximum amount that can be paid to DevCo or the applicable DevCo Affiliate in such year without causing any DevCo REIT to fail to meet the REIT Requirements for such year, determined as if the payment of such amount were Nonqualifying Income. If the amount payable for any tax year under the preceding sentence is less than the amount that SpinCo or its Affiliates would otherwise be obligated to pay to DevCo pursuant to this Agreement (the DevCo Excess Amount), then SpinCo or the applicable SpinCo Affiliate shall place the DevCo Excess Amount in escrow and shall not release any portion thereof to DevCo or the applicable DevCo Affiliate, and neither DevCo nor such Affiliate shall be entitled to any such amount, unless and until DevCo or its Affiliate delivers to SpinCo or its Affiliate at the sole option of the applicable DevCo REIT, (A) notice that it has received advice of such DevCo REITs tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income, (B) a letter from the independent accountants of such DevCo REIT indicating the maximum amount that can be paid at that time to DevCo or the DevCo Affiliate without causing such DevCo REIT to fail to meet the REIT Requirements for any relevant taxable year, in which case such maximum amount shall be paid to DevCo or the applicable DevCo Affiliate, or (C) a private letter ruling issued by the Internal Revenue Service to the applicable DevCo REIT indicating that the receipt of any DevCo Excess Amount hereunder would not cause such DevCo REIT to fail to satisfy the REIT Requirements. The obligation to pay any amount which is not paid as a result of this provision shall terminate five years from the original date such amount would have been payable without regard to this provision and neither DevCo nor any DevCo Affiliate shall have any further right to receive any such amount.
ARTICLE VI
GENERAL AND ADMINISTRATIVE
Section 6.1 Employer Rights. Nothing in this Agreement shall be deemed to be an amendment to any Aimco Benefit Arrangement, DevCo Benefit Arrangement or SpinCo Benefit Arrangement or to prohibit any member of the DevCo Group or SpinCo Group, as the case may be, from amending, modifying or terminating any Aimco Benefit Arrangement, DevCo Benefit Arrangement or SpinCo Benefit Arrangement at any time within its sole discretion.
Section 6.2 Effect on Employment. Nothing in this Agreement is intended to or shall confer upon any employee or former employee of DevCo, SpinCo or any of their respective Affiliates any right to continued employment, or any recall or similar rights to any such individual on layoff or any type of approved leave.
Section 6.3 Consent of Third Parties. If any provision of this Agreement is dependent on the Consent of any third party and such Consent is withheld, the Parties shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the fullest extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the Parties hereto shall negotiate in good faith to implement the provision (as applicable) in a mutually satisfactory manner.
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Section 6.4 Access to Employees. On and after the Effective Time, DevCo and SpinCo shall, or shall cause each of their respective Affiliates to, make available to each other those of their employees who may reasonably be needed in order to defend or prosecute any legal or administrative action (other than a legal action between DevCo and SpinCo) to which any employee or director of the DevCo Group or the SpinCo Group or any DevCo Benefit Arrangement or SpinCo Benefit Arrangement is a party and which relates to a DevCo Benefit Arrangement or SpinCo Benefit Arrangement. The Party to whom an employee is made available in accordance with this Section 6.4 shall pay or reimburse the other Party for all reasonable expenses which may be incurred by such employee in connection therewith, including all reasonable travel, lodging and meal expenses, but excluding any amount for such employees time spent in connection herewith.
Section 6.5 Beneficiary Designation/Release of Information/Right to Reimbursement. To the extent permitted by applicable Law and except as otherwise provided for in this Agreement, all beneficiary designations, authorizations for the release of information and rights to reimbursement made by or relating to SpinCo Employees under DevCo Benefit Arrangements shall be transferred to and be in full force and effect under the corresponding SpinCo Benefit Arrangements until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply, to the relevant SpinCo Employee.
Section 6.6 No Third-Party Beneficiaries. This Agreement is solely for the benefit of the Parties and, except to the extent otherwise expressly provided herein, nothing in this Agreement, express or implied, is intended to confer any rights, benefits, remedies, obligations or Liabilities under this Agreement upon any Person, including any SpinCo Employee or other current or former employee, officer, director or contractor of the DevCo Group or SpinCo Group, other than the Parties and their respective successors and assigns.
Section 6.7 No Acceleration of Benefits. Except as otherwise provided in this Agreement, no provision of this Agreement shall be construed to create any right, or accelerate vesting or entitlement, to any compensation or benefit whatsoever on the part of any SpinCo Employee or other former, current or future employee of the DevCo Group or SpinCo Group under any Benefit Arrangement of the DevCo Group or SpinCo Group.
Section 6.8 Employee Benefits Administration. At all times following the date hereof, the Parties will cooperate in good faith as necessary to facilitate the administration of employee benefits and the resolution of related employee benefit claims with respect to SpinCo Employees and DevCo Employees, as applicable, including with respect to the provision of employee level information necessary for the other Party to manage, administer, finance and file required reports with respect to such administration.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Amendments and Waivers.
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(1) This Agreement may not be amended except by an agreement in writing signed by both Parties.
(2) Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party entitled to the benefit thereof and any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized representative of such Party. No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that either Party would otherwise have.
Section 7.2 Entire Agreement. This Agreement and the Separation Agreement, including the Exhibits and Schedules referenced herein and therein and attached hereto and thereto, constitute the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersede all prior negotiations, agreements, commitments, writings, courses of dealing and understandings with respect to the subject matter hereof.
Section 7.3 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.
Section 7.4 Third-Party Beneficiaries. This Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.
Section 7.5 Notices. All notices, requests, permissions, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) five (5) Business Days following sending by registered or certified mail, postage prepaid, (b) when sent, if sent by facsimile or email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, (c) when delivered, if delivered personally to the intended recipient, and (d) one (1) Business Day following sending by overnight delivery via a national courier service and, in each case, addressed to a Party at the following address for such Party (as updated from time to time by notice in writing to the other Party):
i. If to DevCo or DevCo OP:
c/o Apartment Investment and Management Company
4282 S. Ulster St.
Suite 1450
Denver, CO 80237
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Attention: General Counsel; Chief Financial Officer
ii. If to SpinCo or SpinCo OP:
Apartment Income REIT Corp.
4282 S. Ulster St.
Suite 1700
Denver, CO 80237
Attention: General Counsel; Chief Financial Officer
Section 7.6 Counterparts; Electronic Delivery. This Agreement may be executed in multiple counterparts, each of which when executed shall be deemed to be an original, but all of which together shall constitute one and the same agreement. Execution and delivery of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic means shall be deemed to be, and shall have the same legal effect as, execution by an original signature and delivery in person.
Section 7.7 Severability. If any term or other provision of this Agreement or the Schedules attached hereto is determined by a nonappealable decision by a court, administrative agency or arbitrators to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the court, administrative agency or arbitrators shall interpret this Agreement so as to affect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions are fulfilled to the fullest extent possible. If any sentence in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.
Section 7.8 Assignability; Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns; provided, however, that the rights and obligations of each Party under this Agreement shall not be assignable, in whole or in part, directly or indirectly, whether by operation of law or otherwise, by such Party without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed) and any attempt to assign any rights or obligations under this Agreement without such consent shall be null and void. Notwithstanding the foregoing, either Party may assign its rights and obligations under this Agreement to any of their respective Affiliates; provided that no such assignment shall release such assigning Party from any liability or obligation under this Agreement.
Section 7.9 Termination; Effect of Termination. Upon written notice, this Agreement may be terminated at any time prior to the Effective Time by and in the sole discretion of DevCo
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without the approval of SpinCo or any other party thereto. In the event of termination pursuant to this Section 7.9, neither Party shall have any Liability of any kind to the other Party as a result of such termination.
Section 7.10 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive Laws of the State of Delaware, without regard to any conflicts of law provisions thereof that would result in the application of the Laws of any other jurisdiction.
Section 7.11 Construction. This Agreement shall be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation shall be applied against either Party. The Parties represent that this Agreement is entered into with full consideration of any and all rights which the Parties may have. The Parties have relied upon their own knowledge and judgment. The Parties have had access to independent legal advice, have conducted such investigations they thought appropriate, and have consulted with such other independent advisors as they deemed appropriate regarding this Agreement and their rights and asserted rights in connection therewith. The Parties are not relying upon any representations or statements made by the other Party, or such other Partys employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement. The Parties are not relying upon a legal duty, if one exists, on the part of the other Party (or such other Partys employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or their preparation, it being expressly understood that neither Party shall ever assert any failure to disclose information on the part of the other Party as a ground for challenging this Agreement.
Section 7.12 Performance. Each Party shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party.
Section 7.13 Title and Headings. Titles and headings to Sections and Articles are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement..
Section 7.14 Schedules. The Schedules attached hereto are incorporated herein by reference and shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.
APARTMENT INVESTMENT AND MANAGEMENT COMPANY | ||
By: | /s/ H. Lynn C. Stanfield | |
Name: H. Lynn C. Stanfield | ||
Title: Authorized Person | ||
AIMCO OP L.P. | ||
By: | /s/ H. Lynn C. Stanfield | |
Name: H. Lynn C. Stanfield | ||
Title: Authorized Person | ||
APARTMENT INCOME REIT CORP. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person | ||
AIMCO PROPERTIES, L.P. | ||
By: | /s/ Paul L. Beldin | |
Name: Paul L. Beldin | ||
Title: Authorized Person |
[Signature Page to Employee Matters Agreement]
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Exhibit 10.4
MASTER LEASING AGREEMENT
dated as of December 15, 2020
by and between
AIMCO Properties, L.P.
And
Aimco Development Company, LLC
TABLE OF CONTENTS
Page | ||||||
1. |
Definitions | 1 | ||||
2. |
Leased Property; Redevelopment | 5 | ||||
(a) The Master Leases |
5 | |||||
(b) Consents |
6 | |||||
(c) Redevelopment of the Leased Properties |
6 | |||||
(d) Fair Market Value |
7 | |||||
(e) Initial Leased Properties |
8 | |||||
(f) Land Bank Assets |
8 | |||||
(g) Additional Properties |
8 | |||||
(h) Costs of Pre-Development and Pre-Leasing Work |
9 | |||||
(i) REIT Protections |
9 | |||||
(j) Tax Treatment |
9 | |||||
3. |
Term; Termination | 9 | ||||
(a) Term of this Agreement |
9 | |||||
(b) Termination |
9 | |||||
(c) Master Lease Term |
10 | |||||
4. |
Rent | 10 | ||||
5. |
Termination with Respect to Fewer than All of the Leased Properties | 10 | ||||
6. |
Use of the Leased Property | 11 | ||||
(a) Use |
11 | |||||
(b) Waste; Nuisance |
11 | |||||
(c) Title |
11 | |||||
(d) Compliance with Laws; Insurance |
11 | |||||
(e) Maintenance and Repair |
11 | |||||
7. |
Events of Default; Remedies | 11 | ||||
(a) Events of Default |
11 | |||||
(b) Certain Remedies |
12 | |||||
9. |
Property Management | 13 | ||||
10. |
Right of First Offer | 13 | ||||
(a) Right of First Offer |
13 | |||||
(b) ROFO Closing Process |
13 | |||||
11. |
Purchase Option | 14 | ||||
(a) Exercise of Purchase Option |
14 | |||||
(b) ROFO/Option Tax Allocation |
15 | |||||
12. |
Transfers | 16 | ||||
(a) Prohibition |
16 | |||||
(b) Permitted Transfers |
16 | |||||
(c) Conditions for Assignment |
16 | |||||
(d) No Further Consent |
17 | |||||
(e) Costs |
17 | |||||
(f) No Release of Transferors Obligations |
17 | |||||
(g) Transfers In Bankruptcy |
17 |
i
13. |
No Waiver | 17 | ||||
14. |
Remedies Cumulative | 17 | ||||
15. |
Notices | 18 | ||||
16. |
Additional Representations and Warranties by the Parties | 19 | ||||
(a) Due Authorization, Power and Authority |
19 | |||||
(b) Binding Obligations |
19 | |||||
(c) Solvency |
19 | |||||
(d) Governmental Consents |
19 | |||||
(e) No Violation |
19 | |||||
(f) OFAC |
20 | |||||
17. |
Brokers | 20 | ||||
18. |
Dispute Resolution | 20 | ||||
(a) Representatives |
20 | |||||
(b) Arbitration |
20 | |||||
(c) Binding Agreement |
23 | |||||
19. |
Miscellaneous | 23 | ||||
(a) Survival |
23 | |||||
(b) Severability |
24 | |||||
(c) Estoppel Certificates |
24 | |||||
(d) Binding Effect |
24 | |||||
(e) Governing Law |
24 | |||||
(f) Waiver of Trial by Jury |
24 | |||||
(g) Entire Agreement |
25 | |||||
(h) Counterparts |
25 | |||||
(i) Interpretation |
25 | |||||
(j) Time of Essence |
25 | |||||
(k) Further Assurances |
25 | |||||
(l) REIT Protections |
25 |
Exhibit A | Standard Form of Master Lease | |
Exhibit B | Initial Leased Property | |
Schedule 1 | Contributed Properties | |
Schedule 2 | Seed Properties |
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MASTER LEASING AGREEMENT
THIS MASTER LEASING AGREEMENT (this Agreement) is made and entered into as of December 15, 2020 (the Effective Date), by and between AIMCO Properties, L.P., a Delaware limited partnership (AIR), and Aimco Development Company, LLC, a Delaware limited liability company (DevCo). AIR and DevCo may be referred to herein each individually as a Party and collectively as the Parties.
WITNESSETH:
WHEREAS, AIR and DevCo have agreed, among other things, to cause certain of their respective Affiliates (as hereinafter defined) to enter into leases (each, a Master Lease) of certain real property (including the land and any improvements located thereon) owned by AIR or its Affiliates that, in each case, will become subject to this Agreement (each, a Leased Property), and under each such Master Lease, the applicable Affiliate of DevCo, as tenant thereunder, will cause the development, redevelopment and/or lease-up of the subject Leased Property, as may be required and agreed upon by the Parties;
WHEREAS, the Parties intend to create a pipeline of future opportunities for certain real property owned by AIR or its Affiliates to be considered for inclusion under this Agreement; and
WHEREAS, the Parties desire, among other things, to set forth certain rights of AIR to acquire direct or indirect interests in certain assets held by DevCo or its Affiliates.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:
1. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) the terms defined in this Section have the meanings assigned to them in this Section and include the plural as well as the singular; (b) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles as at the time applicable; and (c) all references in this Agreement to designated Sections and other subdivisions are to the designated Sections and other subdivisions of this Agreement:
AAA: As defined in Section 18(b)(i).
AAA Rules: As defined in Section 18(b)(i).
Acceptance Notice: As defined in Section 10(a).
Additional Property Notice: As defined in Section 2(g).
Affiliate: With respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is controlled by, or is under common Control with, the specified Person. For purposes of this definition: Control of a Person means (x) the direct or indirect ownership of fifty percent (50%) or more of the equity interests in such
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Person or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of voting securities or other interests, by contract or otherwise.
Agreement: As defined in the preamble.
AIR: As defined in the preamble.
AIR Excess Amount: As defined in Section 19(l)(i).
AIR REIT: As defined in Section 19(l)(i).
Appointed Representative: As defined in Section 18(a).
Appraiser: As defined in Section 2(d)(ii).
Bankruptcy Code: The United States Bankruptcy Code (11 U.S.C. § 101 et seq.), and any successor statute or legislation thereto.
Base Rent: As defined in the form of Standard Lease attached hereto as Exhibit A.
Business Day: As used herein, business day or Business Day shall mean any day of the week other than Saturday, Sunday or a day on which banking institutions in the state of Colorado are obligated or authorized by law or executive action to be closed to the transaction of normal banking business.
Chairperson: As defined in Section 18(b)(iii).
Code: As defined in Section 19(l)(i).
Colorado Courts: As defined in Section 18(b)(xi).
Contributed Properties: Collectively, those certain real properties to be held by James-Oxford LP and more particularly described on Schedule 1 attached hereto.
Current FMV: As defined in Section 2(d)(ii).
Current Year Taxes: As defined in Section 11(b).
Default Rate: As defined in the form of Standard Lease attached hereto as Exhibit A.
DevCo: As defined in the preamble.
DevCo Excess Amount: As defined in Section 19(l)(ii).
DevCo REIT: As defined in Section 19(l)(ii).
Director Approval: As defined in Section 2(a).
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Dispute or Disputes: As defined in Section 18(b).
Dispute Notice: As defined in Section 18(b).
Effective Date: As defined in the preamble.
Electing Party: As defined in Section 3(b).
Event of Default: As defined in Section 7(a).
Excluded Transaction: Any of the following (i) a transfer of units in DevCo, (ii) a transfer of units in Aimco OP L.P., a Delaware limited partnership, (iii) a transfers of shares in Apartment Investment and Management Company, (iv) a transfer from one Person to an Affiliate of such Person (so long as they remain an Affiliate of such Person following such transfer), and (v) a distribution in kind to the partners, members or shareholders of DevCo, Aimco OP L.P., a Delaware limited partnership, or Apartment Investment and Management Company.
Governmental Approvals: As defined in the form of Standard Lease attached hereto as Exhibit A.
Governmental Authority: As defined in the form of Standard Lease attached hereto as Exhibit A.
Improvements: As defined in the form of Standard Lease attached hereto as Exhibit A.
Initial Leased Properties: As defined in Section 2(e).
Initial Master Leases: As defined in Section 2(e).
Initial Term: As defined in Section 3(a).
Land Bank Asset and Land Bank Assets: As defined in Section 2(f).
Landlord: Any Person who is a party to a Master Lease as the landlord thereunder.
Laws: As defined in the form of Standard Lease attached hereto as Exhibit A.
Lease Commencement FMV: As defined in Section 2(d).
Leased Property: As defined in the recitals hereto.
Lists: As defined in Section 16(f).
Master Lease: As defined in the recitals hereto.
Non-Requesting Party: As defined in Section 2(g).
Non-Standard Lease: As defined in Section 2(a).
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Nonqualifying Income: As defined in Section 19(l)(i).
Notice: As defined in Section 15.
OFAC: As defined in Section 16(f).
Option: As defined in Section 11(a).
Option Exercise Period: As defined in Section 11(a).
Option Notice: As defined in Section 11(a).
Option Property: As defined in Section 11(a).
Order and Orders: As defined in Section 16(f).
Parkmerced Loan: The loan made pursuant to that certain Mezzanine Loan Agreement, dated as of November 26, 2019, by and between Maximus PM Mezzanine A LLC, a Delaware limited liability company, and APMSF Investor LLC, a Delaware limited liability company (and any other ancillary documentation executed in connection therewith).
Parkmerced Option Agreement: That certain Membership Interest Option Agreement, dated as of November 26, 2019, by and among Parkmerced Holdings LLC, APMSF Common LLC, Parkmerced LKS LLC and Parkmerced RAR LLC and agreed to by Parkmerced Holdings Subsidiary LLC, PM Buyer LLC and Merced Holdings LLC, each, a Delaware limited liability company.
Party and Parties: As defined in the preamble.
Person: An individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
Pre-Development/Pre-Leasing Costs: As defined in Section 2(h).
Pre-Development/Pre-Leasing Work: As defined in Section 2(h).
Proposed Award: As defined in Section 18(b)(v).
Redevelopment: As defined in Section 2(c).
Redevelopment Plans: As defined in Section 2(c).
REIT Requirements: As defined in Section 19(l)(i).
REITs: As defined in Section 19(l)(i).
Requesting Party: As defined in Section 2(g).
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ROFO: As defined in Section 10(a).
ROFO Closing Date: As defined in Section 10(b).
ROFO Deposit: As defined in Section 10(b).
ROFO Notice: As defined in Section 10(a).
ROFO/Option Closing: As defined in Section 11(b).
ROFO Property: As defined in Section 10(a).
ROFO Purchase Price: As defined in Section 10(b).
Seed Properties: Collectively, those certain real properties more particularly described on Schedule 2 attached hereto.
Stabilization: A Leased Property has reached at least ninety-five percent (95%) occupancy for a minimum period of twelve (12) consecutive months.
Standard Lease: As defined in Section 2(a).
Subsidiaries: Corporations, partnerships, limited liability companies, business trusts or other legal entities with respect to which a Person owns, directly or indirectly (including through one or more intermediaries), more than fifty percent (50%) of the voting stock or partnership, membership or other equity interest, respectively.
Tenant: Any Person who is a party to a Master Lease as the tenant thereunder.
Term: As defined in Section 3(a).
Termination Date: As defined in Section 3(b).
Termination Event: As defined in Section 3(b).
Termination Notice: As defined in Section 3(b).
Third Appraiser: As defined in Section 2(d)(ii).
Transfer: As defined in Section 12(a).
Transferee: As defined in Section 12(a).
Transferor: As defined in Section 12(a).
2. Leased Property; Redevelopment.
(a) The Master Leases. The Parties hereby establish the arrangement described herein by which AIR may, from time to time, lease, or cause certain of its Affiliates to
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lease, as Landlord, certain real property that it owns and that is in need of development, redevelopment and/or lease up to DevCo and/or its Affiliates, as Tenant, and in connection therewith, DevCo shall lease, or cause its Affiliates to lease, such real property from AIR or the applicable Affiliate of AIR, as landlord, and cause the development, redevelopment and/or lease-up of such real property, all in accordance with the terms and conditions set forth herein (and, upon the Parties executing a Master Lease for such real property, such real property shall become a Leased Property hereunder). Each time the Parties intend to enter into such a lease arrangement, the Parties will cause their applicable Affiliates to execute a lease agreement with respect to such real property in substantially the form attached hereto as Exhibit A (a Standard Lease). Notwithstanding the foregoing, if the Parties mutually desire to execute a lease for a particular real property on a form other than the form of Standard Lease (each, a Non-Standard Lease), then the Parties may so enter into a Non-Standard Lease, provided that each Party shall first obtain the approval of a majority of the independent and disinterested directors, (i) in the case of AIR, of AIMCO-GP, Inc., a Delaware corporation, and (ii) in the case of DevCo, of Aimco OP GP, LLC, a Delaware limited liability company (each, a Director Approval), to enter into such Non-Standard Lease. Following the Parties agreement to enter into a Non-Standard Lease for a Leased Property, each Party will use good faith efforts to obtain its respective Director Approval within ninety (90) days thereafter, and, promptly upon obtaining such approval, shall provide written notice of such approval to the other Party. Notwithstanding the foregoing, if the amount of all Base Rent (as defined in the payments due over the initial term of such Non-Standard Lease together with the aggregate amount of all Base Rent payments due over the initial terms, respectively, of all other then-existing Non-Standard Leases, in the aggregate, comprises less than ten percent (10%) of the aggregate amount of all Base Rent payments due over the initial terms, respectively, of all executed Master Leases (as defined below) existing as of such date, then such Director Approval will not be required in connection with such Non-Standard Lease. For the avoidance of doubt, any lease of a Leased Property entered into pursuant to this Agreement, whether a Standard Lease or a Non-Standard Lease, shall be a Master Lease. Upon the execution of a Master Lease, the Leased Property that is the subject thereof will automatically and simultaneously become subject to this Agreement and all of the terms and conditions contained herein shall apply thereto, without the necessity of either Party executing any additional documentation or any amendment to this Agreement.
(b) Consents. If the consent of any lender or other third party is required in connection with the execution of any Master Lease, AIR or the applicable Landlord under such Master Lease will bear the responsibility of seeking and obtaining such consent, provided, that, each of the Parties (and their respective Affiliates party to such Master Lease) shall be responsible for the timely payment of fifty percent (50%) of any related costs and expenses (including, without limitation, reasonable attorneys fees, charges and disbursements) incurred by AIR or the applicable Landlord in obtaining such consent.
(c) Redevelopment of the Leased Properties. DevCo agrees that it will cause each Tenant under a Master Lease, at its sole cost and expense, but subject to the terms and provisions of such Master Lease and applicable Laws, to use commercially reasonable efforts to cause the development or redevelopment, and/or the lease-up, of the subject Leased Property, as may be applicable, in each case, in accordance with the Redevelopment Plans for such Leased Property (the Redevelopment). Any such development or redevelopment shall be completed substantially in accordance with the plans and specifications approved by the Parties for the
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Redevelopment of the Leased Property (collectively, the Redevelopment Plans) and all applicable Laws.
(d) Fair Market Value.
(i) Prior to entering into a Master Lease for any Leased Property, the Parties shall agree on the Current FMV of such Leased Property as of the execution date of such Master Lease (the Lease Commencement FMV); provided, that, in determining the Lease Commencement FMV for any Leased Property (in accordance with the procedures set forth below), the Parties will further take into consideration all factors relevant thereto, including, without limitation, the benefit of any Pre-Development/Pre-Leasing Costs (as defined below) incurred by AIR prior to the execution of the applicable Master Lease.
(ii) As used herein, Current FMV means, as of any date of determination, the then-current fair market value of the applicable Leased Property, which shall be determined pursuant to the following procedures: Upon commencing discussions regarding the same, the Parties shall collaborate in an effort to mutually agree on the then-current fair market value of the Leased Property. If the Parties do not reach mutual agreement within thirty (30) days of commencing such discussions, then within five (5) business days following the end of such thirty (30)-day period, each of the Parties will give notice to the other specifying the name and address of an appraiser; any such appraiser shall be an independent appraiser or valuation specialist or investment banker who is qualified to appraise property similar to the Leased Property and is either a member of the Appraisal Institute (or any successor association or body of comparable standing if such Institute is not then in existence) or is a recognized valuation professional within the multifamily residential real estate industry, and has been actively engaged in the appraisal of multifamily residential properties for a period of not less than ten (10) years, immediately preceding its appointment under this Agreement (any such appraiser, valuation specialist or investment banker meeting such standards shall be an Appraiser). The two Appraisers so chosen will meet within ten (10) days after notice of the selection of the second Appraiser and will endeavor to agree on the Current FMV. If, within fifteen (15) days after such notice, the two Appraisers do not agree unanimously on the Current FMV, the two Appraisers will together appoint a third Appraiser (the Third Appraiser). Within ten (10) days following the selection of the Third Appraiser, each of the first two Appraisers will submit his or her designation of the Current FMV to the Third Appraiser in writing; and, within five (5) days following the earlier of the expiration of such ten (10) day period and the date by which both designations have been submitted to the Third Appraiser, the Third Appraiser shall choose one of the designations presented, according to its determination of which such designation most comports with its assessment of the Current FMV (thereafter, such chosen designation being the Current FMV for all purposes hereunder). Any failure of an Appraiser to timely deliver its designation of the Current FMV in accordance herewith shall be deemed for all purposes to constitute acceptance of the other Appraisers timely designation of the Current FMV. The Parties agree that the fees and expenses of each of the first and second Appraiser shall be borne by the Party who appointed such Appraiser,
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and the fees and expenses of the Third Appraiser shall be paid by the Party whose Appraisers designation is not chosen by the Third Appraiser.
(e) Initial Leased Properties. The Parties agree that, concurrently with the execution of this Agreement, AIR and DevCo have caused, or will each cause, their applicable Affiliates to enter into Master Leases for the Leased Properties set forth on Exhibit B attached hereto (such Leased Properties, the Initial Leased Properties, and the Master Leases for the Initial Leased Properties, the Initial Master Leases).
(f) Land Bank Assets. The Parties agree that they will each benefit from identifying certain properties (i) that may provide future opportunities for such properties development, redevelopment and/or lease-up and (ii) which development, redevelopment and/or lease-up thereof the Parties may mutually want to pursue under and in accordance with the terms set forth herein, from time to time during the Term of this Agreement. All such real property that has the potential to be leased pursuant to a Master Lease (but which is not yet subject to a Master Lease) and to become a Leased Property hereunder, as mutually agreed upon by the Parties, will be referred to herein collectively as the Land Bank Assets, and each, a Land Bank Asset). Following the Effective Date, the Parties agree that they will meet annually, on a mutually agreed upon date that is no later than thirty (30) days following the anniversary of the Effective Date, in addition to other times throughout the calendar year if and as the Parties may desire, to discuss the then-current listing of Land Bank Assets and update such listing by adding or removing certain properties therefrom.
(g) Additional Properties. From time to time during the Term of this Agreement, the Parties may mutually agree to add certain Land Bank Assets to this Agreement, so as to become a Leased Property hereunder, and to execute a Master Lease for such new Leased Property in accordance herewith. In the event either Party wishes to make a Land Bank Asset a Leased Property hereunder, such Party (the Requesting Party) will have the right to send a written notice (an Additional Property Notice) to the other Party (the Non-Requesting Party) indicating its desire to add a Land Bank Asset to this Agreement as a Leased Property (and to cause a Master Lease to be executed for such property), which Additional Property Notice will include information regarding the subject property and its leasing and/or development or redevelopment needs. The Requesting Party will further provide additional information and documentation reasonably requested by the Non-Requesting Party within five (5) business days of the date on which such request is made. Upon receipt of the Additional Property Notice from the Requesting Party, the Non-Requesting Party will have thirty (30) days to review the information provided regarding the subject property, request any additional information and documentation regarding the subject property, and approve or disapprove the addition of the subject property to this Agreement. If the Non-Requesting Party approves the addition of the subject property, the Parties will have an additional ninety (90) days following the date of such approval, or such longer period of time as to which the Parties may mutually agree, to (1) collaborate and mutually agree on the Redevelopment Plan for the subject property, and (2) mutually negotiate the terms of the Master Lease for such subject property, using the form of Standard Lease attached hereto as Exhibit A (or a Non-Standard Lease, if so agreed by the Parties). If the Non-Requesting Party disapproves the addition of the subject property (or fails to timely approve it), or if the Parties are unable to reach an agreement as to the Redevelopment Plan and/or the Master Lease terms for such property above within such ninety
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(90) day period (or such longer period of time agreed to by the Parties), then the subject Property will not become a Leased Property hereunder.
(h) Costs of Pre-Development and Pre-Leasing Work. AIR shall be responsible for payment of all costs and expenses of any pre-development and pre-leasing work (including, but not limited to, entitlements, zoning and environmental studies) (the Pre-Development/Pre-Leasing Work, and such costs and expenses related thereto, the Pre-Development/Pre-Leasing Costs) for a Land Bank Asset that are incurred by or on behalf of AIR (or its Affiliates) before AIR sends an Additional Property Notice to DevCo with respect to such Land Bank Asset, as well as all costs and expenses incurred by or on behalf of AIR (or its Affiliates) in connection with AIRs consideration of whether to proceed with entering into a Master Lease for such Land Bank Asset. If and to the extent DevCo performs Pre-Development/Pre-Leasing Work with respect to a Land Bank Asset and incurs Pre-Development/Pre-Leasing Costs in connection therewith, such Pre-Development/Pre-Leasing Costs incurred by DevCo will be deemed its costs of business development, payable solely by DevCo (absent a specific agreement and/or alternate arrangement with AIR that has been memorialized in writing by the Parties). Notwithstanding the foregoing, in the event AIR makes an offer to DevCo, or DevCo makes an offer to AIR, for DevCo to perform any Pre-Development/Pre-Leasing Work on AIRs behalf, and the Parties so mutually agree, then the amount of all actual, out-of-pocket Pre-Development/Pre-Leasing Costs incurred by DevCo in performing such Pre-Development/Pre-Leasing Work shall be reimbursed by AIR, together with the payment of an additional fee to DevCo, the amount of which, and the timing of payment to DevCo of the foregoing, shall be determined pursuant to the mutual agreement of the Parties.
(i) REIT Protections. Each Master Lease shall contain customary REIT protections.
(j) Tax Treatment. Each Master Lease shall specify the intended tax treatment thereof and the parties thereto shall agree not to take any positions inconsistent with such treatment.
3. Term; Termination.
(a) Term of this Agreement. The term of this Agreement shall be for eighteen (18) months, commencing on the Effective Date and expiring on the date immediately preceding the eighteenth (18th) month anniversary of the Effective Date (the Initial Term), unless earlier terminated as provided in this Agreement; provided, however, that the term of this Agreement shall automatically renew each year for an additional one (1) year period (the Initial Term, as may be extended hereby, the Term), unless and until either AIR or DevCo delivers written notice on or before the sixtieth (60th) day prior to the end of the then existing term (as extended hereby) to the other electing to terminate this Agreement, in which case this Agreement shall terminate as of the last day of the then existing term.
(b) Termination. In the event that a sale of all or substantially all of the assets held directly or indirectly by AIR (including, without limitation, the Land Bank Assets), either in a single transaction or in a series of related transactions (a Termination Event), then, within sixty (60) days of the date on which such Termination Event occurs (or, if later, sixty (60) days
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from the date on which DevCo becomes aware that a Termination Event has occurred), either Party (the Electing Party) will have the right to send a written notice (the Termination Notice) to the other Party electing to terminate this Agreement. In event of such an election, this Agreement will terminate on the last day of the month that immediately follows the month in which the Termination Notice was sent by the Electing Party (or upon such other date as may be mutually agreed upon by the Parties) (the Termination Date), except to the extent this Agreement applies to any Master Leases then in effect. Notwithstanding a termination of this Agreement pursuant to this Section 3(b), all Master Leases in effect on the Termination Date will continue unaffected in accordance with their terms.
(c) Master Lease Term. The term of each Master Lease (including any extension options granted to the Tenant thereunder and the term length of any such extension) will be determined by mutual agreement of the Parties, taking into account the following factors with respect to the Leased Property that is the subject of such Master Lease:
(i) the expected duration of the Redevelopment of the subject Leased Property (in order to achieve Stabilization);
(ii) the then-market term length and market lease payments applicable to the subject Leased Property;
(iii) the projected amount of any residual value guaranty with respect to the subject Leased Property;
(iv) the cost and terms associated with obtaining any third-party consents and/or satisfying any contract termination provisions applicable to the subject Leased Property in order to execute the Master Lease for such Leased Property; and
(v) the ability of Tenant to finance the redevelopment and/or lease-up of the Leased Property (to the extent affected by the Term of the Master Lease for the Leased Property).
4. Rent. Rent amounts payable under the Master Leases will be set forth in each such Master Lease.
5. Termination with Respect to Fewer than All of the Leased Properties. Wherever in this Agreement the action of terminating this Agreement with respect to any Leased Property (or action of similar import) is discussed, such action shall mean the termination of the applicable Tenants rights in and to the Leased Property relating to such termination. Notwithstanding anything in this Agreement to the contrary, if this Agreement shall be terminated with respect to any Leased Property, such termination shall not affect the Term of this Agreement with respect to the balance of the Leased Properties not so terminated, and this Agreement shall continue in full force and effect with respect to each other such Leased Property. Nothing contained in this Section shall serve in any way to limit the Parties respective abilities to terminate a Master Lease pursuant to the terms thereof.
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6. Use of the Leased Property.
(a) Use. DevCo shall cause the Tenants to use each Leased Property, including the Improvements thereon, for its intended use (as set forth in the applicable Master Lease for such Leased Property).
(b) Waste; Nuisance. DevCo shall not suffer to be committed, by any Tenant or otherwise, any waste on the Leased Property or permit any nuisance to exist thereon or with respect thereto.
(c) Title. DevCo shall not permit the Leased Property or any part(s) thereof, or any Tenants personal property, to be used in such a manner as (i) might reasonably tend to impair the applicable Landlords title thereto or to any portion thereof or (ii) may make possible a claim of adverse use or possession, or an implied dedication of the Leased Property or any part(s) thereof.
(d) Compliance with Laws; Insurance. DevCo shall cause each Tenant to promptly (i) comply with all Laws regarding the use, operation, maintenance, repair, restoration and Redevelopment of the Leased Property whether or not compliance therewith may require structural changes in any of the Improvements or interfere with the use and enjoyment of the Leased Property, (ii) procure, maintain and comply with all Governmental Approvals and (iii) keep the Leased Property, and all property located in or on such Leased Property, including all fixtures and personal property, insured with the kinds and amounts of insurance described in the applicable Master Lease. DevCo shall pay or cause to be paid all premiums for the insurance coverage required to be maintained by Tenants under the Master Leases.
(e) Maintenance and Repair. DevCo shall cause each Tenant, at its expense, to maintain the Leased Property, and every portion thereof, in accordance with the terms of the applicable Master Lease.
7. Events of Default; Remedies.
(a) Events of Default. Any one or more of the following shall constitute an Event of Default hereof:
(i) Except as otherwise specifically provided for in this Section 7, if either Party shall fail to observe or perform any other term, covenant or condition of this Agreement and such failure is not cured by such defaulting Party within thirty (30) days after notice thereof from the non-defaulting Party, unless such failure cannot with due diligence be cured within a period of thirty (30) days, in which case such failure shall not be deemed to be an Event of Default if the defaulting Party proceeds promptly and with due diligence to cure the failure and diligently completes the curing thereof; provided, however, that such notice shall be in lieu of and not in addition to any notice required under applicable law;
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(ii) Any Party shall:
(1) | admit in writing its inability to pay its debts generally as they become due, |
(2) | file a petition in bankruptcy or a petition to take advantage of any insolvency act, |
(3) | make an assignment for the benefit of its creditors, |
(4) | consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or |
(5) | file a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof; |
(iii) Any Party shall be adjudicated as bankrupt or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of the other Party, a receiver of the defaulting Party or of the whole or substantially all of its property, or approving a petition filed against it seeking reorganization or arrangement of such defaulting Party under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof, and such judgment, order or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of the entry thereof;
(iv) Any Party shall be liquidated or dissolved, or shall begin proceedings toward such liquidation or dissolution, or shall, in any manner, permit the sale or divestiture of substantially all its assets;
(v) Any Transfer occurs without the other Partys consent in accordance with the provisions of this Agreement; and
(vi) Any of the representations or warranties made by either Party hereunder otherwise proves to be untrue when made in any material respect which materially and adversely affects the other Party hereto.
(b) Certain Remedies. In the case of an Event of Default, with reasonable supporting documentation evidencing the expenses incurred by the non-defaulting Party:
(i) the defaulting Party shall reimburse the non-defaulting Party for any amount reasonably incurred by the non-defaulting Party to cure such Event of Default. Any sum not paid when due shall accrue interest thereafter at the rate equal to the Default Rate. In the event of an emergency or where necessary to prevent injury to persons or damage to the Leased Property, the non-defaulting Party may cure any such Event of Default by the defaulting Party prior to expiration of the cure period set forth above, with such notice to the defaulting Party and any of its Affiliates as is appropriate under the circumstances;
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(ii) the non-defaulting Party may enforce its rights hereunder by claims for specific performance and/or injunctive relief; or
(iii) the non-defaulting Party may pursue any other remedies available to it at law or in equity.
9. Property Management. DevCo and its Affiliates may enter into one or more property management agreements for the Leased Property and shall be responsible for the payment of all amounts due thereunder. DevCo and its Affiliates shall ensure that any property manager under such a property management agreement complies with the terms of this Agreement and all applicable Master Leases in carrying out its duties under such property management agreement.
10. Right of First Offer.
(a) Right of First Offer. So long as this Agreement is still in full force and effect, AIR will have a right of first offer (a ROFO) on the direct or indirect transfer (other than any Excluded Transaction) of any real property that is to be acquired (directly by deed or indirectly by equity interests in any entity that directly or indirectly owns or controls such property) by DevCo or any of its Subsidiaries after the Effective Date, provided that such property has achieved Stabilization (any such property, a ROFO Property). For the avoidance of doubt, no ROFO will apply to any such transfers in respect of any right, title or interest in, to or under, or any rights to acquire, (i) the Parkmerced Loan, (ii) the Parkmerced Option Agreement, (iii) any ownership interest in Parkmerced Investors, LLC, a Delaware limited liability company, (iv) the Seed Properties or (v) the Contributed Properties. In the event DevCo intends to acquire any ROFO Property, DevCo will send AIR a written notice (a ROFO Notice) detailing the material terms of the intended acquisition of the ROFO Property (including the contract price and closing date (to be no later than one hundred eighty (180) days from the date of the ROFO Notice), upon receipt of which AIR will have thirty (30) days to notify DevCo in writing whether or not it intends to proceed with the purchase of the ROFO Property in accordance with the terms set forth in the ROFO Notice. If AIR timely delivers a written notice to DevCo that it will proceed with the transfer of the ROFO Property (an Acceptance Notice), DevCo may designate AIR (or AIRs designee) to take title to such ROFO Property on DevCos behalf directly as DevCos designee concurrently with what would have been the consummation of DevCos acquisition of such ROFO Property. If AIR declines to timely exercise its ROFO or fails to timely notify DevCo that it wishes to proceed to a sale of the ROFO Property, DevCo may proceed to acquire the ROFO Property from the third party seller (subject to the terms hereof), provided that any such acquisition shall be for a gross purchase price of no less than the contract price which DevCo has agreed to pay the third party seller of such ROFO Property; and if the acquisition of such ROFO Property with such third party has not been consummated on all such terms within one hundred eighty (180) days of AIR so declining (or having been deemed to so decline), the ROFO will be reinstated in accordance with the terms hereof.
(b) ROFO Closing Process. In the event AIR exercises its ROFO and the Parties proceed to a sale of the ROFO Property, AIR shall be required to make an earnest money deposit (the ROFO Deposit) in an amount equivalent to three percent (3%) of the ROFO
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Purchase Price (as defined below). The ROFO Deposit shall be delivered within five (5) Business Days following the delivery of the Acceptance Notice, by transfer of immediately available funds to a national title insurance company reasonably acceptable to DevCo, who shall perform the services of escrow agent for the closing of the ROFO Property. The ROFO Deposit shall be nonrefundable to AIR (except in the event of a material default of DevCo in performing its closing obligations pursuant to the purchase and sale agreement for the transaction, which shall be in the form attached to the form of Standard Lease (which is attached hereto as Exhibit A)). The closing shall take place on the date set forth in the ROFO Notice (or on such earlier date as the Parties may mutually agree) (the ROFO Closing Date) and shall be completed through a customary closing escrow or held at the principal office of DevCo or such other location as the Parties shall agree upon at least five (5) Business Days prior to the ROFO Closing Date. The purchase price (the ROFO Purchase Price) for any ROFO Property will be an amount equal to one hundred one percent (101%) of the sum of (i) the contract price which DevCo has agreed to pay the third party seller of such ROFO Property and (ii) the amount of all of DevCos reasonable actual out-of-pocket costs and expenses incurred in connection with its proposed acquisition of such ROFO Property (including, without limitation, all costs relating to the negotiation of the contract to acquire such ROFO Property, the inspection of and due diligence performed in connection with such ROFO Property, and any third party broker fees and any other costs typically payable by a purchaser of real property). The ROFO Purchase Price shall be paid in immediately available funds and DevCo shall convey good and marketable title (or other valid interests held by DevCo) in the subject ROFO Property to AIR or its designee free and clear of all liens and encumbrances. If required by AIR, all contracts and agreements between DevCo and any of its Affiliates in respect of the ROFO Property shall be terminated effective as of the ROFO Closing Date. Each Party agrees to cooperate and to take all actions and execute all documents reasonably necessary or appropriate to reflect the acquisition of the ROFO Property by AIR (or its designee). The cost of any title insurance policy endorsements desired by AIR shall be paid by AIR. All other costs shall be borne by the Party who customarily bears such costs in the city and state in which the ROFO Property is located. Any risk of casualty, condemnation or loss following the date that the Acceptance Notice is delivered to DevCo and prior to the ROFO Closing Date shall be borne by AIR, who shall succeed to all rights to insurance proceeds (other than loss of rent proceeds allocable to any period prior to the ROFO Closing Date) or condemnation awards. If the Parties fail to consummate the sale of the ROFO Property within one hundred eighty days (180) of the date of the ROFO Notice, then AIR shall no longer have a ROFO with respect to such ROFO Property and DevCo may proceed to acquire the ROFO Property from the third party seller (subject to the terms hereof).
11. Purchase Option.
(a) Exercise of Purchase Option. AIR shall have an option (an Option) to acquire any real property owned or leased (subject to any consent rights granted to the landlord under any lease under which DevCo or an Affiliate is the tenant, provided, however, that no Option will apply to any Leased Property that is then leased to DevCo or its Affiliates pursuant to a Master Lease) by DevCo or any of its Subsidiaries, which was originally acquired by DevCo or its Subsidiaries after the Effective Date, which had not achieved Stabilization as of such acquisition but which has subsequently achieved Stabilization (each, an Option Property). Within fifteen (15) days following the date on which Stabilization for an Option Property has been achieved, DevCo shall send AIR a written notice advising AIR that such Option Property
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has reached Stabilization (an Option Notice), upon receipt of which AIR will have sixty (60) days (the Option Exercise Period) to exercise its Option to purchase such Option Property by delivering to DevCo written notice of the same. If AIR timely delivers a written notice to DevCo that it intends to exercise its Option and proceed with the acquisition of the Option Property, AIR will pay to DevCo the Current FMV for the subject Option Property, and the Parties will close on such Option pursuant to a purchase and sale agreement, which shall be in the form attached to the form of Standard Lease (which is attached hereto as Exhibit A). The Parties shall apply the closing mechanics set forth in Section 10(b) above (as if the Option Property were a ROFO Property, for such purposes). In the event DevCo fails to timely deliver an Option Notice to AIR, then, within thirty (30) days following the date on which AIR becomes aware that Stabilization of the subject Option Property has occurred, AIR shall have the right to send an Option Notice to DevCo (notifying DevCo that AIR believes the subject Option Property has reached Stabilization), and the Option Exercise Period will commence as of the date of such Option Notice. In the event that a Party receiving an Option Notice disputes that Stabilization of the subject Option Property has occurred or is continuing as of the date of such Option Notice, such Party will send to the other Party a Dispute Notice (as defined in and pursuant to Section 18(b)) containing an explanation of such dispute within fifteen (15) days following its receipt of the Option Notice. The Parties shall endeavor to resolve the dispute, and, if they are unable to so resolve it, will proceed to arbitration to resolve such dispute, all in accordance with the terms of Section 18.
(b) ROFO/Option Tax Allocation. In each event in which AIR exercises a ROFO or an Option and proceeds to the acquisition of the subject ROFO Property or Option Property (each, a ROFO/Option Closing), as applicable, AIR shall assume and agree to pay so much of the real estate taxes and other taxes in respect of the applicable ROFO Property or Option Property related to the applicable ROFO/Option Closing assessed for and first becoming a lien during the calendar year in which such ROFO/Option Closing occurs (the Current Year Taxes) as shall be allocable to AIR by proration (based upon the number of days in such calendar year on and after such date of the ROFO/Option Closing). DevCo shall pay or cause to be paid (i) all delinquent real estate taxes as of the date of the applicable ROFO/Option Closing and (ii) so much of the Current Year Taxes as shall be allocable to DevCo (or its applicable Affiliate) by proration (based upon the number of days in such calendar year prior to the date of the applicable ROFO/Option Closing). Any Taxes which are payable in the calendar year in which a ROFO/Option Closing occurs but are not due and payable at the time of such ROFO/Option Closing and the portion of the Current Year Taxes not assumed by AIR hereunder shall be credited to AIR through a credit against the applicable purchase price at such ROFO/Option Closing reflected on the applicable closing statement. If the Current Year Taxes with respect to any ROFO Property or Option Property related to the applicable ROFO/Option Closing have not been set as of the date thereof, the present tax rate and the most recent assessed valuation for the subject property shall be used for the purposes of making the adjustments at such ROFO/Option Closing under this paragraph and the Parties shall re-prorate within thirty (30) days following receipt of the actual final tax bill. Notwithstanding any of the foregoing to the contrary, DevCo shall have the right to prosecute (with AIRs reasonable cooperation after the applicable ROFO/Option Closing, at no expense or liability to AIR) and retain any recovery in connection with any tax appeals or contests with respect to taxes assessed against the subject ROFO Property or Option Property for tax periods prior to the tax period that includes the
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applicable date of the ROFO/Option Closing, provided such recovery action will not result in a deferral of taxes or reassessment against the subject properties that negatively affects AIR.
12. Transfers.
(a) Prohibition. No Party, without the prior written consent of the other Party hereto, which may be granted or withheld in such other Partys sole discretion, shall, either involuntarily or voluntarily or by operation of law or otherwise, or through one or more step transactions or tiered transactions, assign, pledge, hypothecate, encumber or permit any lien to attach to, or directly or indirectly transfer this Agreement or any interest herein (each, a Transfer; any person or entity to whom a Transfer is made or sought to be made is referred to herein as a Transferee; and any Party by whom a Transfer is made or sought to be made is referred to herein as a Transferor). A Transfer shall include, without limitation, (x) any assignment that otherwise occurs by merger, consolidation, reorganization, transfer, or (y) any other direct or indirect change in either the Control of a Party or in the corporate, partnership, or proprietary structure of a Party or any entity that has a direct or indirect interest in such Party. Notwithstanding the foregoing, however, a Transfer shall not include any direct or indirect change in either the Control or ownership of Apartment Investment and Management Company, Aimco OP L.P., Apartment Income REIT Corp. or AIR. Any Transfer in violation of the provisions of this Section 12 shall be void and shall constitute an Event of Default.
(b) Permitted Transfers. Notwithstanding anything contained in this Section 12 to the contrary, either Party may, without the consent of the other Party hereto, assign this Agreement to an Affiliate of such Party (which remains an Affiliate of such Party following such Transfer).
(c) Conditions for Assignment. For each permitted assignment of this Agreement, the Transferor shall comply with the following:
(i) At least twenty (20) days prior to the date or the effective date of such assignment, whichever date shall first occur, the Transferor shall furnish the other Party hereto with the name and business address of the proposed Transferee and the contact information of the manager, general partner, officer or other representative of the proposed Transferee;
(ii) at the time of the Transfer, there shall be no uncured default of the Transferor (after the expiration of all applicable notice and cure periods) under this Agreement; and
(iii) Transferee shall deliver to the other Party, within thirty (30) days after its date or effective date, whichever date shall first occur, an executed copy of the assignment and assumption agreement whereby the Transferee (A) has agreed to assume all obligations of the Transferor, thereafter arising, and (B) has agreed to be bound by all of the covenants, agreements, obligations, terms, provisions and conditions of this Agreement, thereafter arising, on the part of the Transferor to be fulfilled, performed or observed.
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(d) No Further Consent. The consent by any Party to any Transfer shall not constitute a consent to any subsequent Transfer or to any subsequent or successive Transfer. Any purported or attempted Transfer contrary to the provisions of this Section shall be void and, at the option of such Party, shall terminate this Agreement.
(e) Costs. Any Party requesting consent to a Transfer shall reimburse the other Party for such other Partys actual costs and expenses incurred in conjunction with the processing and documentation of any request to Transfer, including any reasonable consultants fees, whether or not such Transfer is actually consummated.
(f) No Release of Transferors Obligations. No Transfer shall relieve the Transferor of its obligation to perform all of the other obligations to be performed by such Transferor hereunder. The liability of any Transferor hereunder and any immediate and remote successor in interest of such Transferor (i.e., by means of any Transfer), and the due performance of the obligations of this Agreement on the Transferors part to be performed or observed, shall not in any way be discharged, released or impaired by any (i) agreement which modifies any of the rights or obligations of the Parties under this Agreement, (ii) stipulation which extends the time within which an obligation under this Agreement is to be performed, (iii) waiver of the performance of an obligation required under this Agreement, or (iv) failure to enforce any of the obligations set forth in this Agreement. If any Transferee defaults in any performance due hereunder, the other Party may proceed directly against the Transferor named herein and/or any immediate and remote successor in interest of Transferor without exhausting its remedies against such Transferee.
(g) Transfers In Bankruptcy. In the event of a Transfer pursuant to the provisions of the Bankruptcy Code, all consideration payable or otherwise to be delivered in connection with such Transfer shall be paid or delivered to the other Party, shall be and remain the exclusive property of such other Party and shall not constitute property of the Transferor or of the estate of the Transferor within the meaning of the Bankruptcy Code. Any consideration constituting the other Partys property pursuant to the immediately preceding sentence and not paid or delivered to such other Party shall be held in trust for the benefit of such Party and be promptly paid or delivered to such Party. For purposes of this Section, the term consideration shall mean and include money, services, property and any other thing of value such as payment of costs, cancellation or forgiveness of indebtedness, discounts, rebates, barter and the like. If any such consideration is in a form other than cash (such as in kind, equity interests, indebtedness earn-outs, or other deferred payments, consulting or management fees, etc.), the non-Transferring Party shall be entitled to receive in cash the then present fair market value of such consideration.
13. No Waiver. No failure by either Party to insist upon the strict performance of any term hereof or to exercise any right, power or remedy hereunder during the continuance of any default or Event of Default shall constitute a waiver of any such breach or of any such term. No waiver of any breach shall affect or alter this Agreement, which shall continue in full force and effect with respect to any other then existing or subsequent breach.
14. Remedies Cumulative. Each legal, equitable or contractual right, power and remedy of the Parties now or hereafter provided either in this Agreement or by statute or
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otherwise shall be cumulative and concurrent and shall be in addition to every other right, power and remedy and the exercise or beginning of the exercise by such Parties of any one or more of such rights, powers and remedies shall not preclude the simultaneous or subsequent exercise by any Party of any or all of such other rights, powers and remedies.
15. Notices. All notices, demands, requests, consents, approvals or other communications (any of the foregoing, a Notice) required or permitted to be given hereunder shall be given in writing and shall be sent by (a) electronic mail, (b) registered or certified United States mail, postage prepaid, return receipt requested, (c) a reputable overnight courier that provides a receipt for delivery, or (d) delivered by hand (against confirmation of delivery), to the Party to be so notified at its address (or e-mail address, if applicable) hereinafter set forth, or to such other address (or e-mail address, if applicable) and Person as may be designated from time to time by any party hereto in the manner provided for in this Section. Any Notice shall be deemed to have been received: (i) on the date of sending by e-mail if sent prior to 5:00 P.M. (Eastern Standard Time) on a business day (otherwise on the next business day), (ii) three (3) days after the date such Notice is mailed, (iii) one business day after delivery to a reputable overnight courier service if delivered prior to 5:00 P.M. (Eastern Standard Time) on a business day (otherwise on the next business day) and (iv) on the date of delivery by hand if delivered prior to 5:00 P.M. (Eastern Standard Time) on a business day (otherwise on the next business day), in each case addressed to the Parties as follows:
To AIR:
c/o Apartment Income REIT Corp.
4582 S. Ulster Street, Suite 1700
Denver, Colorado 80237
Attention: General Counsel
Email: Lisa.Cohn@aimco.com
With a copy to:
c/o Apartment Income REIT Corp.
4582 S. Ulster Street, Suite 1700
Denver, Colorado 80237
Attention: Chief Financial Officer
Email: Paul.Beldin@aimco.com
To DevCo:
c/o Apartment Investment and Management Company
4582 S. Ulster Street, Suite 1450
Denver, Colorado 80237
Attention: General Counsel
Email: Jennifer.Johnson@aimco.com
With a copy to:
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c/o Apartment Investment and Management Company
4582 S. Ulster Street, Suite 1450
Denver, Colorado 80237
Attention: Chief Financial Officer
Email: Lynn.Stanfield@aimco.com
A notice given by counsel for either Party shall be deemed a valid notice if addressed and sent in accordance with the provisions of this Section. Any Party may change the address (or e-mail address, if applicable) or person to which any such Notices are to be delivered hereunder by furnishing five (5) business days prior written notice of such change to the other Parties in accordance with the provisions of this Section. Notices shall be deemed to have been given on the date as set forth above, even if there is an inability to actually deliver any such Notice because of a changed address of which no Notice was given, or there is a rejection or refusal to accept any Notice offered for delivery. Each of the Parties hereto waives personal or any other service other than as provided for in this Section.
16. Additional Representations and Warranties by the Parties. Each Party represents and warrants to the other Party as follows:
(a) Due Authorization, Power and Authority. Such Party is duly organized, validly existing and in good standing under the laws of its state of organization/formation, is qualified to do business in its state of formation and has full power, authority and legal right to execute and deliver and to perform and observe the provisions of this Agreement to be observed and/or performed by such Party.
(b) Binding Obligations. This Agreement has been duly authorized, executed and delivered by such Party, and constitutes and will constitute the valid and binding obligations of such Party enforceable against such Party in accordance with its terms, except as such enforceability may be limited by creditors rights, laws and general principles of equity.
(c) Solvency. Such Party is solvent, has timely and accurately filed all tax returns required to be filed by such Party, and is not in default in the payment of any taxes levied or assessed against such Party or any of its assets, or subject to any judgment, order, decree, rule or regulation of any Governmental Authority which would, in each case or in the aggregate, adversely affect such Partys condition, financial or otherwise, or such Partys prospects or the Leased Property.
(d) Governmental Consents. No other consent, approval or other authorization of, or registration, declaration or filing with, any Governmental Authority is required for the due execution and delivery of this Agreement, or for the performance by or the validity or enforceability of this Agreement against the other Party hereto.
(e) No Violation. The execution and delivery of this Agreement and compliance with the provisions hereof will not result in (i) a breach or violation of (A) any law applicable to such Party now in effect; (B) the organizational or charter documents of such Party;
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(C) any judgment, order or decree of any Governmental Authority binding upon DevCo; or (D) any agreement or instrument to which such Party is a counterparty or by which it is bound; or (ii) the acceleration of any obligation of such Party.
(f) OFAC. Such Party is in compliance with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the Order) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of Treasury (OFAC) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation or orders, collectively referred to as the Orders). Neither such Party nor any of its Affiliates (i) is listed on the Specially Designated Nationals and Blocked Person List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the Lists), (ii) is a Person (as defined in the Order) who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or (iii) is owned or controlled by (including without limitation by virtue of such Person being a director or owning voting shares or interests), or acts for or on behalf of, any person on the Lists or any other person who has been determined by competent authority to be subject to the prohibitions contained in the Orders.
17. Brokers. Each of AIR and DevCo represents and warrants to the other that it has not had any dealings with any broker, agent, or finder relating to the transactions contemplated hereby, and each agrees to pay for any claim for brokerage commissions, compensation or fees by any broker, agent, or finder in connection with this Agreement, or any other transactions contemplated hereby resulting from the acts of such party (including any legal fees and costs incurred because of a claim for such fees). The provisions of this Section 17 shall survive any expiration or earlier termination of this Agreement.
18. Dispute Resolution.
(a) Representatives. Each Party shall appoint a representative who shall be responsible for administering the dispute resolution provisions in this Section 18 (each, an Appointed Representative). Each Appointed Representative shall have the authority to resolve any Disputes (as defined below) on behalf of the Party appointing such representative.
(b) Arbitration. Any dispute, controversy or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, enforceability, validity, termination or breach of this Agreement, whether arising in contract or tort, between the Parties (each, a Dispute and, collectively, Disputes) shall first be referred by either Party for amicable negotiations by the Appointed Representatives by providing written notice of such Dispute in the manner provided by Section 15 (a Dispute Notice). All documents, communications and information disclosed in the course of such negotiations that are not otherwise independently discoverable shall not be offered or received as evidence or used for impeachment or for any other purpose, but shall be considered as to have been disclosed for settlement purposes.
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(i) If, for any reason, a Dispute is not resolved in writing by the Appointed Representatives within thirty (30) days of the date of delivery of the Dispute Notice, or if a Party fails to appoint an Appointed Representative within the periods specified herein, such Dispute shall be submitted to final and binding arbitration administered by the American Arbitration Association (the AAA) in accordance with its Commercial Arbitration Rules in effect at the time (the AAA Rules), except as modified herein.
(ii) The seat of the arbitration shall be Denver, Colorado.
(iii) The arbitration shall be conducted by three arbitrators. The claimant and respondent shall each appoint one arbitrator within thirty (30) days of receipt by respondent of the demand for arbitration. The two arbitrators so appointed shall appoint the third and presiding arbitrator (the Chairperson) within thirty (30) days of the appointment of the second arbitrator. If any Party fails to appoint an arbitrator, or if the two Party-appointed arbitrators fail to appoint the Chairperson within the time periods specified herein, then any such arbitrator shall, upon any Partys request, be appointed by the AAA in accordance with the AAA Rules. Any arbitrator selected pursuant to this Section shall be neutral and impartial and shall not be affiliated with or an interested person of any Party; further, any arbitrator appointed by AAA shall be a retired judge or a practicing attorney with no less than fifteen (15) years of experience with litigation and arbitration involving the multifamily real estate industry and an experienced arbitrator.
(iv) By electing to proceed under the AAA Rules, the Parties confirm that any dispute, claim or controversy concerning the arbitrability of a Dispute or the jurisdiction of the arbitral tribunal, including whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the existence, scope, validity interpretation or enforceability of the Parties agreement to arbitrate, shall be determined by the arbitration tribunal.
(v) Each Party shall submit its claims according to the timetable established by the arbitral tribunal. With respect to each claim advanced in the arbitration, each sides submissions shall specify the proposed determination or resolution that it contends the arbitral tribunal should make (and, if applicable, any monetary relief that it contends that the arbitral tribunal should award) (in each case, the Proposed Award), which Proposed Award, if applicable, may be expressed as zero. As to each claim for monetary relief, each sides Proposed Award shall also state whether pre- or post-award interest should be awarded, and if so, at what interest rate, and the date from which such interest (if any) should be calculated.
(vi) There shall be only two Proposed Awards (one for each side of the claim). Where there are more than two parties to the arbitration, the arbitral tribunal shall have power to make appropriate directions as to which parties shall comprise each side for purposes of submitting Proposed Awards, in every instance to ensure a proper alignment of parties with respect to each such claim.
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(vii) In rendering the award or otherwise making any determination or resolution, the Chairperson shall be limited to choosing, without modification, the Proposed Award of one of the sides, according to its determination of which Proposed Award most comports with its assessment of the case. Insofar as monetary relief is claimed, the arbitral tribunal shall not award any monetary relief of any kind except as set forth in this Section 18, provided that this will not limit the power of the arbitral tribunal: (1) to award relief per paragraph (viii) hereof; (2) to apply any statute of limitation that it determines is applicable to any claim; (3) to dismiss or exclude any claim that it determines is: (A) precluded by any part of this Agreement, and/or (B) beyond the scope of this Section 18; (4) to receive and determine dispositive motions in accordance with the AAA Rules; and/or (5) to apportion fees/costs per paragraph (ix) hereof.
(viii) In addition to monetary relief, and/or the making of any other determination or resolution that is primarily at issue in the Dispute, the arbitral tribunal shall be empowered to award equitable relief, including, but not limited to, an injunction and specific performance of any obligation under this Lease.
(ix) The arbitral tribunal shall award the prevailing Party its attorneys fees and costs reasonably incurred in the arbitration, including the prevailing Partys share of the arbitrator fees and AAA administrative costs.
(x) The Parties intend that this agreement to arbitrate shall be valid, enforceable and irrevocable, and any determination, resolution and/or award made or rendered by the arbitration tribunal shall be final and binding on the Parties. The Parties agree to comply with any award made in any such arbitration proceedings. Judgment upon any award may be entered in any court of competent jurisdiction, including any court having jurisdiction over any party or any of its assets.
(xi) By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment, or other order in aid of arbitration proceedings and the enforcement of any award. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the Parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any Party to respect the arbitral tribunals orders to that effect. In any such action brought in court for such provisional remedies or enforcement of any award, each of the Parties irrevocably and unconditionally (A) consents and submits to the non-exclusive jurisdiction and venue of the Courts of the State of Colorado and the Federal Courts of the United States of America located within the State of Colorado (the Colorado Courts); (B) waives, to the fullest extent it may effectively do so, any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens or any right of objection to jurisdiction on account of its place of incorporation or domicile, which it may now or hereafter have to the bringing of any such action or proceeding in any Colorado Court; (C) consents to service of process in the manner provided by Section 15 or in any other manner permitted by Law; and (D) WAIVES ANY RIGHT TO TRIAL BY JURY.
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(xii) This arbitration, and all prior, subsequent or concurrent judicial proceedings related thereto and permitted herein, shall be conducted pursuant to the Federal Arbitration Act, found at Title 9 of the U.S. Code. The Parties intend that the arbitration tribunal shall apply the substantive Laws of the State of Delaware to any Dispute hereunder, without regard to any choice of law principles thereof that would mandate the application of the Laws of another jurisdiction.
(xiii) In order to facilitate the comprehensive resolution of related disputes, all claims between the Parties that arise under or in connection with this Lease may be brought in a single arbitration. Upon the request of any Party constituted under this Lease, the arbitral tribunal shall consolidate such arbitration proceeding with any other arbitration proceeding relating to this Lease, if the arbitral tribunal determines that (A) there are issues of fact or law common to the proceedings so that a consolidated proceeding would be more efficient than separate proceedings, and (B) no Party would be unduly prejudiced as a result of such consolidation through undue delay or otherwise. In the event of different rulings on this question by the arbitral tribunal constituted hereunder and another arbitral tribunal constituted under this Lease, the ruling of the arbitral tribunal constituted first in time shall control, and such arbitral tribunal shall serve as the tribunal for any consolidated arbitration.
(xiv) In the event of a Dispute, each Party shall continue to perform its obligations under this Lease in good faith during the resolution of such Dispute as if such Dispute had not arisen, unless and until this Lease is terminated in accordance with the provisions hereof.
(xv) Any arbitration hereunder shall be confidential, and the Parties and their agents agree not to disclose to any third party (A) the existence or status of the arbitration, (B) all information made known and documents produced in the arbitration not otherwise in the public domain, and (C) all awards arising from the arbitration, except and to the extent that disclosure is required by applicable Law or is required to protect or pursue a legal right, and in any such case, the Party making such disclosure shall produce only those materials and information that are necessary and shall take reasonable steps to safeguard the confidentiality of the materials and information.
(c) Binding Agreement. The Parties agree that the provisions of this Section 26 bind themselves and their Affiliates, and further agree to take all measures to lawfully cause their Affiliates to abide and be bound by the terms of this Section 18.
19. Miscellaneous.
(a) Survival. Anything contained in this Agreement to the contrary notwithstanding, all claims against, and liabilities and indemnities of, AIR or DevCo arising prior to the expiration or earlier termination of the Term shall survive such expiration or termination. In addition, all claims against, and all liabilities and indemnities hereunder of DevCo shall continue in full force and effect and in favor of AIR and its successors and assigns, notwithstanding any conveyance of the Leased Property to DevCo or its Affiliates.
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(b) Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. However, if any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future Laws, such provisions shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of the contract, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid or enforceable.
(c) Estoppel Certificates. AIR shall, within ten (10) business days after receipt of written request from DevCo (but not more than twice per calendar year), deliver to AIR or any prospective mortgagee, Transferee or purchaser of DevCos or any Tenants interest in a Leased Property, without charge, a certificate certifying that this Agreement is in full force and effect, and whether it has been modified (and if there have been modifications, stating them), and whether or not AIR knows of any default, breach or violation by DevCo under any of the terms of this Agreement, and such other matters as may reasonably be requested; and such other matters as may reasonably be requested by AIR or such prospective mortgagee or purchaser. DevCo shall, within ten (10) business days after receipt of written request from AIR (but not more than twice per calendar year), deliver to AIR or any prospective Transferee, mortgagee or purchaser of AIRs or any Landlords interest in a Leased Property, without charge, a certificate certifying that this Agreement is in full force and effect, and whether it has been modified (and if there have been modifications, stating them), and whether or not AIR knows of any default, breach or violation by AIR under any of the terms of this Agreement, and such other matters as may reasonably be requested by AIR or any such prospective mortgagee or prospective purchaser. Any estoppel certificate requested hereunder by a mortgagee of any Landlord or Tenant shall be in such form as may be reasonably requested by the requesting mortgagee, and otherwise in conformance with the terms of this Section.
(d) Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective permitted successors and assigns.
(e) Governing Law. This Agreement shall be deemed to be made in Colorado. THIS AGREEMENT WILL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF COLORADO, EXCLUDING ITS CONFLICT OF LAWS RULES. The Parties hereby irrevocably consent to the exclusive jurisdiction of any state or federal court seated in Colorado. The Parties agree that the venue provided above is the most convenient forum.
(f) Waiver of Trial by Jury. To the fullest extent not prohibited by applicable law, the Parties hereby waive their respective right to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding and/or hearing brought by either Party on any matter whatsoever arising out of, or in any way connected with, this Agreement, and any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith, or arising from any relationship of the Parties in connection
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with the foregoing, or any claim of injury or damage, or the enforcement of any remedy under any law, statute or regulation, emergency or otherwise, now or hereafter in effect.
(g) Entire Agreement. This Agreement, including the exhibits, schedules, documents and instruments attached hereto, constitutes the entire agreement among the Parties hereto and supersedes any and all prior agreements, understandings, letters of intent, negotiations and discussions, whether written or oral, of the Parties with respect to the subject matter of this Agreement.
(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one instrument binding on all Parties hereto. The Parties hereto irrevocably and unreservedly agree that this Agreement may be executed by way of electronic signatures (including, but not limited to, by way of electronic signatures generated by DocuSign, Adobe Sign or similar programs or replacements thereto) and delivered by electronic transmission. The delivery by electronic means shall constitute effective execution and delivery hereof, and neither this Agreement, nor any part or provision of this Agreement, shall be challenged or denied any legal effect, validity and/or enforceability solely on the grounds that it is in the form of an electronic record.
(i) Interpretation. In this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other genders; the word or shall be deemed to include and/or; the words including, includes and include shall be deemed to be followed by the words without limitation; references to articles, sections, paragraphs (or subdivisions of sections or paragraphs), or exhibits are to those of this Agreement unless otherwise indicated; and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement. Caption and paragraph headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Exhibits to this Agreement (including exhibits and schedules to such exhibits), are incorporated into and made a part of this Agreement.
(j) Time of Essence. Time is of the essence of the obligations of the Parties hereto.
(k) Further Assurances. The Parties agree to promptly sign all documents reasonably requested to give effect to the provisions of this Agreement.
(l) REIT Protections.
(i) DevCo acknowledges that certain AIR Affiliates (each, an AIR REIT) have elected to be classified as real estate investment trusts (REITs) and, as a result, must comply with certain requirements, including, without limitation, the provisions of Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the Code) (such requirements, the REIT Requirements). In the event that counsel or independent accountants for any AIR REIT determine that there exists a
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material risk that any amounts due to AIR or any AIR Affiliate hereunder, or under any Master Lease, would be treated as gross income not described in Section 856(c)(2) or 856(c)(3) of the Code (Nonqualifying Income), the amount paid to AIR or any AIR Affiliate under this Agreement or the applicable Master Lease in any tax year may not exceed the maximum amount that can be paid to AIR or the applicable AIR Affiliate in such year without causing any AIR REIT to fail to meet the REIT Requirements for such year, determined as if the payment of such amount were Nonqualifying Income. If the amount payable for any tax year under the preceding sentence is less than the amount that DevCo or its Affiliates would otherwise be obligated to pay to AIR or an AIR Affiliate pursuant to this Agreement or pursuant to the applicable Master Lease, as applicable (the AIR Excess Amount), then DevCo or the applicable DevCo Affiliate shall place the AIR Excess Amount in escrow and shall not release any portion thereof to AIR or the applicable AIR Affiliate, and neither AIR nor such Affiliate shall be entitled to any such amount, unless and until AIR or its Affiliate delivers to DevCo or its Affiliate at the sole option of the applicable AIR REIT, (A) notice that it has received advice of such AIR REITs tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income, (B) a letter from the independent accountants of such AIR REIT indicating the maximum amount that can be paid at that time to AIR or the AIR Affiliate without causing such AIR REIT to fail to meet the REIT Requirements for any relevant taxable year, in which case such maximum amount shall be paid to AIR or the applicable AIR Affiliate, or (C) a private letter ruling issued by the Internal Revenue Service to the applicable AIR REIT indicating that the receipt of any AIR Excess Amount hereunder would not cause such AIR REIT to fail to satisfy the REIT Requirements. The obligation to pay any amount which is not paid as a result of this provision shall terminate five years from the original date such amount would have been payable without regard to this provision and neither AIR nor any AIR Affiliate shall have any further right to receive any such amount.
(ii) AIR acknowledges that certain DevCo Affiliates (each, a DevCo REIT) have elected to be classified as REITs and, as a result, must comply with the REIT Requirements. In the event that counsel or independent accountants for any DevCo REIT determine that there exists a material risk that any amounts due to DevCo or DevCo Affiliates hereunder, or under any Master Lease, would be treated as Nonqualifying Income, the amount paid to DevCo or to any DevCo Affiliate under this Agreement or the applicable Master Lease in any tax year may not exceed the maximum amount that can be paid to DevCo or the applicable DevCo Affiliate in such year without causing any DevCo REIT to fail to meet the REIT Requirements for such year, determined as if the payment of such amount were Nonqualifying Income. If the amount payable for any tax year under the preceding sentence is less than the amount that AIR or its Affiliates would otherwise be obligated to pay to DevCo or a DevCo Affiliate pursuant to this Agreement or pursuant to the applicable Master Lease (the DevCo Excess Amount), then AIR or the applicable AIR Affiliate shall place the DevCo Excess Amount in escrow and shall not release any portion thereof to DevCo or the applicable DevCo Affiliate, and neither DevCo nor such Affiliate shall be entitled to any such amount, unless and until DevCo or its Affiliate delivers to AIR or its Affiliate at the sole option of the applicable DevCo REIT, (A) notice that it has received advice of such DevCo REITs tax counsel to the effect that such amount, if and to the extent paid, would
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not constitute Nonqualifying Income, (B) a letter from the independent accountants of such DevCo REIT indicating the maximum amount that can be paid at that time to DevCo or the DevCo Affiliate without causing such DevCo REIT to fail to meet the REIT Requirements for any relevant taxable year, in which case such maximum amount shall be paid to DevCo or the applicable DevCo Affiliate, or (C) a private letter ruling issued by the Internal Revenue Service to the applicable DevCo REIT indicating that the receipt of any DevCo Excess Amount hereunder would not cause such DevCo REIT to fail to satisfy the REIT Requirements. The obligation to pay any amount which is not paid as a result of this provision shall terminate five years from the original date such amount would have been payable without regard to this provision and neither DevCo nor any DevCo Affiliate shall have any further right to receive any such amount.
[Signature page follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and attested by their respective officers thereunto duly authorized.
AIMCO PROPERTIES, L.P., | ||
a Delaware limited partnership | ||
By: | /s/ Paul Beldin | |
Name: Paul Beldin | ||
Title: Authorized Person | ||
AIMCO DEVELOPMENT COMPANY, LLC, a Delaware limited liability company | ||
By: | /s/ Lynn Stanfield | |
Name: Lynn Stanfield | ||
Title: Authorized Person |
[Signature Page Master Leasing Agreement]
EXHIBIT A
Standard Form of Master Lease
[attached]
A-1
MASTER LEASE AGREEMENT
dated as of [___________], 20[__]
by and between
[_____________________]1,
as Landlord,
And
[_____________________]2,
as Tenant
1 | NTD: Insert name of the AIR OP (or AIMCO Properties, L.P.) affiliate that owns the Property. |
2 | NTD: Insert name of the New AIMCO (or Aimco OP L.P.) affiliate that will hold the leasehold interest in the Property. |
MASTER LEASE AGREEMENT
TABLE OF CONTENTS
1. | The Property | 1 | ||||||
(a) | Lease of Property | 1 | ||||||
(b) | Condition of Property | 1 | ||||||
(c) | Use | 2 | ||||||
2. | Term; Termination; Residual Value of the Property | 2 | ||||||
(a) | Lease Term | 2 | ||||||
(b) | Termination Option | 3 | ||||||
(c) | Residual Value of the Property | 7 | ||||||
3. | Rent | 8 | ||||||
(a) | Base Rent | 8 | ||||||
(b) | Additional Rent | 10 | ||||||
(c) | Payment of Rent | 10 | ||||||
(d) | Maintenance; Net Lease | 10 | ||||||
(e) | Late Fee; Interest | 11 | ||||||
4. | Taxes and Impositions | 11 | ||||||
(a) | Real Estate Taxes and Assessments | 11 | ||||||
(b) | Impositions | 12 | ||||||
(c) | Payment of Taxes and Impositions | 12 | ||||||
(d) | Tax Liens | 12 | ||||||
(e) | Right to Contest Taxes and Impositions | 12 | ||||||
(f) | Limitation on Taxes | 13 | ||||||
5. | Utilities | 13 | ||||||
6. | Redevelopment | 13 | ||||||
(a) | Development/Redevelopment of the Property | 13 | ||||||
(b) | Contractors and Supervision | 14 | ||||||
(c) | Construction Financing | 14 | ||||||
(d) | Governmental Approvals; Landlord Cooperation | 15 | ||||||
(e) | Compliance with Laws | 15 | ||||||
(f) | Compliance with Private Restrictions | 15 | ||||||
(g) | Inspection, Audit and Reporting Requirements | 16 | ||||||
(h) | Lease-Up of the Property | 16 | ||||||
(i) | Easements | 16 | ||||||
(j) | Third Party Property Rights | 17 | ||||||
7. | Environmental | 17 | ||||||
(a) | Restrictions | 17 | ||||||
(b) | Hazardous Substances | 17 | ||||||
(c) | Environmental Audit | 18 |
(d) | Survival | 18 | ||||||
8. | Maintenance | 18 | ||||||
9. | Alteration; Demolition | 19 | ||||||
10. | Insurance | 19 | ||||||
(a) | Property Insurance | 19 | ||||||
(b) | Liability Insurance | 19 | ||||||
(c) | Business Automobile Liability Insurance | 20 | ||||||
(d) | Workers Compensation and Employers Liability Insurance | 20 | ||||||
(e) | Professional Liability Insurance | 20 | ||||||
(f) | Additional Insurance | 20 | ||||||
(g) | Insurer | 20 | ||||||
(h) | Umbrella Policies | 20 | ||||||
(i) | Self-Insurance | 20 | ||||||
(j) | General Requirements | 21 | ||||||
(k) | Release; Waiver of Subrogation Property | 21 | ||||||
(l) | Contractors Insurance | 21 | ||||||
11. | Casualty | 24 | ||||||
(a) | Notice of Casualty | 24 | ||||||
(b) | Restoration | 24 | ||||||
12. | Condemnation | 25 | ||||||
(a) | Taking | 25 | ||||||
(b) | Partial Taking | 25 | ||||||
(c) | Temporary Taking | 25 | ||||||
13. | Assignments and Subleases; Transfer by Landlord | 26 | ||||||
(a) | Transfers | 26 | ||||||
(b) | Permitted Transfers | 26 | ||||||
(c) | Sale of Leasehold Interest | 26 | ||||||
(d) | Conditions for Assignment | 27 | ||||||
(e) | Non-Release During Term | 28 | ||||||
14. | Financing and Reporting | 28 | ||||||
(a) | Leasehold Mortgages | 28 | ||||||
(b) | Consents | 28 | ||||||
(c) | Default Notice | 28 | ||||||
(d) | Defaults | 29 | ||||||
(e) | Assignees | 29 | ||||||
(f) | New Lease | 29 | ||||||
(g) | Financial Condition | 30 | ||||||
(h) | Legal Proceedings | 30 | ||||||
(i) | No Merger | 30 | ||||||
(j) | Bankruptcy | 30 | ||||||
(k) | Further Assurances; Subordination | 31 |
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(l) | Landlords Mortgages | 32 | ||||
15. | Indemnification | 32 | ||||
(a) | Indemnification by Tenant | 32 | ||||
(b) | Environmental Indemnity | 32 | ||||
(c) | General Indemnity Provisions | 33 | ||||
(d) | Indemnification by Landlord | 33 | ||||
(e) | Survival | 33 | ||||
(f) | Limitation of Liability | 33 | ||||
16. | Tenant Defaults and Remedies | 35 | ||||
(a) | Default | 35 | ||||
(b) | Remedies | 35 | ||||
17. | Representations and Warranties | 37 | ||||
(a) | Representations and Warranties of Tenant | 37 | ||||
(b) | Representations and Warranties of Landlord | 37 | ||||
18. | Notices | 38 | ||||
(a) | Notices | 38 | ||||
(b) | Additional Provisions | 39 | ||||
19. | Mechanics Liens | 39 | ||||
20. | Surrender | 40 | ||||
21. | Brokers | 40 | ||||
22. | Estoppel Certificates | 40 | ||||
23. | Memorandum of Lease | 40 | ||||
24. | Landlord Covenants | 41 | ||||
(a) | Quiet Enjoyment | 41 | ||||
(b) | Landlords Access | 41 | ||||
25. | Holdover | 41 | ||||
26. | Dispute Resolution | 41 | ||||
(a) | Representatives | 41 | ||||
(b) | Arbitration | 41 | ||||
(c) | Binding Agreement | 44 | ||||
27. | Miscellaneous | 44 | ||||
(a) | Waiver | 44 | ||||
(b) | Severability | 44 | ||||
(c) | Modifications | 45 | ||||
(d) | Binding Effect | 45 | ||||
(e) | Entire Agreement; Addendum | 45 | ||||
(f) | Counterparts | 45 | ||||
(g) | Expenses | 45 |
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(h) | Interpretation | 45 | ||||||||
(i) | No Third-Party Beneficiaries | 46 | ||||||||
(j) | Governing Law and Jurisdiction | 46 | ||||||||
(k) | WAIVER OF JURY TRIAL | 46 | ||||||||
(l) | Time of the Essence; Business Days | 46 | ||||||||
(m) | Force Majeure | 46 | ||||||||
(n) | [Guaranty | 47 | ||||||||
(o) | Tax Treatment | 47 | ||||||||
(p) | REIT Protections | 47 |
List of Schedules | ||||||
The Property |
Schedule 1 | |||||
Form of Purchase and Sale Agreement |
Schedule 2 | |||||
Form of Memorandum of Lease |
Schedule 3 | |||||
Redevelopment Plans |
Schedule 4 | |||||
Addendum |
Schedule 5 | |||||
[Form of Lease Guaranty][Intentionally Omitted]3 |
Schedule 6 |
3 | NTD: If guaranty will not be required in connection with a Master Lease, replace Form of Lease Guaranty (first brackets) with Intentionally Omitted (second brackets). |
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MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT (this Lease) is made and entered into as of this [__] day of [________], 20[__] (the Effective Date), by and between [_______________], a [_____________________], as landlord (Landlord), and [________________], a [_____________________], as tenant (Tenant). Landlord and Tenant are referred to herein collectively as the Parties.
WITNESSETH:
WHEREAS, AIMCO Properties, L.P., a Delaware limited partnership (AIR), and Aimco Development Company, LLC, a Delaware limited liability company (DevCo, and together with AIR, collectively, the MLA Parties), entered into that certain Master Leasing Agreement, dated as of December [15], 2020 (the Master Leasing Agreement), pursuant to which the MLA Parties have agreed, among other things, to cause certain of their respective affiliates to enter into leases of certain real property that, in each case, is or will become subject to the Master Leasing Agreement (each, a MLA Property), and under each such lease, the applicable affiliate of DevCo, as tenant thereunder, will cause the development, redevelopment and/or lease-up of the subject MLA Property, as may be required and agreed upon by the MLA Parties; and
WHEREAS, Landlord owns certain real property more particularly described on Schedule 1 attached hereto (the Land; and the Land, together with the improvements located thereon, the Property), which Property has been designated as a MLA Property under the Master Leasing Agreement; and
WHEREAS, in accordance with the Master Leasing Agreement, Landlord desires to lease the Property to Tenant and Tenant desires to lease the Property from Landlord, in order, among other things, to cause the [development][redevelopment][and ]lease-up of the Property, in accordance with the terms and conditions set forth in this Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:
1. The Property.
(a) Lease of Property. Landlord, for and in consideration of the covenants and agreements herein contained on the part of Tenant to be paid, kept, observed, and performed, hereby leases to Tenant, and Tenant hereby leases from Landlord for the Term (as hereinafter defined), the Property. Tenants use of the Property shall be in compliance with the terms of this Lease.
(b) Condition of Property. Tenant accepts the Property in its as-is, where-is condition, with all faults, subject to (i) all Laws (as hereinafter defined) including all zoning resolutions, restrictions, rules and ordinances, building restrictions and other laws and regulations now or hereafter applicable to the Property, (ii) all covenants, conditions, restrictions, easements and other matters of record as of the date hereof or entered into after the date hereof in accordance with the terms of this Lease, (iii) all matters an accurate survey of the Property would reveal, (iv) all express representations and warranties made by Landlord in this Lease, (v) all Known Existing
Environmental Conditions (as hereinafter defined), and (vi) all Unknown Existing Environmental Conditions (as hereinafter defined). Tenant acknowledges that (x) Tenant and its agents have had an opportunity to inspect the Property, including undertaking environmental studies of the Property; (y) Tenant has found the Property fit for its use; and (z) Landlord is not obligated to make any improvements or repairs to the Property. Except for the representations and warranties by Landlord as expressly set forth in this Lease, Landlord makes no warranty or representation, express or implied, with respect to the Property or any part thereof, including, without limitation, its fitness for use, design or condition for any particular use or purpose or otherwise, any environmental matters, or the quality of the material or any workmanship with respect to the Property, latent or patent, it being agreed that all such risks are to be borne by Tenant; provided, however, that any Known Existing Environmental Conditions shall remain the responsibility of Landlord.
(c) Use. Tenant may use the Property for any and all uses not inconsistent with this Lease and otherwise permitted under applicable Law. Tenant shall not use the Property, or permit the Property to be used, in any manner, or do or suffer any act in or about the Property which: (i) violates or conflicts with any applicable Law; (ii) causes or is reasonably likely to cause damage to the Property; (iii) violates a requirement or condition of any policy of insurance covering the Property; (iv) constitutes or is reasonably likely to constitute an unreasonable nuisance, annoyance or inconvenience to, or interference with, tenants or occupants of the Property or its equipment, facilities or systems; or (v) is otherwise prohibited under the Private Restrictions (as hereinafter defined). The uses permitted under this Section 1(c) from time to time are the Allowable Uses.
2. Term; Termination; Residual Value of the Property.
(a) Lease Term. The term of this Lease (the Term) shall commence on [________________] (the Commencement Date) and shall expire on [________________]4 (the Expiration Date), unless earlier terminated as provided in this Lease. The term lease year or Lease Year as used in this Lease means a period of twelve (12) successive calendar months during the Term. The first Lease Year shall begin on the Commencement Date, unless the Commencement Date is a day other than the first day of a calendar month, in which case the first Lease Year shall begin on the first day of the month following the Commencement Date. Each subsequent Lease Year shall be a period of twelve (12) calendar months, commencing at the expiration of the previous Lease Year.
4 | NTD: The Term of each lease (including any extension options and the term length of any such extension) will be determined, by mutual agreement of the MLA Parties, upon consideration of the following factors (to be set forth with more particularity in the Master Leasing Agreement): (a) expected duration of the development/redevelopment and/or lease-up of the subject Property (in order to achieve Stabilization), (b) the then-market term length and market lease payments applicable to the Property, (c) the projected amount of any residual value guaranty, (d) any consents and/or contract termination provisions and related costs applicable to the Property in order to execute the lease, (e) the ability of Tenant to finance the redevelopment and/or lease-up of the Property (to the extent affected by the Term of the lease) and (f) the tax treatment of the lease. |
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(b) Termination Option.
(i) From and after the occurrence of a Termination Trigger (as defined below) with respect to the Property, but in any case, no later than sixty (60) days following the date of such occurrence, Tenant will have the option to terminate this Lease by sending to Landlord a written notice (a Termination Notice) stating that Tenant desires to terminate this Lease, together with reasonable documentation evidencing that a Termination Trigger has occurred and is continuing as of the date of such Termination Notice (including, without limitation, copies of paid invoices, lien releases (in statutory form, if applicable) and a rent roll). A Termination Trigger will have occurred when the development or redevelopment of the Property has been substantially completed (if applicable) and the Property has reached at least ninety-five percent (95%) occupancy for a minimum period of twelve (12) consecutive months (Stabilization). Notwithstanding the foregoing, if the Current FMV of the Property as of the date the Termination Trigger occurs is less than the Lease Commencement FMV, then Tenant will not have a right or option to terminate this Lease pursuant to this Section 2(b) and this Lease will continue in full force and effect, and in accordance with the terms hereof.
(ii) In the event that Landlord disputes that a Termination Trigger has occurred or that such Termination Trigger is continuing as of the date the Termination Notice is sent to Landlord, Landlord will send to Tenant a Dispute Notice (as defined in and pursuant to Section 26(b)) containing an explanation of such dispute within thirty (30) days following its receipt of the Termination Notice. If, following Landlords delivery to Tenant of a Dispute Notice, the Parties are unable to resolve the dispute within thirty (30) days thereafter, the Parties will proceed to arbitration to resolve such dispute, in accordance with the terms of Section 26; provided, however, that the Parties will endeavor to conclude any such arbitration within thirty (30) days (e.g., the arbitrators will be selected within ten (10) days and the hearing will be held and the decision rendered within twenty (20) days thereafter) or, if possible, by the Termination Date (as defined below), and the decision rendered thereby will be final, binding and non-appealable. If any such arbitration concludes on or prior to the applicable Termination Date, and the arbitration (A) is decided in favor of Tenant, then this Lease will terminate on such Termination Date, or (B) is decided in favor of Landlord, then this Lease will continue in full force and effect, as though the applicable Termination Notice had not been sent (provided, that if the Base Rent increased (in accordance with Section 3(a)(ii)) on the basis that Stabilization had occurred, and it is determined that Stabilization did not occur, then Tenant shall receive a rent credit for any overpayment of Base Rent by Tenant due to such increase). In the event that any arbitration has not concluded on or before the applicable Termination Date, the following terms shall apply: (1) Tenant will pay all Rent amounts due after such Termination Date, through and including the date on which the arbitration concludes, into an escrow account; (2) if the arbitration is decided in favor of Tenant, then, on the date which is fifteen (15) days following the date on which the arbitration decision is rendered (the Final Termination Date), (a) this Lease will terminate, (b) the escrowed Rent amounts will be returned to Tenant, (c) Landlord will reimburse Tenant for all other expenses incurred in the ordinary course in connection with the Property (e.g., property management fees, repair and maintenance costs, taxes, assessments, debt service payments and related fees paid by Tenant to any Leasehold Mortgagee (as hereinafter defined) (to the extent any such payments or fees are incurred solely on account of the indebtedness secured by the Leasehold Mortgage being repaid on or about the Final Termination Date instead of on the Termination Date (as set forth in the Termination Notice), etc.) during the period commencing on the first day following the
3
Termination Date and ending on the Final Termination Date (such period, the Termination Extension Period) and (d) Tenant will pay over to Landlord the aggregate amount of any rent amounts or other income collected from occupants of the Property during, and attributable to, the Termination Extension Period or any portion thereof; and (3) if the arbitration is decided in favor of Landlord, then (a) this Lease will continue in full force and effect, as though the applicable Termination Notice had not been sent, and, (b) within three (3) Business Days following the date on which the arbitration decision is rendered, the escrowed Rent amounts will be paid to Landlord (provided, that if the Base Rent increased (in accordance with Section 3(a)(ii)) on the basis that Stabilization had occurred, and it is determined that Stabilization did not occur, then Tenant shall receive a rent credit for any overpayment of Base Rent by Tenant due to such increase). Failure to send a Dispute Notice within the thirty (30) day period following Landlords receipt of the Termination Notice will be deemed an approval by Landlord to terminate this Lease.
(iii) Upon the affirmative or deemed approval of Landlord to terminate this Lease, the Parties will mutually collaborate to effect the termination of this Lease, which termination will be effective on the last day of the month in which occurs the sixtieth (60th) day following the date of delivery to Landlord of the Termination Notice (the Termination Date).
(iv) On or prior to the Termination Date, Landlord has the right, but not the obligation, to pay Tenant the Added Improvement Value Payment (as defined below) for this Lease. The Added Improvement Value Payment will be the amount calculated as of the Termination Date pursuant to the following formula: ninety-five percent (95%) of the resulting difference of (A) the Current FMV (as hereinafter defined) of the Property (taking into account both the value-add after the development or redevelopment and/or lease up thereof and any market fluctuations then in effect), less (B) [$____________]5, being the fair market value of the Property immediately prior to the Commencement Date (the Lease Commencement FMV). As used herein, Current FMV means, as of any date of determination, the then-current fair market value of the Property, which shall be determined pursuant to the following procedures: Upon commencing discussions regarding the same, the Parties shall collaborate in an effort to mutually agree on the then-current fair market value of the Property. If the Parties do not reach mutual agreement within thirty (30) days of commencing such discussions, then within five (5) business days following the end of such thirty (30)-day period, each of the Parties will give notice to the other specifying the name and address of an appraiser; any such appraiser shall be an independent appraiser or valuation specialist or investment banker who is qualified to appraise property similar to the Property and is either a member of the Appraisal Institute (or any successor association or body of comparable standing if such Institute is not then in existence) or is a recognized valuation professional within the multifamily residential real estate industry, and has been actively engaged in the appraisal of multifamily residential properties for a period of not less than ten (10) years, immediately preceding its appointment under this Lease (any such appraiser, valuation specialist or investment banker meeting such standards shall be an Appraiser). The two Appraisers so chosen will meet within ten (10) days after notice of the selection of the second Appraiser and will endeavor to agree on the Current FMV. If, within fifteen (15) days after such notice, the two Appraisers do not agree unanimously on the Current FMV, the two Appraisers will together
5 | NTD: AIMCO to advise of the fair market value of the applicable Property at the time of lease commencement, with such number to be input in the space provided here. |
4
appoint a third Appraiser (the Third Appraiser). Within ten (10) days following the selection of the Third Appraiser, each of the first two Appraisers will submit his or her designation of the Current FMV to the Third Appraiser in writing; and, within five (5) days following the earlier of the expiration of such ten (10) day period and the date by which both designations have been submitted to the Third Appraiser, the Third Appraiser shall choose one of the designations presented, according to its determination of which such designation most comports with its assessment of the Current FMV (thereafter, such chosen designation being the Current FMV for all purposes hereunder). Any failure of an Appraiser to timely deliver its designation of the Current FMV in accordance herewith shall be deemed for all purposes to constitute acceptance of the other Appraisers timely designation of the Current FMV. The Parties agree that the fees and expenses of each of the first and second Appraiser shall be borne by the Party who appointed such Appraiser, and the fees and expenses of the Third Appraiser shall be paid by the Party whose Appraisers designation is not chosen by the Third Appraiser.
(v) If Landlord declines to pay Tenant the Added Improvement Value Payment hereunder, then this Lease will terminate and Tenant will have the right to cause a forced sale of Landlords fee interest in the Property; provided, that, Tenant may, by delivery of a written notice to Landlord within ten (10) days following the date on which Landlord so declines to make the Added Improvement Value Payment, elect to rescind the applicable Termination Notice, following which this Lease will continue in full force and effect, as though such Termination Notice had not been sent. Any proceeds received from such forced sale will be paid first to Landlord, in an amount equal to the Lease Commencement FMV, and then any proceeds remaining thereafter will be paid to Tenant. In connection with any forced sale, Tenant will manage the process thereof, determine the sale price of the Property (which will be an arms-length third party sale that maximizes the value of the Property) and negotiate the terms of the sale documentation, using the form of purchase and sale agreement attached hereto as Schedule 2). Notwithstanding the foregoing, Tenant may be the purchaser of the Property at the forced sale, provided that in such event, Tenant shall pay a purchase price equal to the Lease Commencement FMV at such sale; and provided further, that, for the period of time commencing on the date of such sale and expiring on the one (1) year anniversary thereof, in the event Tenant subsequently intends to sell the Property pursuant to an offer received from a third party, for a gross purchase price that is less than the sum of (1) the Added Improvement Value Payment and (2) the Lease Commencement FMV, that Tenant is willing to accept (an Offer), then Landlord shall have a right of first refusal (a ROFR) with respect to any such sale of the Property.
(vi) In the event Tenant receives an Offer, Tenant will send Landlord a written notice (a ROFR Notice) detailing the material terms of the Offer (including purchase price and closing date), upon receipt of which Landlord will have thirty (30) days to accept or reject such Offer (or such shorter time as such Offer may permit) by delivering to Tenant written notice of the same. If Landlord timely delivers a written notice to Tenant that it intends to exercise its ROFR and proceed with the acquisition of the Property (an Acceptance Notice), Landlord will pay Tenant the purchase price set forth in the Offer (the ROFR Purchase Price), and the Parties will close on such ROFR pursuant to a purchase and sale agreement, which shall be in the form attached hereto as Schedule 2, as modified to reflect the terms of the Offer. To the extent any closing mechanics applicable to the sale of the ROFR Property are not set forth in the Offer, the Parties shall apply the closing mechanics set forth in paragraph (vii) below. If Landlord expressly declines to exercise its ROFR or otherwise fails to timely exercise its ROFR, Tenant may proceed
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with the transfer of the Property with the third party making the Offer on substantially the same terms as those set forth therein. If the transfer to such third party has not been consummated on all such terms within one hundred eighty (180) days of Landlord so declining (or having been deemed to so decline) to exercise its ROFR, the ROFR will be reinstated in accordance with the terms hereof.
(vii) In the event Landlord exercises its ROFR and the Parties proceed to a sale of the Property, Landlord shall be required to make an earnest money deposit (the ROFR Deposit) in an amount equivalent to three percent (3%) of the ROFR Purchase Price. The ROFR Deposit shall be delivered within five (5) Business Days following the delivery of the Acceptance Notice, by transfer of immediately available funds to a national title insurance company reasonably acceptable to Tenant, who shall perform the services of escrow agent for the closing of the Property. The ROFR Deposit shall be nonrefundable to Landlord (except in the event of a material default of Tenant in performing its closing obligations pursuant to the purchase and sale agreement for the transaction). The closing shall take place on the date set forth in the ROFR Notice (or on such earlier date as the Parties may mutually agree) (the ROFR Closing Date) and shall be completed through a customary closing escrow or held at the principal office of Tenant or such other location as the Parties shall agree upon at least five (5) Business Days prior to the ROFR Closing Date. The ROFR Purchase Price shall be paid in immediately available funds and Tenant shall convey good and marketable title (or other valid interests held by Tenant) in the subject ROFR Property to Landlord or its designee free and clear of all liens and encumbrances. If required by Landlord, all contracts and agreements between Tenant and any of its Affiliates in respect of the Property shall be terminated effective as of the ROFR Closing Date. Each Party agrees to cooperate and to take all actions and execute all documents reasonably necessary or appropriate to reflect the acquisition of the Property by Landlord (or its designee) pursuant to the terms hereof. The cost of any title insurance policy endorsements desired by Landlord shall be paid by Landlord. All other costs shall be borne by the Party who customarily bears such costs in the city and state in which the Property is located. Any risk of casualty, condemnation or loss following the date that the Acceptance Notice is delivered to Tenant and prior to the ROFR Closing Date shall be borne by Landlord, who shall succeed to all rights to insurance proceeds (other than loss of rent proceeds allocable to any period prior to the ROFR Closing Date) or condemnation awards. If the Parties fail to consummate the sale of the Property in accordance with the terms hereof within one hundred eighty days (180) of the date of the ROFR Notice, then Landlord shall no longer have a ROFR with respect to the Property and Tenant may proceed to sell, or cause the sale, of the Property to a third party (subject to the terms hereof).
(viii) In the event Landlord exercises its ROFR and proceeds to the acquisition of the Property (a ROFR Closing), then, solely with respect to the period of time commencing on the date on which Tenant acquired the Property pursuant to paragraph (v) above (the Applicable Tax Period), the following provisions shall apply: Landlord shall assume and agree to pay so much of the real estate taxes and other taxes in respect of the Property assessed for and first becoming a lien during the calendar year in which such ROFR Closing occurs (the Current Year Taxes) as shall be allocable to Landlord by proration (based upon the number of days in such calendar year on and after such date of the ROFR Closing). Tenant shall pay or cause to be paid (i) all delinquent real estate taxes as of the date of the ROFR Closing (to the extent incurred during the Applicable Tax Period) and (ii) so much of the Current Year Taxes as shall be allocable to Tenant (or its applicable Affiliate) by proration (based upon the number of days in
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such calendar year prior to the date of the ROFR Closing). Any Taxes which are payable in the calendar year in which a ROFR Closing occurs but are not due and payable at the time of such ROFR Closing and the portion of the Current Year Taxes not assumed by Landlord hereunder shall be credited to Landlord through a credit against the ROFR Purchase Price at the ROFR Closing reflected on the applicable closing statement. If the Current Year Taxes with respect to the Property have not been set as of the date thereof, the present tax rate and the most recent assessed valuation for the Property shall be used for the purposes of making the adjustments at such ROFR Closing under this paragraph and the Parties shall re-prorate within thirty (30) days following receipt of the actual final tax bill. Notwithstanding any of the foregoing to the contrary, Tenant shall have the right to prosecute (with Landlords reasonable cooperation after the ROFR Closing, at no expense or liability to Landlord) and retain any recovery in connection with any tax appeals or contests with respect to taxes assessed against the Property for tax periods prior to the tax period that includes the ROFR Closing Date, provided such recovery action will not result in a deferral of taxes or reassessment against the Property that negatively affects Landlord.
(ix) If a lender or third-party consent is required in connection with the termination of this Lease pursuant to this Section 2, Tenant will bear the responsibility of obtaining such consent and Tenant will pay all costs incurred in connection therewith. The provisions of this Section 2 shall survive the termination of this Lease.
(c) Residual Value of the Property. Within thirty (30) days following the Expiration Date, or, if earlier, the date of any termination of this Lease pursuant to Section 16(b), Landlord shall deliver to Tenant a written notice (a Residual Value Notice) setting forth Landlords reasonable determination of the then-current fair market value of each of (i) the Land and (ii) the improvements and fixtures situated on the Land, including any Improvements (as hereinafter defined) (collectively, the Property Improvements), in each case as of the Expiration Date or earlier date of termination, as applicable, and the amount of the Residual Value Shortfall (as defined below) with respect to each of the Land and the Property Improvements, if any. If the then-current fair market value of the Land as of such date (as reasonably determined by Landlord) is less than $[___________] (the Guaranteed Land Value), and/or the then-current fair market value of the Property Improvements as of such date (as reasonably determined by Landlord) is less than $[___________] (the Guaranteed Improvements Value), then Tenant shall pay to Landlord, within thirty (30) days following the date of such Residual Value Notice, (A) the amount by which the then-current fair market value of the Land is less than the Guaranteed Land Value and (B) the amount by which the then-current fair market value of the Property Improvements is less than the Guaranteed Improvements Value (any and all such amounts determined pursuant to clauses (A) and (B), collectively, the Residual Value Shortfall). Any failure of Landlord to timely send a Residual Value Notice to Tenant shall be deemed an acknowledgement by Landlord that the then-current fair market value of the Land is at least equal to the Guaranteed Land Value and the then-current fair market value of the Property Improvements is at least equal to the Guaranteed Improvements Value (and that the Residual Value Shortfall is zero), and the Parties shall have no further obligations under this Section 2(c). If Landlord sends a Residual Value Notice that does not include Landlords reasonable determination of the then-current fair market value of either the Land or the Property Improvements, then Landlord shall be deemed to have failed to timely send a Residual Value Notice to Tenant with respect to such excluded Land or Property Improvements, as applicable, and the immediately preceding sentence shall apply solely in respect thereto. In the event that Tenant disputes Landlords determination of
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the then-current fair market value of the Land and/or the Property Improvements, Tenant shall send to Landlord a written notice containing an explanation of such dispute (a FMV Dispute Notice) within fifteen (15) days following its receipt of the Residual Value Notice. If the Parties are unable to mutually agree upon the then-current fair market value of the Land and/or the Property Improvements, as applicable, within a period of thirty (30) days following Tenants delivery of the FMV Dispute Notice, then within five (5) business days following the end of such thirty (30) day period, each of the Parties will give written notice to the other specifying the name and address of an Appraiser and the Parties will use the appraisal process described in Section 2(b)(iv) to determine the then-current fair market value of the Land and/or the Property Improvements, as applicable, whereupon such determined value(s) shall be used for purposes of calculating the Residual Value Shortfall (if any) hereunder. Within thirty (30) days following the conclusion of the appraisal process, the amount of any Residual Value Shortfall due to Landlord (if any) shall be so paid by Tenant. Any failure of Tenant to timely send an FMV Dispute Notice to Landlord shall be deemed an acceptance by Tenant of Landlords determination of the then-current fair market value of the Land and/or the Property Improvements, as applicable (as set forth in the Residual Value Notice). The provisions of this Section 2(c) shall survive the expiration or earlier termination of this Lease.
3. Rent.
(a) Base Rent.
(i) Tenant shall pay to Landlord, during the Term, an annual rent amount (the Base Rent), exclusive of any other charge to be paid by Tenant, payable in equal, consecutive monthly installments, in advance, without any abatement, deductions, reduction or set-off whatsoever, on the first day of each calendar month throughout the Term and pro rata for any partial month during the Term. The Base Rent as of the Commencement Date shall be [$________] (the Initial Base Rent).6
(ii) Following the Commencement Date, the Initial Base Rent shall be reset as of the earlier of (A) the first day of the month that immediately follows the month in which
6 | NTD: The Initial Base Rent shall be determined pursuant to the following formula (the Market Rent Formula): (1) the product of (a) the Current FMV (as defined herein), multiplied by (b) the Market NOI Cap Rate (as defined below), less (2) the product of (a) One Thousand Two Hundred Dollars ($1,200.00) (as such amount shall be Adjusted for Inflation (as defined below), for purposes of making the calculation of the Market Rent Formula, for each year that has followed the Master Leasing Agreement commencement date as of the date on which such calculation is being made) multiplied by (b) the number of existing apartment units on the Property as of the Commencement Date. In each case, the resulting calculation based on the Market Rent Formula will be subject to adjustment by up to ten percent (10%) (as measured by net present value) by the MLA Parties in order to confirm that the resulting Base Rent amount conforms to the then-current market lease rate. |
Market NOI Cap Rate means the resulting quotient upon dividing (1) the Net Operating Income for the Property, by (2) the Current FMV of the Property (as defined in Section 2(b)(iv)). Net Operating Income means, as of any date of determination, (x) all operating income for the Property for the immediately preceding full twelve (12) calendar months, less (y) all operating expenses for the Property for the immediately preceding full twelve (12) calendar months. |
(contd)
8
Stabilization of the Property occurs and (B) [Insert Fixed Date]7 (such earlier date, the Initial Rent Reset Date), as follows: The Initial Base Rent shall be reset to an amount equal to the sum of (1) the Initial Base Rent and (2) the aggregate sum of the CPI Rent Adjustment Amount (as hereinafter defined) for each lease year that would have been calculated during the period beginning on the Commencement Date and ending on the Initial Rent Reset Date (including pro rata for any partial lease year during such period) had the Base Rent been increased annually by an amount equal to the CPI Rent Adjustment Amount on each anniversary of the Commencement Date during such period, with, for the avoidance of doubt, each such CPI Rent Adjustment Amount compounded over the prior lease years. For the avoidance of doubt, the Initial Base Rent shall be fixed and without adjustment until it is reset on the Initial Rent Reset Date, in accordance with the terms of this Section 3(a)(ii).
(iii) Beginning on the first (1st) anniversary of the Initial Rent Reset Date and on each anniversary thereafter during the Term of this Lease, the then-current Base Rent will increase by an amount equal to the CPI Rent Adjustment Amount.
(iv) As used herein:
(A) CPI Rent Adjustment Amount means, with respect to any sum (as may have been previously adjusted, the Initial Sum), an amount equal to the product of (1) the Initial Sum multiplied by (2) the sum of (a) a fraction (i) the numerator of which is the difference between (x) the Consumer Price Index (as defined below) for the calendar month in which the last day of the Specified Interval (as defined below) falls and (y) the Consumer Price Index for the calendar month immediately preceding the commencement of the Specified Interval, and (ii) the denominator of which is the Consumer Price Index for the calendar month immediately preceding the commencement of the Specified Interval, expressed as a percentage (the CPI Factor), and (b) [__] percent ([__]%)8. Notwithstanding the foregoing, if the CPI Factor is less than [___] percent ([__]%), then the foregoing formula shall be modified to replace the CPI Factor therein with [__] percent ([__]%).
(B) Consumer Price Index means the Consumer Price Index for Urban Consumers, Northeast, 1982-1984=100, published by the Bureau of Labor Statistics of the United States Department of Labor (or any successor index thereto, appropriately adjusted).
Adjusted for Inflation means, with respect to any sum, that there shall be added to such sum (as previously adjusted), on an annual basis (such period, the Specified Interval), an amount equal to the product of (i) such sum (as previously adjusted) and (ii) a fraction (A) the numerator of which is the difference between (1) the Consumer Price Index for the calendar month in which the last day of the Specified Interval falls and (2) the Consumer Price Index for the calendar month immediately preceding the commencement of the Specified Interval, and (B) the denominator of which is the Consumer Price Index for the calendar month immediately preceding the commencement of the Specified Interval. Consumer Price Index means the Consumer Price Index for Urban Consumers, Northeast, 1982-1984=100, published by the Bureau of Labor Statistics of the United States Department of Labor (or any successor index thereto, appropriately adjusted).
7 | NTD: The date indicated here should be a date that occurs after the expected Stabilization Date. |
8 | NTD: The percentage set forth in (b) will be adjusted for each lease pursuant to the economic model for such lease. |
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(C) Specified Interval means, as of any date, the immediately preceding lease year or portion of such lease year, as may be appropriate for purposes of such calculation.
(b) Additional Rent. In addition to Base Rent, Tenant shall pay (to the extent provided in this Lease) all costs and expenses of the development, repair, replacement, management and operation of the Property, including, but not limited to all amounts, liabilities, obligations, and impositions which Tenant assumes or agrees to pay under this Lease, and any fine, penalty, interest, charge, and cost which may be added for nonpayment or late payment of such items (collectively, the Additional Rent). The Base Rent and Additional Rent are hereinafter referred to collectively as Rent. Landlord shall have all legal, equitable, and contractual rights, powers and remedies provided in this Lease or otherwise available at law or in equity in the case of nonpayment of Rent.
(c) Payment of Rent. All payments of Rent and any other amounts payable by Tenant to Landlord pursuant to this Lease shall be sent to Landlord at Tenants election by ACH transfer to Landlords bank as directed by Landlord or by check to c/o AIMCO Properties, L.P., 4582 S. Ulster Street, Suite 1700, Denver, CO 80237 or such other address as Landlord may designate in writing to Tenant from time to time, at least five (5) business days prior to any required payment of Rent, without abatement, deductions, reduction or set-off (including, for the avoidance of doubt, in connection with any force majeure events, delays in Tenants or Contractors (as hereinafter defined) ability to timely complete the Redevelopment (as hereinafter defined) in accordance with the Redevelopment Plans (as hereinafter defined) or otherwise), except as otherwise expressly set forth herein.
(d) Maintenance; Net Lease. It is the intent of Landlord and Tenant that this Lease be absolutely net to Landlord such that Tenant shall be responsible for and pay any and all Operating Costs (defined below) associated with and relating to the Property and this Lease, except as specifically set forth herein with respect to Excluded Taxes (as hereinafter defined). Operating Costs means, without limitation, (i) operating costs of the Property (including, without limitation, utilities, maintenance, operations, repairs and replacements, and the cost of supplies, materials and labor directly related to the foregoing), (ii) costs of compliance with all applicable Laws (as hereinafter defined) and matters of record (including, without limitation, easement agreements), (iii) property management fees, (iv) expenses and costs incurred in the management of the Redevelopment, (v) costs of insurance that Tenant is required to maintain, (vi) Taxes and Impositions (as hereinafter defined) and (vii) all other costs and expenses related to the ownership and operation of the Property, whether capital or operating, foreseeable or unforeseeable, latent or patent, structural or non-structural, ordinary or extraordinary, to the extent incurred during the Term. Notwithstanding the foregoing, Operating Costs, for purposes of this paragraph, shall not include (A) Landlords internal costs and expenses (including internal legal expenses), (B) costs and expenses (including payments of interest, principal and rent) under Landlords financing in connection with the Property, (C) costs and fees of professionals and consultants hired by or on behalf of Landlord in connection with the Property or this Lease (including accountants, attorneys and engineers), and (D) costs and expenses relating to the ownership or operation of the entity that is Landlord and each of its affiliates (including professional and consulting fees, salaries and wages of Landlords personnel, and other office and administrative expenses of any kind).
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(e) Late Fee; Interest. If payment of any item of Base Rent or Additional Rent shall not be paid within five (5) days of the original due date thereof, then (i) a late fee of three percent (3%) of the amount of the late payment shall be assessed and payable by Tenant to Landlord, and (ii) such late payment shall accrue interest from the date on which such payment was due until such payment has been paid in full, at a rate per annum equal to the lesser of (x) two percent (2%) over the then prime rate published in the Wall Street Journal (or any successor publication) and (y) the maximum rate allowed by Law (the Default Rate) for the purpose of defraying Landlords administrative expenses incident to the handling of such overdue payments.
4. Taxes and Impositions. Tenant shall pay, as Additional Rent, Impositions (as hereinafter defined) and Real Estate Taxes (as hereinafter defined), as set forth herein.
(a) Real Estate Taxes and Assessments. Subject to Section 4(c) below, Tenant shall pay all Real Estate Taxes (as hereinafter defined) levied, assessed, accruing, or imposed from and after the Commencement Date, which shall become due and payable during the Term with respect to the Property. If any such Real Estate Taxes may, at the option of the taxpayer, be paid in installments, Tenant may exercise the option to pay the same in installments; provided Tenant pays all costs and charges related to such installment payment method. All Real Estate Taxes that shall be assessed with respect to a taxable year or period beginning on or before and ending after the Commencement Date or beginning on or before and ending after the Termination Date shall be apportioned pro rata between Landlord and Tenant on a per diem basis in accordance with the respective number of days in such taxable year or period during which this Lease is in effect. Real Estate Taxes shall mean the ad valorem real estate taxes levied against the Property (and the improvements and fixtures located thereon), betterment assessments, special benefit taxes and special assessments levied or imposed against the Property, taxes levied or assessed on gross rentals payable by Tenant to the extent charged, assessed or imposed upon tenants in general which are based upon the rents payable under this Lease, any impact fees levied or assessed, whether or not billed by the taxing authority as a special benefit tax or a special assessment, all taxes levied or assessed on the Property that are in addition to or in lieu of taxes that are currently so assessed, and penalties and interest related to Real Estate Taxes if the applicable Real Estate Tax bills have been forwarded to Tenant in a timely manner; provided, however, that Real Estate Taxes shall not include any Excluded Taxes. Excluded Taxes shall mean, without limitation, Landlords income taxes, gift taxes, excess profit taxes, excise taxes, franchise taxes, estate, succession, inheritance and realty transfer taxes resulting from the transfer of any direct or indirect interest in the Property by Landlord unless such taxes replace Real Estate Taxes in the future (except as expressly set forth in the last sentence of this Section 4(a)), and any interest or penalty charges resulting solely from Landlords failure to promptly deliver the Real Estate Tax bills to Tenant if the applicable taxing authority has forwarded the tax bill to Landlord rather than Tenant. All special benefit taxes and special assessments shall be amortized over the longest time permitted under ordinance and Tenants liability for installments of such special benefit taxes and special assessments not yet due shall be paid in full prior to the expiration or termination of this Lease; provided, that the useful life of any such improvements do not extend beyond the expiration of the Term. Tenant shall also pay, directly to the applicable Governmental Authority (as hereinafter defined), any storm water charges, fees and taxes and use and occupancy tax in connection with the Property or any improvements thereon (or in the event Landlord is required by law to collect such tax, Tenant shall pay such use and occupancy tax to Landlord as Rent within thirty (30) days of written demand and Landlord shall remit any amounts so paid to Landlord to the appropriate
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Governmental Authority in a timely fashion) and deliver evidence of such payment to Tenant within ten (10) days of making such payment or within ten (10) days of receipt of Tenants request for such evidence of payment.
(b) Impositions. Subject to Section 4(c) below, Tenant shall pay all assessments, water and sewer rents, rates and charges, levies, license, permit and inspection fees, and other governmental charges, both general and special, of any kind and nature whatsoever, including, without limitation, condominium assessments (general and special) charged to the Property (collectively, the Impositions and, together with the Real Estate Taxes, collectively, the Taxes and Impositions) which shall be assessed, levied, confirmed, imposed upon, or become due and payable out of or in respect of, or become a lien upon, the Property or the leasehold, or any part thereof or appurtenance thereto during the Term, whether such charges are made directly to Tenant or through or in the name of Landlord. If any such Impositions may, at the option of the taxpayer, be paid in installments, Tenant may exercise the option to pay the same in installments; provided Tenant pays all costs and charges related to such installment payment method.
(c) Payment of Taxes and Impositions. If the Property is taxed separately, then Tenant shall pay all Taxes and Impositions directly to each body, agency, or authority imposing, assessing, levying, or otherwise collecting such Taxes and Impositions, prior to delinquency and in the manner specified by such body, agency, or authority, and shall submit to Landlord evidence of such payment together with a copy of the bill or invoice for such Taxes and Impositions within ten (10) days after making such payment. If, on the other hand, the Property is not taxed separately and is therefore taxed under one tax bill along with other property owned by Landlord (such other property together with the Property shall be collectively referred to herein as the Tax Parcel), then Tenant shall pay its proportionate share, as reasonably determined by Landlord and Tenant, of such Taxes and Impositions assessed against the Tax Parcel within ten (10) business days of demand from Landlord. Landlord and Tenant shall in good faith make reasonable efforts to cause the Property to be separately taxed, and to cause all appropriate Governmental Authorities to send directly to Tenant all pertinent statements and bills in respect of the Impositions relating to the Property. Subject to Section 4(c) below, all Taxes and Impositions which Tenant agrees to pay pursuant to this Lease that are not paid prior to delinquency may be paid by Landlord if Tenant fails to pay such Taxes and Impositions within ten (10) days after written notice from Landlord to Tenant. Tenant shall reimburse Landlord for any such payments (including, without limitation, any penalty and interest imposed in connection with Tenants failure to pay any Tax or Imposition prior to delinquency) within fifteen (15) days of receipt of an invoice therefor. Interest shall accrue on such unpaid expenditures from the date of Tenants receipt of an invoice from Landlord until the date that payment is received by Landlord at the Default Rate.
(d) Tax Liens. Tenant shall keep the Property free and clear of all liens from Taxes and Impositions (except for those created by or through Landlord) and shall, subject to Section 4(c) below, cause the prompt discharge of all liens from Taxes and Impositions (except for those created by or through Landlord) imposed on the Property.
(e) Right to Contest Taxes and Impositions. Tenant may, at its sole cost and expense, contest the amount or validity of Taxes and Impositions upon the Property by appropriate proceedings. Nothing contained herein shall imply any right on the part of Tenant to postpone such
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payment unless such proceedings and/or security given shall, to the extent the same were paid or given by Tenant, stay both the collection thereof and the sale of the Property to satisfy same. Landlord, at Tenants written request and sole cost and expense, shall join in such proceedings if any law shall so require. Tenant will pay such Taxes and Impositions as they are finally levied, assessed or imposed as a result of any such proceeding. If there shall be any refund payable by the Governmental Authority (as hereinafter defined) with respect to any Taxes and Impositions paid by Tenant, Tenant shall be entitled to receive and retain the same.
(f) Limitation on Taxes. Nothing contained herein shall obligate Tenant to pay any general income, inheritance, estate, gift, succession, sales, use or revenue tax (or any substitution therefor) of, or levied or assessed against Landlord; nor any other tax, assessment, charge, or levy (or any substitution therefor) against Landlord with respect to or because of the Rent and other income derived by Landlord under this Lease; nor shall Tenant be deemed obligated to pay any corporation, franchise, capital stock, payroll, excise, privilege, or any other tax of similar nature (or any substitution therefor) which may be levied or assessed against Landlord.
5. Utilities. Tenant shall be solely responsible for installing, arranging for, and maintaining satisfactory utility lines and services to and for the Property or any portion thereof, including, without limitation, water service, gas, oil, sanitary and storm sewer service, electricity, steam, power, telephone and any other communication services, trash collection, and any and all other utility services desired, rendered, or supplied to or in connection with the Property (collectively, the Utilities) during the Term. Tenant shall pay prior to delinquency all deposits, rents, costs, tap-in fees and other charges and fees for such Utilities directly to the provider of such Utilities during the Term. Tenant shall, at its sole cost and expense, procure and keep in effect all necessary permits, licenses, and other authorizations required by any Governmental Authority or otherwise required by Laws (as hereinafter defined) and/or utility companies or providers for the proper installation and maintenance upon the Property of the wires, pipes, shafts, ducts, conduits, tubes, and other equipment and appliances for use in supplying any such services to and upon the Property. Landlord shall not be required to furnish any utility lines or services to the Property. Landlord shall, upon written request from Tenant and at no out of pocket cost to Landlord, reasonably cooperate with Tenant in connection with obtaining Utilities and the aforementioned permits, licenses and authorizations and shall provide assistance as reasonably requested by Tenant in connection therewith.
6. Redevelopment.
(a) Development/Redevelopment of the Property. As of the Commencement Date and throughout the Term, the Parties agree that Tenant may, at its election and its sole cost and expense, but subject to the terms and provisions of the Private Restrictions (as hereinafter defined) and applicable Laws, endeavor to cause the development, redevelopment and/or the lease-up of the Property, in each case, in accordance with the Redevelopment Plans (as hereinafter defined) for the Property (the Redevelopment); provided that, if and only if Tenant so elects to undertake the Redevelopment, then (i) Tenant agrees that, once Tenant has commenced the Redevelopment (including, without limitation, entering into contracts with one or more Development Professionals (as defined below) or obtaining construction financing, in each case, in connection with the Redevelopment), Tenant shall thereafter use commercially reasonable efforts to then cause the completion of such Redevelopment in accordance with the terms hereof
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and (ii) the remaining provisions of this Section 6 shall apply and the Parties agree they shall be bound by such provisions. In such event, any such development or redevelopment shall include the construction, erection, alterations, improvements, repairs, renovation, modification and/or installation of signage and other work, on, under, above and to the Property including, without limitation, one or more buildings, parking areas, parking garages, utility lines, conduits and facilities, electricity and power generation facilities, sanitary sewer lines and pump stations, drainage and storm water management systems and similar and dissimilar improvements and facilities, as may be applicable (collectively, the Improvements), substantially in accordance with the plans and specifications approved by the MLA Parties with respect to the Redevelopment and attached hereto as Schedule 4 (collectively, the Redevelopment Plans) and the terms of any development agreement(s) entered into in connection with the Redevelopment (a Development Agreement). Any Improvements shall be constructed in a good and workmanlike manner, using good materials that are comparable to such materials as are commonly used in the construction or redevelopment of similar buildings of similar grade in the city and state in which the Property is located. If the Redevelopment Plans contemplate the development of the Property, then all Improvements, including, without limitation, any building or buildings, building equipment and/or other items, improvements, additions, changes or alterations on the Property, and all drawings, plans, licenses, permits, approvals and other tangible and intangible personal property relating to or used at the Improvements, shall be and remain the sole property of Tenant and, as applicable, those claiming by, through or under Tenant (including subtenants), and Landlord shall have no interest therein or rights with respect thereto until the end of the Term at which time the Improvements, if any, then located on the Property shall become the property of Landlord. The Parties agree that Tenant will bear all market risk for the cost and pace of construction, rental rate achievement and absorption pace, in each case to the extent applicable and as each relates to the Redevelopment; and the terms of this Lease shall not be amended or modified in any respect (including, without limitation, with respect to the Rent amounts payable under this Lease) in connection therewith.
(b) Contractors and Supervision. If the Redevelopment Plans contemplate the development or redevelopment of the Property (or if, during the Term, any capital projects are required on the Property), Tenant shall enter into contracts with such architects, engineers, contractors and other such professionals (each, a Development Professional) as may be required to effect such development, redevelopment or other capital project. Any Development Professionals so engaged by Tenant shall be subject to the approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed (it being agreed that if Landlord does not respond to Tenants notice requesting Landlords consent to any such Development Professional on or prior to ten (10) Business Days after the date Tenant gives such notice to Landlord, then Landlord shall be deemed to have consented to such Development Professional).
(c) Construction Financing. Tenant shall be solely responsible for procuring and obtaining any new line of credit or asset-level construction financing which Tenant requires in connection with the Redevelopment of the Property, and Tenant shall have the right to grant one or more leasehold mortgages encumbering its leasehold interest in the Property in accordance with the terms of Section 14. The Parties agree that this Lease and the Redevelopment contemplated hereunder shall not require a construction-related completion bond.
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(d) Governmental Approvals; Landlord Cooperation. Tenant, at Tenants expense, prior to any construction of the Improvements pursuant to the Redevelopment, shall obtain all permits, approvals and certificates required by any Governmental Authorities in connection therewith. Landlord shall have the right to require Tenant to make all filings with Governmental Authorities to obtain such permits, approvals and certificates using an expeditor designated reasonably by Landlord (provided that the charges imposed by such expeditor are commercially reasonable and such expeditor performs in a reasonable and competent manner) or another expeditor selected by Tenant and approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Upon the request of Tenant, Landlord shall join in and promptly execute any applications for any permits, approvals or certificates required to be obtained by Tenant in connection with the Improvements (provided that applicable Laws require Landlord to join in such application) and shall otherwise cooperate with Tenant in connection therewith. Tenant shall reimburse Landlord for any reasonable and actual out-of-pocket costs, including, without limitation, reasonable attorneys fees, charges and disbursements, that Landlord incurs and pays to an unrelated third party in so joining in such applications and cooperating with Tenant, within thirty (30) days after the date that Landlord gives to Tenant an invoice therefor from time to time, accompanied by reasonable supporting documentation of such costs. Upon completion of the Improvements, Tenant, at Tenants expense, shall (i) obtain certificates of final approval for the Improvements to the extent required by any Governmental Authority, and (ii) furnish Landlord with copies of such certificates.
(e) Compliance with Laws. Tenant shall, at its sole cost and expense, comply in all material respects with all federal, state and local laws, rules, ordinances and regulations (including, without limitation, the Americans with Disabilities Act of 1990) (collectively, the Laws) applicable to the use, demolition, construction or occupancy of the Improvements. Tenant shall, subject to any terms and conditions set forth in this Lease, diligently take all actions reasonably necessary to obtain, maintain and comply with all governmental, regulatory and administrative permits or approvals (collectively, Governmental Approvals) required by any national, federal, state, local, or other government or political subdivision or any agency, authority, board, department, or instrumentality thereof, or any court, arbitrator (to the extent required by the terms of this Lease) or tribunal or quasi-governmental agency (each, a Governmental Authority) having jurisdiction over the Property, this Lease, and/or Tenants activities on the Property. Tenant shall be responsible for all costs and expenses associated with its activities under this Lease, including obtaining the Governmental Approvals. Landlord shall, upon written request from Tenant and at no material cost to Landlord, reasonably cooperate with Tenant in connection with the Governmental Approvals process and shall provide assistance as reasonably requested by Tenant in connection with obtaining Governmental Approvals.
(f) Compliance with Private Restrictions. Tenant shall not use, occupy or improve the Property, or permit the Property or the Improvements or any part thereof, to be used, occupied or improved, so as to violate any condominium declaration (or similar documentation) that the Property may be subject to, if any, or any terms, conditions or covenants of any other development-related documentation (including, without limitation, zoning declarations, community benefits agreements, or reciprocal easement agreements), and any recorded easements, restrictions, covenants, or agreements now or hereafter (subject to the terms hereof) affecting the Property (Private Restrictions). Tenant shall at all times comply with all affirmative obligations, if any, imposed on Landlord by any Private Restrictions; provided, however, Tenant
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shall not be responsible for the performance of obligations with which Tenant cannot comply because Tenant is not the fee owner of the Property. After the Commencement Date, Landlord shall not enter into any Private Restrictions affecting the Property without Tenants prior written consent (which shall not be unreasonably withheld, conditioned, or delayed only if the proposed Private Restrictions or amendment do not increase the cost to Tenant to develop or operate the Improvements or interfere with Tenants development or operation of the Improvements for the Allowable Uses).
(g) Inspection, Audit and Reporting Requirements.
(i) In the event that Tenant elects to undertake the Redevelopment, then Landlord shall have the right to engage a construction consultant (the Construction Consultant) at Landlords sole cost and expense. Further, in the event that Tenant elects to undertake the Redevelopment, Tenant shall reasonably cooperate to permit representatives of Landlord and the Construction Consultant, at reasonable times and on reasonable advance notice, to examine Tenants books of record and account, to make copies and abstracts therefrom, and to discuss its affairs, finances and accounts with its principal officers, engineers and independent accountants, in each case solely in connection with the Redevelopment (and by this provision Tenant authorizes said accountants to discuss with such Persons such affairs, finances and accounts, but after prior notice to Tenant of such discussions). Without limiting the foregoing, representatives of the Construction Consultant and Landlord shall have the right at reasonable times and on reasonable advance notice to (a) inspect the Property and all materials to be used in connection with the Redevelopment from time to time and to witness the construction of the Improvements to ensure compliance with the Redevelopment Plans, (b) to conduct such environmental and engineering inspections and studies as Landlord may reasonably require, (c) to examine all detailed plans, shop drawings and change orders in connection with the Redevelopment, and (d) meet with the representatives of any Development Professionals to discuss the status of and issues relating to the Redevelopment (and by this provision Tenant authorizes the Development Professionals to cooperate and discuss with such Persons such construction matters, but after reasonable prior notice to Tenant of such discussions). Upon request, Tenant will furnish Landlord with any items in the possession of, under the control of, or reasonably obtainable by, Tenant, that Landlord or the Construction Consultant may consider reasonably necessary or useful in connection with the performance of any inspection of the Improvements. Without limiting the generality of the foregoing, Tenant shall furnish or cause to be furnished such items as working details, licenses, permits, approvals, certificates of public authorities, zoning ordinances, building codes and copies of the contracts to which Tenant is a party (if applicable).
(ii) Following the date on which construction otherwise commences, Tenant shall provide to Landlord a quarterly reporting package with respect to the ongoing work and construction at the Property in form and substance reasonably agreed upon by the Parties.
(h) Lease-Up of the Property. Tenant will direct the property manager for the Property (the Property Manager) to complete the lease-up of the Property in accordance with the terms of the Redevelopment Plans.
(i) Easements. If the Redevelopment Plans contemplate the development of the Property, Tenant shall have the right to enter into agreements with utility companies creating such
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easements relating solely to the Property in favor of such utility companies as are required in Tenants sole discretion; provided, however, any easements or similar agreements made with parties other than providers of utilities shall, unless Landlord consents in writing in advance, which consent shall not be unreasonably withheld, delayed or conditioned, terminate upon the expiration or sooner termination of the Term.
(j) Third Party Property Rights. Except as otherwise expressly limited or prohibited hereunder, Tenant may enter into agreements relating to the acquisition, occupancy, easement, rights of way, or leasing of any real property relating to the construction of the Improvements or operation thereof (including the aggregation and allocation of air rights) (collectively, Third Party Rights), provided that no Third Party Rights shall extend beyond the Term of this Lease without the prior consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed (excepting standard one (1) year residential leases on a form (and for rent amounts) approved by Landlord in connection with any lease-up of the Property). Subject to Landlords agreement to be bound by the covenants regarding confidentiality contained in such Third Party Rights, Tenant shall provide all information and documentation to Landlord relating to Third Party Rights as reasonably requested by Landlord from time to time.
7. Environmental.
(a) Restrictions. Tenant shall not bring or otherwise cause to be brought or permit any of its agents, employees, contractors, invitees, subtenants, licensees or occupants to use, generate, transport, treat, dispose of or bring in, on or about any part of the Property (or any improvements erected thereon), any Hazardous Substance (as hereinafter defined); provided, however, that Hazardous Substances may be brought, kept, used or disposed of in, on or about the Property in quantities and for purposes similar to those brought, kept, used or disposed of in, on or about similar multifamily residential properties, and which are brought, kept, used and disposed of in strict compliance with all applicable Laws.
(b) Hazardous Substances. For purposes of this Section 7, Hazardous Substance means any matter giving rise to liability under the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, U.S.C. Section 9601 et seq. (including the so-called Superfund amendments thereto), any other applicable federal, state or local statute, law, ordinance, rule or regulation governing or pertaining to any hazardous substances, hazardous wastes, chemicals or other materials, including, without limitation, asbestos, polychlorinated biphenyls, radon, petroleum and any derivative thereof or any common law theory based on nuisance or strict liability (all of the foregoing statutes, laws, ordinances, rules, regulations and common law theories being sometimes hereinafter collectively referred to as Hazardous Materials Laws). Tenant shall cooperate with Landlord and permit Landlord and all Governmental Authorities reasonable access to the Property in a manner that will not unreasonably interfere with Tenants (or any of its occupants) use of the Property for purposes of operating, inspecting, maintaining and monitoring any environmental controls, equipment, barriers and/or systems required by applicable Hazardous Materials Laws. Except for Known Existing Environmental Conditions to be removed and remediated pursuant to the Development Agreement (if any), if, during the Term, the existence, presence, release, placement on or in the Property or the generation, transportation, storage, treatment or disposal at the Property of any Hazardous Substance (including Unknown Existing
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Environmental Conditions (as hereinafter defined)) (i) gives rise to liability (including, but not limited to, a response action, remedial action or removal action) under Hazardous Materials Laws; (ii) causes a public health effect; or (iii) pollutes the environment, Tenant, except to the extent such matters were caused by the Indemnified Landlord Parties (as hereinafter defined), shall promptly take any and all remedial and removal action necessary to clean up the Property and mitigate exposure to liability arising from the Hazardous Substance, in accordance with Hazardous Material Laws. For purposes of this Lease, Known Existing Environmental Conditions means, collectively, any environmental conditions at the Property disclosed on the most recent Phase I Environmental Assessment available for the Property, such conditions discovered during the performance of the Improvements, Specified Environmental Liabilities (as hereinafter defined) and environmental conditions at the Property known by any of the Indemnified Landlord Parties, and Unknown Existing Environmental Conditions means the existence, presence or release of Hazardous Substances in violation of Hazardous Materials Laws at the Property as of the Effective Date, other than the Known Existing Environmental Conditions.
(c) Environmental Audit. Upon request by Landlord during the Term, prior to Tenants exercise of any renewal right and/or prior to Tenants vacating the Property, Landlord at its sole cost and expense shall have reasonable access to the Property for conducting an environmental audit from an environmental company reasonably acceptable to Landlord, at Landlords cost and expense, except as herein provided. In addition, if Landlord has a good faith and reasonable reason to believe that Hazardous Substances in violation of Hazardous Materials Laws exist at the Property, then Landlord shall specify the reasons to Tenant, and if Tenant does not provide information to Landlords reasonable satisfaction regarding the suspected presence of Hazardous Substances in violation of Hazardous Materials Laws, Landlord may request that Tenant perform an environmental audit from an environmental company reasonably acceptable to Landlord. If Tenant gives Landlord written notice that Tenant does not intend to perform such audit, or if Tenant fails to complete such audit within thirty (30) days following Landlords request, then Landlord may perform such audit (a Requested Audit). If any environmental audit discloses the presence of Hazardous Substances, other than Known Existing Environmental Conditions, in violation of Hazardous Materials Laws, then, except to the extent caused by any of the Indemnified Landlord Parties, to the extent the same are in violation of applicable Hazardous Materials Laws and are required to be remediated under Hazardous Materials Laws, Tenant shall perform any required remediation promptly and in all events prior to surrendering possession of the Property to Landlord. If any Requested Audit discloses the presence of Hazardous Substances, other than Known Existing Environmental Conditions, in violation of Hazardous Materials Laws, then, except to the extent caused by any of the Indemnified Landlord Parties, Tenant shall promptly reimburse Landlord for the reasonable out-of-pocket cost of the Requested Audit paid by Landlord to unrelated third parties.
(d) Survival. The provisions of this Section 7 shall survive the expiration or earlier termination of this Lease.
8. Maintenance. Tenant, at its sole cost and expense, shall, or shall cause the Property Manager to, keep and maintain the Property, and all private roadways, sidewalks and curbs appurtenant to the Property and which are under Tenants control, in good and safe condition and repair (ordinary wear and tear and damages by fire and other casualty excepted), whether or not the need for such repairs occurs as a result of Tenants activities on the Property, the elements or
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the age of the Property, and, with reasonable promptness, make all necessary and appropriate repairs thereto of every kind and nature, including those necessary to comply with changes in any Laws, whether interior or exterior, structural or non-structural, ordinary or extraordinary, foreseen or unforeseen, to the extent such repairs are required hereunder by reason of a condition arising from and after the Commencement Date. Landlord shall not be required to (a) furnish any services, including utilities, or facilities to the Property, (b) make any repairs, replacements, alterations, restorations or renewals of any nature to the Property, whether ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or to make any expenditure whatsoever with respect thereto, except as set forth herein or in the Master Leasing Agreement, or (c) maintain the Property in any way.
9. Alteration; Demolition. In addition to the Improvements, Tenant may make non-structural alterations, additions and improvements (collectively, Alterations) to the Property without the consent of Landlord. All Alterations undertaken by Tenant pursuant to this Section 9, and use thereof, shall be in compliance with all then-applicable Laws, Private Restrictions, the Redevelopment Plans and the terms of this Lease.
10. Insurance.
(a) Property Insurance. At all times during the Term, Tenant shall procure and maintain, at its sole expense, physical damage insurance providing physical loss or damage protection against any peril included within the classification causes of loss special form property damage (formerly all-risk) (including endorsements for increased costs of compliance, malicious mischief, vandalism, sprinkler leakage, flood, earth movement and boiler and machinery coverage) for the 100% of replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance, covering (i) all leasehold and tenant improvements in and to the Property (including the Improvements and subsequent Alterations) and (ii) Tenants furniture, business and personal trade fixtures, equipment, furniture system and other personal property from time to time situated in the Property (Tenants Property Policy). The proceeds of such insurance shall be used for the repair and replacement of the property so insured. If such physical damage insurance no longer becomes available in the future, Tenant shall obtain such comparable insurance as is then available. Tenant has the right to satisfy Tenants obligations to carry Tenants Property Policy with a blanket insurance policy if such blanket insurance policy provides, on a per occurrence basis, that a loss that relates to any other location does not impair or reduce the level of protection available for the Property below the amount required by this Lease.
(b) Liability Insurance. At all times during the Term, Tenant shall procure and maintain, at its sole expense for the protection of Landlord as an additional insured and Tenant as the named insured, commercial general liability insurance applying to the use and occupancy of the Property and the business operated by Tenant (Tenants Liability Policy). Such insurance shall have a combined single limit of liability of $1,000,000 per occurrence and a general aggregate limit of $2,000,000, and Tenant shall provide in addition excess liability insurance on a following form basis, with overall limits of $5,000,000. All such policies shall be written to apply to bodily injury (including death), property damage and personal injury losses, shall include blanket contractual liability, broad form property damage, completed operations, products liability, host liquor liability, cross liability and severance of interest clauses, and shall include Landlord and its
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agents, beneficiaries, partners, employees, and any Leasehold Mortgagee of any Leasehold Mortgage (as hereinafter defined) designated by Landlord in writing as additional insureds.
(c) Business Automobile Liability Insurance. At all times during the Term, Tenant shall procure and maintain, at its sole expense for the protection of Landlord as an additional insured and Tenant as the named insured, primary automobile liability insurance with limits of not less than $1,000,000 per occurrence covering owned, hired and non-owned vehicles used by Tenant.
(d) Workers Compensation and Employers Liability Insurance. At all times during the Term (and prior to the Commencement Date with respect to any use or activity of Tenant hereunder at the Property), Tenant shall procure and maintain Workers Compensation Insurance in accordance with the laws of the state in which the Property is located, and employers liability insurance with a limit of $1,000,000 bodily injury each accident; $1,000,000 bodily injury by disease each person; and $1,000,000 bodily injury by disease policy limit.
(e) Professional Liability Insurance. Professional liability insurance for Tenant including errors and omissions in an amount no less than $5,000,000 per claim for all professionals (other than contractors pollution professional noted in (C) below) covering the services under this Lease and under the Development Agreement shall be held and maintained for a minimum of three years following completion of all services (if applicable).
(f) Additional Insurance. In addition to the insurance described above, Tenant shall maintain such additional insurance as may be reasonably required from time to time by any Leasehold Mortgagee and shall further at all times maintain adequate coverage required by Law.
(g) Insurer. Tenant shall cause Tenants Liability Policy and Tenants Property Policy to be issued by a reputable and financially sound insurer that is (i) permitted to do business in the state in which the Property is located and (ii) rated A-/VII or better by A.M. Bests Rating Guide or any successor thereto (it being understood that if such ratings are no longer issued, then such insurers financial integrity shall conform to the standards that constitute such ratings from Bests Insurance Guide as of the date hereof).
(h) Umbrella Policies. Tenant has the right to satisfy Tenants obligation to carry Tenants Liability Policy with an umbrella insurance policy if such umbrella insurance policy contains an aggregate per location endorsement that provides the required level of protection for the Property.
(i) Self-Insurance. Tenant shall have the option, in conjunction with Tenants ultimate parent corporation (or any subsidiaries or affiliates thereof), to maintain self insurance or to provide or maintain any insurance required under this Lease under blanket insurance policies maintained by Tenants ultimate parent corporation (or any subsidiaries or affiliates thereof), or to provide or maintain insurance through such alternative risk management programs as Tenants ultimate parent corporation (or any subsidiaries or affiliates thereof) may provide or participate in from time to time (any such types of insurance programs being referred to herein collectively as Self-Insurance Programs). Any such Self Insurance Programs shall not operate to decrease the insurance coverage or limits set forth in this Section 10. Any such Self Insurance Programs shall
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be deemed to contain all of the terms and conditions applicable to the requirements for Tenants insurance contained in this Section 10. If Tenant elects to provide its insurance through a Self-Insurance Program, then, with respect to any claims which may result from incidents occurring during the Term, the insurance provided by such Self Insurance Program shall survive the expiration or earlier termination of this Lease to the same extent as the insurance required would survive.
(j) General Requirements. The insurance requirements identified in this Section 10 shall not be construed to modify, limit or reduce the indemnification requirements set forth herein or Tenants liability arising under or out of this Lease. Each policy of insurance required to be carried by Tenant under this Lease must be evidenced by a certificate of insurance, which certificate must also evidence waiver of subrogation as to the Indemnified Landlord Parties on all insurance policies, including workers compensation. If policies purchased by Tenant above do not expressly allow the insured to waive rights of subrogation prior to loss, the insured shall cause them to be endorsed with a waiver as required above. The required certificates of insurance shall be delivered no later than the Effective Date, with the exception of any certificates of insurance relating to initial construction of the Property, which shall be delivered no later than fifteen (15) days before the commencement of construction to Landlord at the address designated in this Lease for service of Notice upon Landlord or such other address as Landlord may specify by written notice to Tenant from time to time.
(k) Release; Waiver of Subrogation Property. Landlord and Tenant each hereby release each other from liability for damage to the property of the other to the extent the loss, liability or damage is insured under the property insurance that such party is required to obtain hereunder. Landlord and Tenant shall obtain waivers of subrogation rights by the insurer against Landlord or Tenant, as the case may be, in all property insurance policies affecting any portion of the Property.
(l) Contractors Insurance.
(i) With respect to all contractors and subcontractors performing any work on or about the Property (Contractor), Tenant shall obtain or shall cause all of such Contractors to obtain, maintain throughout such work, and shall provide evidence reasonably satisfactory to Landlord of the following insurance coverages:
(A) Commercial General Liability insurance all on an occurrence basis in an amount not less than $1,000,000 per occurrence limit per location and/or project for bodily injury and property damage, $1,000,000 personal and advertising injury; $2,000,000 General Aggregate; $2,000,000 Products/Completed Operations Aggregate. Coverage is to include full contractual liability coverage.
(B) Workers Compensation insurance in amounts required by law for all employees, and Employers Liability insurance with minimum limits as follows: Bodily Injury by Accident $1,000,000 Each Accident, Bodily Injury by Disease $1,000,000 Policy Limit, Bodily Injury by Disease $1,000,000 Each Employee.
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(C) Contractors pollution liability (CPL) including mold coverage and Professional Liability Insurance including errors and omissions in an amount not less than a minimum of $2,000,000 per loss/claim/occurrence (if applicable).
(D) Professional liability insurance including errors and omissions in an amount no less than $2,000,000 per claim for all other professionals (other than contractors pollution professional noted in (C)) covering the services under this Lease and under the Development Agreement and shall be maintained for a minimum of three years following completion of all services (if applicable).
(E) Comprehensive automobile liability, including owned, non-owned and hired vehicles, in the minimum amount of $1,000,000 combined single limit for bodily injury and property damage liability.
(F) Umbrella/Excess Liability insurance all on an occurrence basis be following form over underlying Commercial General Liability, Business Automobile, Employers Liability insurance policies with the following minimum limits: (1) $1,000,000 if the aggregate amount of such contract is less than $1,000,000 where the work includes leasehold improvements, repairs and maintenance (no structural work); (2) $2,000,000 if the aggregate amount of such contract with the Contractor is more than $1,000,000 but is less than $5,000,000 where the work includes leasehold improvements, repairs and maintenance (no structural work); (3) $5,000,000 if the aggregate amount of such contract with the Contractor is $5,000,000 or more but is less than $15,000,000; (4) $10,000,000 if the aggregate amount of such contract with the Contractor is $15,000,000 or more but is less than $35,000,000; (5) $25,000,000 if the aggregate amount of such contract with the Contractor is $35,000,000 or more but is less than $75,000,000; and (6) $50,000,000 if the agreement amount of such contract with the Contractor is $125,000,000 and higher; provided, however, that each contract should be reviewed based upon the scope of work, and any project over $150,000,000 should be approved by Landlord in terms of the appropriate Umbrella/Excess limits. In any event, the limits established for the contract must be sufficient for the exposures associated with the construction.
(G) A Certificate of Insurance (on an ACORD form or other equivalent form reasonably acceptable to Landlord) is required to demonstrate compliance with the above noted insurance requirements and should be furnished to Landlord prior to commencement of the applicable work. The Certificate of Insurance must name Landlord, Tenant and their respective subsidiaries and affiliates, owners, trustees, officers, and/or agents as additional insureds under all policies with the exception of sections (B) (Workers Compensation) and (D) (Professional Liability) above. Contractors coverage shall be primary and non-contributing with or in excess of any coverage available to Landlord or Tenant. Tenant shall or shall cause Contractor to waive subrogation on all policies including workers compensation. Contractors insurance certificate must also evidence waiver of subrogation on all insurance policies including the workers compensation. If policies purchased by Contractor do not expressly allow the insured to waive rights of subrogation prior to loss, the insured shall cause them to be endorsed with a waiver as required above in favor of Landlord. Should any of the described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions. The required certificates of insurance shall be delivered to Landlord at the
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address designated in this Lease for service of Notice upon Landlord or such other address as Landlord may specify by written notice to Tenant from time to time.
(H) Such policies of insurance shall be issued by a reputable and financially sound insurer that is (i) permitted to do business in the state in which the Property is located and (ii) rated A-/VII or better by A.M. Bests Rating Guide or any successor thereto (it being understood that if such ratings are no longer issued, then such insurers financial integrity shall conform to the standards that constitute such ratings from Bests Insurance Guide as of the date hereof).
(I) Landlord and Tenant acknowledge that during the Term insurance practices, coverages and the forms and content of insurance policies and certificates of insurance may change. Accordingly, Landlord and Tenant agree that on the fifth (5th) anniversary of the Commencement Date, and each five (5) years thereafter, or earlier should the market conditions warrant, Landlord and Tenant shall discuss, in good faith, the implications of such changes in light of the nature of the insurance being maintained by contractors with respect to similar properties meeting the standards observed by prudent operators of facilities similar to the Property in the city and state in which the Property is located, and shall agree in writing, acting reasonably, to change the nature or extent of the insurance or coverages required to be maintained by it pursuant to this Section 10(k)(i) or increase or decrease the amount of any such coverage limits, retention or deductibles, in order to conform reasonably to prudent risk management practices consistent with such standards or change the required minimum ratings of carriers or other provisions of this Section 10(k)(i) in order to conform reasonably to prudent risk management practices consistent with such standards. Notwithstanding the foregoing, Landlord may require Tenant to procure and maintain, or require Tenants subtenants to procure and maintain, at any time upon written notice to Tenant during the Term, such policies of insurance with limits as may be required by Landlords lender to ensure that no breach exists pursuant to any loan documents to which Landlord may be subject, including, but not limited to, any Lien (as hereinafter defined).
(ii) All Contractors liability policies shall be endorsed to be primary and non-contributing and must not contain any residential exclusions nor any exclusions applicable to the contractual work with the policies of any other party being excess, secondary and non-contributing. With the exception only of professional liability coverage, all such insurance shall be issued on an occurrence basis, and not on a claims made basis coverages shall be maintained until the completion of the work by the applicable professional with tail coverage pertaining to such work for the duration of the applicable statute of repose following the completion of the work by the applicable professional. The duration for which coverage for completed operations must be maintained may only be reduced with the express written consent of Landlord, not to be unreasonably withheld, in circumstances where (A) warranted based upon the nature and scope of work; and (B) contractor declines or is unwilling to maintain coverage for the required term set forth herein.
(iii) Neither the issuance of any insurance policy required under this Lease, nor the minimum limits specified herein with respect to Tenants insurance coverage, shall be deemed to limit or restrict in any way Tenants liability arising under or out of this Lease.
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11. Casualty.
(a) Notice of Casualty. If any Improvements shall be destroyed or damaged in whole or in substantial part by fire or other casualty (including any casualty for which insurance was not obtained or obtainable) of any kind or nature, ordinary or extraordinary, foreseen or unforeseen (a Casualty), Tenant shall give to Landlord prompt written notice thereof (a Damage Notice).
(b) Restoration. In the case of any damage to or destruction of the Improvements by Casualty, Tenant shall use its best efforts to, within one hundred eighty (180) days of such Casualty, restore the affected portion of the Improvements (or construct such replacement Improvements as Tenant shall elect in its sole discretion) to substantially the same condition they were in prior to such Casualty, or, if such affected portion is subject to Redevelopment, then to proceed with the development or redevelopment thereof to complete the Redevelopment in accordance with the Redevelopment Plans (the Restoration Work). The Restoration Work by Tenant shall be commenced promptly following the Casualty and shall be performed in a good and workmanlike manner and in accordance with applicable Laws in all material respects. The net proceeds of Tenants Property Policy (the Insurance Proceeds) shall be applied first to the Restoration Work and then as provided in any Leasehold Mortgage and if there is no Leasehold Mortgage, paid to Tenant. Except as set forth below in this Section 11(b), Landlord shall have no interest in any Insurance Proceeds or policies of insurance maintained by Tenant at or which pertain in whole or in part to the Property. Tenant shall be, and any Leasehold Mortgage shall provide that Tenant is, entitled to settle all insurance and other related claims, and to retain and utilize any Insurance Proceeds in accordance with the terms hereof. If, as indicated in the Damage Notice, a substantial portion of the Property is damaged as a result of the Casualty, then, as soon as reasonably practicable following the Casualty, but in any event no later than thirty (30) days after the date of delivery of the Damage Notice to Landlord, Tenant shall deliver to Landlord a written notice (a Restoration Work Notice) containing (i) a description of the Restoration Work to be performed and an estimate of the reasonable cost to complete such Restoration Work (a Cost Estimate), which such description and Cost Estimate shall be prepared by the developer contracted by Tenant to perform the Redevelopment Work or another developer reasonably acceptable to Landlord, and (ii) an estimate of the amount of the Insurance Proceeds that are or will become available to Tenant in connection with the Casualty. Notwithstanding anything contained in this Section 11 to the contrary, if a substantial portion of the Property is damaged and the amount of the Cost Estimate exceeds the amount of Insurance Proceeds that are or will be available to Tenant, then, unless and except if Landlord agrees to fund such shortfall in connection with the Restoration Work, Tenant shall have the right, at its option, to terminate this Lease, it being expressly acknowledged and agreed that all of Tenants obligations hereunder with respect to the Restoration Work are subject to Tenants receipt of Insurance Proceeds therefor and payment by Landlord of any shortfall amount. Within fifteen (15) days following its receipt of the Restoration Work Notice, Landlord shall notify Tenant in writing whether Landlord agrees to fund such shortfall; any failure of Landlord to timely provide such notice shall be deemed an election by Landlord not to fund the shortfall. Any right to terminate this Lease pursuant to this Section 11 shall be exercisable by Tenant by delivering written notice thereof to Landlord no later than ninety (90) days following the date of the Casualty; following Tenants delivery of such notice, this Lease shall terminate on the last day of the month immediately following the month in which Tenant delivered such notice to Landlord. In the event
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that Tenant timely notifies Landlord that it elects to terminate this Lease in accordance with the terms of this Section 11, then, notwithstanding anything contained in this Section to the contrary, any Insurance Proceeds which Tenant has received or is entitled to receive in connection with the Casualty, which pertain in whole or in part to the Property (excluding any portion of the Insurance Proceeds that relate to the personal property of Tenant), shall be paid to Landlord on or prior to the date on which this Lease so terminates (or within ten (10) days following Tenants receipt of such Insurance Proceeds, to the extent not received by Tenant prior to such date of termination). Notwithstanding any other provision of this Lease to the contrary (but subject to Tenants right to terminate this Lease pursuant to this Section 11), Tenant shall not be entitled to any abatement or other reduction of Rent in connection with such event or the period during which Tenant or any occupants of the Property are unable to utilize the Property for their intended uses. The terms of this Section 11 shall survive the expiration or earlier termination of this Lease.
12. Condemnation.
(a) Taking. In the case of a complete or substantially complete taking of the Property, this Lease shall not terminate; and the award shall be split between Tenant and Landlord based on an appraised valuation of their respective interests in the Property, with Tenant receiving the amount equal to the value of its interest in this Lease and the Improvements immediately prior to the taking, and with Landlord receiving the value of its remainder interest in the fee estate after the termination of this Lease. Any balance owed to Leasehold Mortgagees is to be paid solely out of Tenants share.
(b) Partial Taking. In the case of a partial taking, Tenant shall elect, in its sole discretion, to either restore the Improvements or construct such replacement Improvements, [to the extent possible to effect the Redevelopment as contemplated by the Redevelopment Plans]9. Such restoration or construction shall be made by Tenant within one hundred eighty (180) days after receipt of notice of a taking. In either such election, the award will first be used to pay the costs of such restoration, and the remainder will be paid to Tenant to the extent, if any, of the diminution in the value of its leasehold interest resulting from the taking (if any, as reasonably determined by the Parties), and Landlord will receive an amount equal to its remainder interest in that portion of the fee estate that was taken. Any Leasehold Mortgage will permit condemnation awards to be paid to Tenant and provide that Tenant has the sole and exclusive right to participate in the adjustment of any claims in connection therewith; and any amount required to be paid to the Leasehold Mortgagees will come solely from Tenants share after such restoration or construction of the Property.
(c) Temporary Taking. In the case of a temporary taking, this Lease will continue, Tenant will continue to pay all Rent; and Tenant will receive and retain all awards for such temporary taking payable on account of the use and occupancy (or the displacement of Tenants use and occupancy) of the Property.
9 | NTD: Include bracketed language if the Property is subject to development or redevelopment (rather than a lease-up only). |
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13. Assignments and Subleases; Transfer by Landlord.
(a) Transfers. Without the prior written consent of Landlord, which may be granted or withheld in Landlords sole discretion, Tenant shall not, either involuntarily or voluntarily or by operation of law or otherwise, assign, mortgage, pledge, hypothecate, encumber or permit any lien to attach to, or directly or indirectly transfer this Lease or any interest herein, or sublet the Property or any part thereof, or permit the Property to be occupied by anyone other than Tenant or Tenants employees (each a Transfer and any person or entity to whom a Transfer is made or sought to be made is referred to herein as a Transferee). A Transfer shall include, without limitation, any assignment that otherwise occurs by merger, consolidation, reorganization, transfer, or other direct or indirect change in either the Control (as defined below) of Tenant or in the corporate, partnership, or proprietary structure of Tenant or any entity that has a direct or indirect interest in Tenant. Notwithstanding the foregoing, however, a Transfer shall not include any direct or indirect change in either the Control or ownership of Apartment Investment and Management Company or Aimco OP L.P. Any Transfer in violation of the provisions of this Section 13 shall be void and shall constitute an Event of Default (as hereinafter defined).
(b) Permitted Transfers. Notwithstanding anything contained in this Section 13 to the contrary, Tenant may, without the consent of Landlord, (i) grant a collateral assignment and/or a leasehold mortgage or other security instrument to a mortgagee in connection with a loan used to finance the Redevelopment of the Property, (ii) assign this Lease to an Affiliate of Tenant (which remains an Affiliate of Tenant following such Transfer), and (iii) cause the lease-up of the Property in accordance with the Redevelopment Plans. As used herein, Affiliate means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is controlled by, or is under common Control with, the specified Person. For purposes of this Section 13, Control of a Person means (x) the direct or indirect ownership of fifty percent (50%) or more of the equity interests in such Person or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of voting securities or other interests, by contract or otherwise; and Person means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
(c) Sale of Leasehold Interest. Notwithstanding anything contained in this Lease to the contrary, if, following the occurrence of a Termination Trigger, Tenant declines or otherwise fails to timely exercise its option (or does not otherwise have the option) to terminate this Lease pursuant to Section 2(b) hereof, then, at any time thereafter during the Term of this Lease, Tenant shall have the right to sell and assign its interest under this Lease to a third party, subject to (i) Landlords Lease Purchase ROFR (as defined below), and, (ii) to the extent Landlord does not exercise its Lease Purchase ROFR, (A) the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed, and (B) satisfaction of the following conditions: (1) the assignee is of a character and reputation and engaged in a business which is consistent with a multifamily residential property of the class and nature of the Property, (2) such assignee shall have a tangible net worth, after giving effect to the sale, of not less than the greater of the net worth of Tenant as of the Commencement Date or the net worth of Tenant immediately prior to such sale, (3) the satisfaction by Tenant of the conditions set forth in Section 13(d) and (4) the delivery to Landlord of documentation reasonably evidencing the satisfaction of
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the conditions set forth in this clause (ii) and any other documentation reasonably requested by Landlord (such additional documentation to be delivered to Landlord within five (5) business days following Landlords request therefor). In the event Tenant desires to sell and assign its interest under this Lease pursuant to this Section 13(c), Landlord shall have a right of first refusal to acquire such interest (the Lease Purchase ROFR). If Tenant receives an offer to so sell and assign its interest hereunder which Tenant is willing to accept (a Lease Purchase Offer), Tenant shall, no later than ninety (90) days prior to the date of the proposed sale and assignment of its leasehold interest, send Landlord a written notice (a Lease Purchase ROFR Notice) detailing the material terms of the Lease Purchase Offer (including purchase price and closing date), upon receipt of which Landlord will have thirty (30) days to accept or reject such Lease Purchase Offer by delivering to Tenant written notice of the same. If Landlord timely delivers a written notice to Tenant that it intends to exercise its Lease Purchase ROFR and proceed with the acquisition of Tenants interest in this Lease, Landlord will pay Tenant the purchase price set forth in the Lease Purchase Offer, and the Parties will close on such Lease Purchase ROFR and this Lease will terminate. To the extent any closing mechanics applicable to the sale of Tenants interest in the Property are not set forth in the Lease Purchase Offer, the Parties shall apply the closing mechanics set forth in Section 2(b)(vii). If Landlord expressly declines to exercise, or otherwise fails to timely exercise, its Lease Purchase ROFR, then Landlord shall, within thirty (30) days thereafter, grant or refuse to grant its consent to Tenants request to assign its interest under this Lease to the third party making the Lease Purchase Offer; any failure of Landlord to timely grant its consent to such assignment shall be deemed to be a refusal to grant consent. If Landlord so grants its consent to such assignment, then upon and subject to the satisfaction of the conditions set forth in clause (ii) above, Tenant may proceed with the transfer of its interest in this Lease to the third party making the Lease Purchase Offer on the same terms as those set forth therein. If such conditions have not been satisfied and the transfer to such third party has not been consummated on all such terms, in each case, within one hundred eighty (180) days of Landlord so declining (or having been deemed to so decline) to exercise its Lease Purchase ROFR, the Lease Purchase ROFR will be reinstated in accordance with the terms hereof.
(d) Conditions for Assignment. For each permitted assignment of this Lease (including, without limitation, pursuant to Section 13(c) above), Tenant shall comply with the following (provided that any transfer of Tenants interest in this Lease pursuant to the exercise of Landlords Lease Purchase ROFR will not require satisfaction of the conditions set forth in clauses (i) through (iii) below):
(i) Tenant, at least twenty (20) days prior to the date or the effective date of such assignment, whichever date shall first occur, shall furnish Landlord with the name and business address of the proposed Transferee and the contact information of the manager, general partner, officer or other representative of the proposed Transferee;
(ii) at the time of the Transfer, there shall be no uncured default of Tenant (after the expiration of all applicable notice and cure periods) under this Lease;
(iii) Transferee shall deliver to Landlord, within thirty (30) days after its date or effective date, whichever date shall first occur, an executed copy of the assignment and assumption agreement whereby the Transferee (A) has agreed to assume all obligations of Tenant, including but not limited to those pertaining to Rent, thereafter arising, and (B) has agreed to be
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bound by all of the covenants, agreements, obligations, terms, provisions and conditions of this Lease, thereafter arising, on the part of Tenant to be fulfilled, performed or observed; and
(iv) in the event that Landlords fee interest in the Property is subordinated to the secured interest of a Leasehold Mortgagee pursuant to a Leasehold Mortgage, then, on or prior to the date of any assignment or other Transfer of Tenants interest under this Lease, Tenant shall repay to each Leasehold Mortgagee all outstanding indebtedness secured by any Leasehold Mortgage so as to cause the release and discharge of such Leasehold Mortgage as of such date.
(e) Non-Release During Term. Notwithstanding anything herein to the contrary, in the event of any assignment of this Lease, Tenant shall not be released or discharged from any liability, whether past, present or future, under this Lease (provided, that, an assignment to Landlord pursuant to Section 13(c) shall serve to release Tenant from any liability under this Lease first arising from and after the date of such assignment).
14. Financing and Reporting.
(a) Leasehold Mortgages. In connection with the Redevelopment of the Property, Tenant may from time to time grant one or more mortgages, deeds of trust or other security interests in its leasehold estate under this Lease (a Leasehold Mortgage) and assign this Lease as security for such Leasehold Mortgage(s). Such Leasehold Mortgages and any foreclosure, sale or other realization proceeding pursuant to any Leasehold Mortgage granted by Tenant and any deed or assignment in lieu thereof (Realization Proceedings) shall not require the consent of Landlord and shall not be subject to the provisions of Section 13 hereof. No Leasehold Mortgage shall place or create any lien or encumbrance affecting Landlords interest in the Property or the Improvements. The holder of any Leasehold Mortgage (a Leasehold Mortgagee) hereunder shall provide Landlord with notice of such Leasehold Mortgage together with a true copy of such Leasehold Mortgage and the name and address of such Leasehold Mortgagee (Leasehold Mortgagee Address). Following receipt of such notice by Landlord, the provisions of this Section 14 shall apply in respect to such Leasehold Mortgage. Tenant shall promptly provide to Landlord copies of the note and other instruments secured by any Leasehold Mortgage and any and all amendments to any such instruments as may be made from time to time.
(b) Consents. No amendment, cancellation, surrender or material modification of this Lease shall be effective with respect to any Leasehold Mortgagee, its successors or assigns unless consented to in writing by such Leasehold Mortgagee.
(c) Default Notice. Landlord shall provide to any Leasehold Mortgagee at the Leasehold Mortgagee Address a copy of any notice of default or notice of termination given by Landlord to Tenant under this Lease and no such notice shall be effective until a copy has been provided to each Leasehold Mortgagee. After receipt or rejection of such notice, any Leasehold Mortgagee shall have the same period as Tenant after receipt of such notice by Tenant to cure such default and Landlord shall accept such performance by or on behalf of any Leasehold Mortgagee as if done by Tenant. A Leasehold Mortgagee shall be entitled to exercise all the rights of Tenant under this Lease. Notwithstanding the provisions of Section 16 of this Lease, if Landlord shall give to Tenant any notice of termination of this Lease, a copy shall be delivered to any Leasehold
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Mortgagee at the Leasehold Mortgagee Address and such Leasehold Mortgagee shall have thirty (30) days from receipt of such notice to cure such default (including payment of any sums then due to Landlord under the Lease), or, if such default does not involve the payment of any moneys to Landlord and is of such a nature that it cannot be completely cured within such thirty (30)-day period, to commence curing the same within such thirty (30) days and thereafter to diligently pursue curing the same in good faith, and in any such event this Lease shall not terminate but shall continue in full force and effect.
(d) Defaults. No Leasehold Mortgagee shall be required to cure any default predicated on the bankruptcy, insolvency or similar condition of Tenant. No Leasehold Mortgagee shall be required to pay or discharge any lien on the Tenants leasehold estate that is junior in priority to the lien of such Leasehold Mortgage; provided that such lien is not also a lien against Landlords interest in the Property. If any default or other obligation of Tenant under this Lease is not reasonably susceptible of being cured or performed by such Leasehold Mortgagee, the same shall not constitute a basis for termination of this Lease (or a condition to entering into a New Lease (as hereinafter defined) as provided in clause (f) below), and this Lease shall continue in full force and effect; provided that such Leasehold Mortgagee shall pay or cause to be paid all monetary sums required to be paid by Tenant under this Lease in accordance with the terms of this Lease and continue in good faith to perform all of Tenants other obligations under this Lease that are reasonably susceptible of performance by the Leasehold Mortgagee, and, in addition, such Leasehold Mortgagee, if not enjoined or stayed, shall take steps to acquire or sell Tenants interest in this Lease by foreclosure or other Realization Proceedings and prosecute the same to completion with reasonable diligence.
(e) Assignees. No Leasehold Mortgagee, as such, shall be deemed an assignee or Transferee of this Lease so as to require such Leasehold Mortgagee, as such, to assume the performance of any obligations of Tenant hereunder; but the purchaser, assignee or other acquirer of the leasehold estate pursuant to any Realization Proceedings shall be deemed an assignee or Transferee hereunder and shall be deemed to have agreed to perform all the obligations of the Tenant under this Lease from and after the date of such purchase or acquisition, but only so long as such purchaser, assignee, or other acquirer is the owner of the leasehold estate; provided that any Leasehold Mortgagee shall, in connection with a Realization Proceeding, have the right to assign this Lease without the consent of Landlord hereunder.
(f) New Lease. In the event this Lease is terminated due to the default of Tenant, or in connection with the bankruptcy of any party hereto, or for any other reason, Landlord shall provide any Leasehold Mortgagee with written notice thereof and a statement of all defaults of Tenant then known to Landlord and any sums then due under this Lease or that would be due but for such termination. Upon written request by any Leasehold Mortgagee to Landlord within thirty (30) days after the receipt of such notice, Landlord and such Leasehold Mortgagee or its designee (the New Tenant) shall enter into a new lease (the New Lease) of the Property for the remainder of the term of this Lease, effective as of the date of termination, at the Rent and upon all the terms, covenants and conditions (including any options to renew, but excluding any requirements that are no longer applicable or that have already been fulfilled) of this Lease provided:
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(i) Performance. Such Leasehold Mortgagee or the New Tenant shall pay or cause to be paid all sums due to Landlord at the time of execution and delivery of the New Lease regardless of such termination, and all reasonable expenses of Landlord, including reasonable attorneys fees, charges and disbursements, incurred by Landlord in connection with the termination of this Lease and the preparation of the New Lease (less any net income actually realized by Landlord from the Property from the date of termination to the date of the beginning of the New Lease); and such New Tenant shall agree to remedy any other defaults of Tenant of which such Leasehold Mortgagee has been notified by Landlord and which are reasonably susceptible of being cured by the New Tenant.
(ii) Priority. Any New Lease made pursuant to this Section shall be prior to any mortgage or other lien, charge or encumbrance on the fee or leasehold title to the Property and the New Tenant shall have the same right, title and interest in and to the Property and the Improvements thereon as Tenant had under this Lease. Landlord shall assign without warranty to the New Tenant any interest of Landlord in and to any subleases of all or any portion of the Property.
(iii) New Lease Priority. If more than one Leasehold Mortgagee shall request a New Lease under this clause (f), Landlord shall enter into a New Lease with the Leasehold Mortgagee or its designee whose mortgage is prior in right. Landlord may rely upon a mortgagee title insurance policy issued by a licensed title insurance company doing business in the county in which the Property is located to determine the priority of any Leasehold Mortgage, without liability to Landlord.
(g) Financial Condition. Any Leasehold Mortgagee, New Tenant or successor to Tenants interest under this Lease (or the parent of such Leasehold Mortgagee, New Tenant or successor) shall have a minimum net worth equal to or greater than $100,000,000.
(h) Legal Proceedings. Landlord shall give notice to any Leasehold Mortgagee at the Leasehold Mortgagee Address of any arbitration or legal proceeding between Landlord and Tenant involving obligations under this Lease. Any Leasehold Mortgagee shall have the right to intervene in any such proceedings and be made a party thereto.
(i) No Merger. So long as any Leasehold Mortgage is in existence, unless all Leasehold Mortgagees consent in writing, the fee title to the Property and the leasehold estate of Tenant under this Lease shall not merge but shall remain separate estates, notwithstanding that the fee title and such leasehold estates shall be acquired by the same party.
(j) Bankruptcy. If, in any bankruptcy proceeding, (i) this Lease is rejected by Tenant or a trustee for Tenant, such rejection shall, as between Landlord and any Leasehold Mortgagee, be deemed an assignment of this Lease to such Leasehold Mortgagee (in order of priority, if more than one) made with the consent of Landlord, unless such Leasehold Mortgagee shall reject such deemed assignment by notice in writing to Landlord within 30 days after the later of the date of (A) such rejection or deemed rejection or (B) the approval of such rejection by the bankruptcy court; any such rejection shall not affect the rights of any Leasehold Mortgagee under clause (f) hereof; (ii) this Lease is rejected by Landlord or its trustee, Tenant shall not have the right to treat this Lease as terminated except with the prior written consent of all Leasehold
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Mortgagees; and (iii) if the Property is sold or proposed to be sold free and clear of the interest of Tenant under this Lease, each of Tenant and any Leasehold Mortgagees shall be entitled to notice thereof, to contest such sale and to petition for adequate protection of its interest hereunder.
(k) Further Assurances; Subordination.
(i) If any Leasehold Mortgagee requires any modification of this Lease or of any subordination, non-disturbance and attornment agreement or other document to be provided under this Lease, or if any such modification is necessary or appropriate to comply with rating agency requirements, then Landlord shall, at Tenants or any Leasehold Mortgagees request, promptly execute and deliver to Tenant such instruments in recordable form effecting such modification as such Leasehold Mortgagee or rating agency shall require, provided that any such modification does not modify the Rent or the Term, and does not otherwise materially adversely affect Landlords rights, materially increase Landlords obligations, or materially decrease Tenants obligations under this Lease. If any prospective Leasehold Mortgagee requires any such modification, then Landlord shall execute and deliver such modification, in accordance with and to the extent required by this paragraph, and place such modification in escrow with Landlords counsel. Landlords counsel shall release such modification upon the closing of such prospective Leasehold Mortgagees loan to Tenant.
(ii) Upon the request of any Leasehold Mortgagee, Landlord will agree to subordinate its fee interest in the Property to such Leasehold Mortgagees secured interest in the Property pursuant to the Leasehold Mortgage (and any renewal, consolidation, extension, modification or replacement thereof), except to the extent that any such instrument expressly provides that this Lease is subordinate thereto. To the extent any Leasehold Mortgagee does not make such a request, Landlord shall have the right to subordinate or cause to be subordinated its interest in the Property to such Leasehold Mortgage. [In the event that Landlords fee interest in the Property is subordinated to the secured interest of a Leasehold Mortgagee pursuant to a Leasehold Mortgage, then, as of the date of such subordination and for such time until the Leasehold Mortgage has been released and discharged, Landlord agrees that it shall not incur or permit to be incurred any new indebtedness which is, in any manner, secured by the Property (excepting any indebtedness previously incurred and then-existing as of the date of such subordination).]10
(iii) In the event that Landlords fee interest in the Property is subordinated to the secured interest of a Leasehold Mortgagee pursuant to a Leasehold Mortgage, then, following the date on which Stabilization of the Property occurs, the amount of any indebtedness secured by such Leasehold Mortgage shall, as of such date, be amortized on a straight-line basis, such that all such indebtedness will be repaid and such Leasehold Mortgage released and discharged on or prior to the Expiration Date. Tenant shall promptly execute and deliver any instruments or other documents which may be reasonably required by Landlord or the Leasehold Mortgagee to effect the foregoing. In the event this Lease terminates prior to the Expiration Date, then on or prior to the date of such earlier termination, Tenant shall repay to the
10 | NTD: Parties to include if requested by Leasehold Mortgagee. |
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Leasehold Mortgagee all outstanding indebtedness secured by the Leasehold Mortgage so as to cause the release and discharge of the Leasehold Mortgage as of such date.
(l) Landlords Mortgages. Landlord shall not grant or create any mortgage, deed of trust or other lien or encumbrance (Lien) against Landlords interest in the Property or this Lease unless the instrument granting or creating such Lien shall by its terms state that such Lien is subordinate to this Lease and to any New Lease created pursuant to clause (f) hereof. Landlord agrees that, in connection with any Lien existing as of the Effective Date, it will use commercially reasonable efforts to cause any mortgagee or other holder of a security interest in the Property pursuant to such Lien to execute a subordination, non-disturbance and attornment agreement on a form customarily used by and reasonably acceptable to such mortgagee or holder, subordinating such Lien to this Lease and providing that, if any mortgagee or other holder of any Lien described herein (or its designee) succeeds to Landlords interest in the Property and this Lease upon a foreclosure of the Lien or other transfer of Landlords interest in the Property (including pursuant to a sale of the Property at a foreclosure sale), such successor will attorn to the rights and interests of Tenant under this Lease.
15. Indemnification.
(a) Indemnification by Tenant. Except to the extent caused by the sole negligence, gross negligence or willful misconduct of any of the Indemnified Landlord Parties, Tenant shall defend, indemnify and save harmless Landlord and Landlords trustees, and their respective officers, managers, agents directors, employees, subsidiaries, affiliates, successors and assigns (collectively, the Indemnified Landlord Parties) against all costs (including reasonable attorneys fees, charges and disbursements), damages, liabilities, losses, suits or claims (collectively, Claims), for bodily or personal injury or property damage occurring during the Term on the Property caused by Tenant or its officers, managers, agents, directors, subsidiaries, affiliates, successors, assigns, invitees, visitors or contractors, and shall, at its own expense, defend, indemnify and save harmless Landlord and the other Indemnified Landlord Parties against all Claims brought against Landlord and/or the other Indemnified Landlord Parties, for which Tenant is responsible for indemnification hereunder, and if Tenant fails to do so, Landlord or any Indemnified Landlord Party (at its option, but without being obligated to do so) may, at the reasonable cost and expense to Tenant and upon notice to Tenant in the manner set forth in Section 18, defend such Claims and Tenant shall pay and discharge any and all judgments, costs, liabilities, losses, and expenses, including reasonable attorneys fees, charges and disbursements, that arise therefrom. In no event shall Tenant be liable to Landlord or any Indemnified Landlord Party under this Lease or at law or in equity for punitive damages.
(b) Environmental Indemnity. Except to the extent caused by the sole negligence, gross negligence or willful misconduct of any of the Indemnified Landlord Parties, Tenant shall defend, indemnify and save harmless Landlord and the other Indemnified Landlord Parties against all loss, liability or expense relating to personal, property or economic injury arising from the presence of Hazardous Substances located in, on, or about the Property during the Term caused by Tenant or its officers, managers, agents, directors, subsidiaries, affiliates, successors, assigns, visitors, indemnitees, or contractors.
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(c) General Indemnity Provisions. The indemnities in this Section 15 are intended to specifically cover actions brought by the indemnifying partys own employees, and with respect to acts or omissions during the Term shall survive termination or expiration of this Lease. Tenant shall promptly notify Landlord of casualties or accidents occurring in or about the Property or the release of Hazardous Substances or any notice received by Tenant from any Governmental Authority or other third party with respect to the release of Hazardous Substances. If any action or proceeding is brought against any Indemnified Landlord Party or Indemnified Tenant Party (as defined below), as applicable, then the indemnifying party, upon notice from the indemnified party, shall defend the claim at the indemnifying partys expense with counsel reasonably satisfactory to the indemnified party. If any action, suit, or proceeding is brought against an indemnified party by reason of any such occurrence, the indemnifying party shall use its best efforts to defend such action, suit, or proceeding. Notwithstanding any provision contained in this Lease to the contrary, Tenant is not obligated to indemnify the Indemnified Landlord Parties against any Claims arising from Known Existing Environmental Conditions.
(d) Indemnification by Landlord. Landlord shall indemnify, defend and hold harmless Tenant and its directors, officers, employees, agents, contractors and attorneys, and their respective successors and assigns (each, an Indemnified Tenant Party) from any and all Claims to the extent arising from (x) any acts, intentional omissions, or gross negligence or willful misconduct of Landlord or any person claiming under Landlord, or the contractors, subcontractors, agents, employees, invitees, or visitors of Landlord or any such person, including, without limitation, any and all Claims related to or connected with personal injury (including death of any person) or property damage; and (y) any breach, violation, or nonperformance by Landlord or any person claiming under Landlord or the employees, agents, contractors, subcontractors, invitees, or visitors of Landlord or of any such person, of any term, covenant, or provision of this Lease or any Laws.
(e) Survival. The terms and provisions of this Section 15 shall survive the expiration or earlier termination of this Lease.
(f) Limitation of Liability.
(i) Neither Landlord, Tenant nor their respective agents and employees shall be liable for any loss, injury, death, or damage (including consequential damages) to persons, property, or the other party occasioned by theft, act of God, public enemy, injunction, riot, strike, labor disturbances, insurrection, war, act of terrorism, court order, third party suits which prevent or delay, requisition, order of governmental body or authority, withdrawal of previously committed Governmental Approvals, grants or governmental funding support, the failure of any Governmental Authority to issue permits or approvals in a timely fashion, fire, explosion, falling objects, steam, water, rain or snow, leak or flow of water, rain or snow from the Property or into the Property or from the roof, street, subsurface, or from any other place, or by dampness or from the breakage, leakage, obstruction, or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, or lighting fixtures of the Property, or from construction, repair, or alteration of the Property, or from any acts or omissions of any other occupant or visitor of the Property, or from any other cause, except to the extent arising from the gross negligence or willful
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act or omission of the other party and such partys owners, trustees, directors, officers, employees, agents, contractors and attorneys, and their respective successors and assigns.
(ii) Notwithstanding anything contained herein to the contrary, Tenant agrees that Landlord shall have no personal liability with respect to any of the provisions of this Lease and Tenant shall look solely to the estate and property of Landlord in the Property together with any rents or profits therefrom for the satisfaction of Tenants remedies, including, without limitation, the collection of any judgment with the enforcement of any judicial process requiring the payment or expenditure of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms and provisions of this Lease to be observed and/or performed by Landlord, and no other assets of Landlord, any of Landlords affiliates, subsidiaries, parents or any of each of their (including Landlords) respective officers, directors, trustees, shareholders, partners and members shall be subject to levy, execution, or other judicial process for the satisfaction of Tenants claims and in the event Tenant obtains a judgment against Landlord, the judgment docket shall be so noted. This Section shall inure to the benefit of Landlords successors and assigns.
(iii) Notwithstanding anything contained herein to the contrary, Landlord agrees that Tenant shall have no personal liability with respect to any of the provisions of this Lease and Landlord shall look solely to the estate and property of Tenant in the Property together with any rents or profits therefrom for the satisfaction of Landlords remedies, including, without limitation, the collection of any judgment with the enforcement of any judicial process requiring the payment or expenditure of money by Tenant in the event of any default or breach by Tenant with respect to any of the terms and provisions of this Lease to be observed and/or performed by Tenant, and no other assets of Tenant and no other assets of Tenant, any of Tenants affiliates, subsidiaries, parents or any of each of their (including Tenants) respective officers, directors, shareholders, partners and members shall be subject to levy, execution, or other judicial process for the satisfaction of Landlords claims and in the event Landlord obtains a judgment against Tenant, the judgment docket shall be so noted. This Section shall inure to the benefit of Tenants successors and assigns.
(iv) To the extent any Liabilities (as defined below) are not specifically allocated herein between the Parties, Tenant agrees to assume all such Liabilities in respect of the Property, relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to December 15, 2020 (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after such date). As used in this Section 15, Liabilities means any and all liabilities and obligations (but excluding Specified Environmental Liabilities), whether accrued, fixed or contingent, mature or inchoate, known or unknown, including those arising under any Law, demand, claim, action, suit, countersuit, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority, or any judgment of any Governmental Authority or any award of any arbitrator of any kind; and Specified Environmental Liabilities means all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Hazardous Materials Laws or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any product take-back requirements or with any settlement,
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judgment or other determination of Liability and indemnity, contribution or similar obligations), in each case, occurring or existing prior to December 15, 2020, and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.
16. Tenant Defaults and Remedies.
(a) Default. It shall be an event of default hereunder (an Event of Default) in the event: (i) Tenant shall at any time fail to pay Rent or other monetary amounts herein required to be paid by Tenant and such failure shall continue for five (5) days after receipt by Tenant and any Leasehold Mortgagee of written notice thereof from Landlord or (ii) Tenant shall fail to observe or perform any of the other covenants and agreements required to be performed and observed by Tenant hereunder and any such default shall continue for a period of thirty (30) days after receipt by Tenant and any Leasehold Mortgagee of written notice thereof from Landlord (provided that if such default is by its nature not reasonably susceptible of being cured within such thirty (30) day period, such 30-day period shall be extended as necessary to provide Tenant the opportunity to cure the default, provided Tenant within said period commences and thereafter diligently proceeds to cure such default without interruption until such cure is completed).
(b) Remedies. In the event that an Event of Default has occurred that has not been cured and is continuing, then Landlord may, at its option:
(i) bring suit for the collection of the Rent or other amounts for which Tenant may be in default, or for the performance of any other covenant or agreement of Tenant hereunder, all without entering into possession of the Property or terminating this Lease; or
(ii) in the case of an Event of Default with respect to a payment of Rent by Tenant to Landlord, re-enter the Property with process of law and take possession thereof, without thereby terminating this Lease, and thereupon Landlord may expel all persons and remove all property therefrom, without becoming liable therefor, and re-let the Property and receive the Rent therefrom, applying the same first to the payment of the reasonable expenses of such re-entry and then to the payment of the Rent accruing hereunder, with the balance, if any, to be held by Landlord for application against future Rent due hereunder. In such event, Landlord shall be obligated to use commercially reasonable good faith efforts to mitigate its damages. The commencement and prosecution of any action by Landlord in forcible entry and detainer, ejectment, or otherwise, or the appointment of a receiver, or any execution of any decree obtained in any action to recover possession of the Property, or any re-entry, shall not be construed as an election to terminate this Lease and, unless this Lease be expressly terminated pursuant to clause (iii) below, such re-entry or entry by Landlord, whether had or taken under summary proceedings or otherwise, shall not be deemed to have absolved or discharged Tenant from any of its obligations and liabilities for the remainder of the Term of this Lease; or
(iii) in the case of an Event of Default with respect to a payment of Rent by Tenant to Landlord, terminate this Lease, re-enter the Property and take possession thereof, provided, however, in no event may Landlord terminate this Lease unless Landlord has first provided Tenant and any Leasehold Mortgagee with written notice of Landlords intent to terminate this Lease, and Tenant (or such Leasehold Mortgagee) fails to cure such Event of Default within thirty (30) days following receipt of such termination notice (provided that if such material
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Event of Default is by its nature not reasonably susceptible of being cured within such additional thirty (30) day cure period, such period shall be extended as necessary to provide Tenant the opportunity to cure such Event of Default, provided Tenant within said period commences and thereafter diligently proceeds to cure such material Event of Default without interruption until such cure is completed). In the event Landlord shall elect to terminate this Lease, all rights and obligations of Tenant, and of any permitted successors or assigns, shall cease and terminate, except that Landlord shall have and retain full right to sue for and collect all Rent of which Tenant shall then be in default and all damages to Landlord by reason of any such breach. In such event, Landlord shall be obligated to use commercially reasonable good faith efforts to mitigate its damages. Tenant shall surrender and deliver up the Property to Landlord and upon any Event of Default by Tenant in so doing, Landlord shall have the right to recover possession by summary proceedings or otherwise and to apply for the appointment of a receiver and for other ancillary relief in such action, provided that Tenant and any Leasehold Mortgagee shall have fifteen (15) days written notice after such application may have been filed and before any hearing thereon. In such event, Landlord shall again have and enjoy the Property, fully and completely, as if this Lease had never been made. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future Laws in the event of Landlords obtaining possession of the Property by reason of the breach or violation by Tenant of any of the covenants and conditions in this Lease contained; or
(iv) in the case of an Event of Default other than with respect to the payment of Rent by Tenant, to cure such Event of Default, and Tenant shall, within thirty (30) days after receipt of a statement thereof, together with reasonable supporting documentation evidencing the expenses incurred by Landlord, reimburse Landlord for any amount reasonably incurred by Landlord to cure such Event of Default. Any sum not paid when due shall accrue interest thereafter at the rate equal to the Default Rate. In the event of an emergency or where necessary to prevent injury to persons or damage to the Property, Landlord may cure any such Event of Default by Tenant prior to expiration of the cure period set forth above, with such notice to Tenant and any Leasehold Mortgagee as is appropriate under the circumstances. In the event Tenant fails to pay Landlord any sum due pursuant to this Section 16(b)(iv) within such thirty (30) day period, Landlord, subject to compliance by Landlord with Section 16(b)(iii) hereof, shall have the same remedies as for non-payment of Rent; or
(v) Landlord may enforce its rights hereunder by claims for specific performance and/or injunctive relief.
All remedies of Landlord herein created and remedies otherwise existing at law or in equity are cumulative and the exercise of one or more rights or remedies shall not be taken to exclude or waive the right to the exercise of any other, but in no event shall Landlord have the right to accelerate the payment of Rent hereunder. All such rights and remedies may be exercised and enforced concurrently and whenever and as often as Landlord shall deem necessary.
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17. Representations and Warranties.
(a) Representations and Warranties of Tenant. Tenant represents and warrants to Landlord, as of the date of this Lease and continuing until expiration or earlier termination of this Lease:
(i) Tenant is a duly organized and presently subsisting [Delaware limited liability company] and is duly authorized to do business, and in good standing under, the laws of the state in which the Property is located.
(ii) Tenant has the right, power, and authority to enter into this Lease and to consummate the transactions contemplated herein in accordance with the terms and conditions hereof.
(iii) The parties executing this Lease on behalf of Tenant have all requisite authority to execute this Lease, and this Lease, as executed, is a valid, legal, and binding obligation of Tenant.
(iv) Neither the execution and delivery of this Lease, nor compliance with the terms and conditions of this Lease by Tenant, nor the consummation of the transactions contemplated herein, constitutes or, to the best of Tenants knowledge, will constitute a violation or breach any lease or other instrument to which it is a party or to which Tenant is subject or by which it is bound.
(v) The execution and delivery of this Lease by Tenant has been duly authorized by all necessary company action on the part of Tenant, and no consent is necessary in connection therewith from any court or corporate or Governmental Authority having jurisdiction over Tenant or the subject matter of this Lease.
(vi) To Tenants knowledge, there is no administrative agency action, litigation, condemnation or other governmental proceeding of any kind pending against Tenant which would prohibit or materially affect the ability of Tenant to comply with the terms and conditions of this Lease or to consummate the transactions contemplated herein.
(vii) Tenant is not insolvent.
(b) Representations and Warranties of Landlord. Landlord represents and warrants to Tenant, as of the date of this Lease and continuing until the expiration or earlier termination of this Lease:
(i) Landlord is a presently subsisting [Delaware limited liability company] and is duly authorized to do business, and in good standing under, the laws of the state in which the Property is located.
(ii) Landlord has the right, power, and authority to enter into this Lease and to consummate the transactions contemplated herein in accordance with the terms and conditions hereof.
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(iii) The parties executing this Lease on behalf of Landlord have all requisite authority to execute this Lease, and this Lease, as executed, is a valid, legal, and binding obligation of Landlord.
(iv) Neither the execution and delivery of this Lease, nor compliance with the terms and conditions of this Lease by Landlord, nor the consummation of the transactions contemplated herein, constitutes or, to Landlords actual knowledge, will constitute a violation or breach of any agreement or other instrument to which Landlord is a party or by which it is bound.
(v) The execution and delivery of this Lease by Landlord has been duly authorized by all necessary corporate action on the part of Landlord and no consent is necessary in connection therewith from any court or Governmental Authority having jurisdiction over Landlord or the subject matter of this Lease.
(vi) Landlord is not insolvent.
18. Notices.
(a) Notices. All notices, demands, requests, consents, approvals or other communications (any of the foregoing, a Notice) required or permitted to be given hereunder shall be given in writing and shall be sent by (a) e-mail (provided that a hardcopy of such Notice is provided to the addressee within one (1) business day following the transmittal of such e-mail in the manner hereinafter provided), and (b) one of the following: (i) registered or certified United States mail, postage prepaid, return receipt requested, (ii) a reputable overnight courier that provides a receipt for delivery, or (iii) delivered by hand (against confirmation of delivery), to the Party to be so notified at its address (or e-mail address, if applicable) hereinafter set forth, or to such other address (or e-mail address, if applicable) and Person as may be designated from time to time by any party hereto in the manner provided for in this Section. Any Notice shall be deemed to have been received: (A) on the date of sending by e-mail if sent prior to 5:00 P.M. (Eastern Standard Time) on a business day (otherwise on the next business day), (B) three (3) days after the date such Notice is mailed, (C) one business day after delivery to a reputable overnight courier service if delivered prior to 5:00 P.M. (Eastern Standard Time) on a business day (otherwise on the next business day) and (D) on the date of delivery by hand if delivered prior to 5:00 P.M. (Eastern Standard Time) on a business day (otherwise on the next business day), in each case addressed to the Parties as follows:
To Landlord:
c/o Apartment Income REIT Corp.
4582 S. Ulster Street, Suite 1700
Denver, Colorado 80237
Attention: General Counsel
Email: Lisa.Cohn@aimco.com
With a copy to:
c/o Apartment Income REIT Corp.
4582 S. Ulster Street, Suite 1700
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Denver, Colorado 80237
Attention: Chief Financial Officer
Email: Paul.Beldin@aimco.com
To Tenant:
c/o Apartment Investment and Management Company
4582 S. Ulster Street, Suite 1450
Denver, Colorado 80237
Attention: General Counsel
Email: Jennifer.Johnson@aimco.com
With a copy to:
c/o Apartment Investment and Management Company
4582 S. Ulster Street, Suite 1450
Denver, Colorado 80237
Attention: Chief Financial Officer
Email: Lynn.Stanfield@aimco.com
(b) Additional Provisions. A notice given by counsel for either Party shall be deemed a valid notice if addressed and sent in accordance with the provisions of this Section. Any Party may change the address (or e-mail address, if applicable) or person to which any such Notices are to be delivered hereunder by furnishing five (5) business days prior written notice of such change to the other Parties in accordance with the provisions of this Section. Notices shall be deemed to have been given on the date as set forth above, even if there is an inability to actually deliver any such Notice because of a changed address of which no Notice was given, or there is a rejection or refusal to accept any Notice offered for delivery. Each of the Parties hereto waives personal or any other service other than as provided for in this Section. Notwithstanding the foregoing, either Party hereto may give the other Party facsimile or verbal notice of the need of emergency repairs. Notices requesting after hours services may be given by delivery to the Property Manager or any other person on the Property designated by Landlord to receive such notices. Any statements to be delivered by Landlord hereunder and all rent bills may be delivered by Landlord via ordinary United States mail.
19. Mechanics Liens. If any mechanics, laborers, or materialmans lien shall at any time be filed against the Property, the underlying fee or leasehold, or any part thereof with respect to the performance of any labor or the furnishing of any materials to, by or for Tenant or anyone claiming by, for or under Tenant, Tenant, within thirty (30) days after notice of the filing thereof, shall cause the same to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction, or otherwise (all in accordance with applicable Law). If Tenant fails to timely remove such lien, Landlord may do so at Tenants expense and Tenant shall reimburse Landlord within ten (10) days after demand, the amount so expended by Landlord to remove such lien together with interest at the Default Rate from the date that funds were paid by Landlord. Nothing contained in this Section 19 shall prevent Tenant from challenging the claim made by the Person that filed such mechanics lien, provided that Tenant discharges such mechanics lien in accordance herewith. Tenant shall not be required to discharge any lien that derives from any act
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or omission of Landlord. Upon the Expiration Date or any earlier termination of this Lease (excepting a termination event whereby Tenant purchases the Property pursuant to Section 2(b)(iv) hereof), Tenant shall deliver to Landlord lien waivers from the applicable Development Professionals (and any subcontractors and suppliers, as applicable) with respect to any work performed by them in connection with the Redevelopment.
20. Surrender. Upon the Expiration Date or any earlier termination of this Lease (subject to any rights of Tenant to purchase the Property pursuant to Section 2(b)(iv) hereof), Tenant shall quit and peacefully surrender and deliver up the Property, including any Alterations or other Improvements thereon, to the possession and use of Landlord, without delay, free of any outstanding notices of violation issued by any local municipality and in a clean and sightly condition, with all portions of the Improvements in good order and repair, with exceptions for ordinary wear and tear and damage by casualty or condemnation (subject to Sections 11 and 12). Tenant shall assign to Landlord, upon written request from Landlord, without any additional consideration, all right, title and/or interest of Tenant in and to all Third Party Rights, free and clear of all liens and encumbrances.
21. Brokers. Each of Landlord and Tenant represents and warrants to the other that it has not had any dealings with any broker, agent, or finder relating to the transactions contemplated hereby, and each agrees to pay for any claim for brokerage commissions, compensation or fees by any broker, agent, or finder in connection with this Lease, or any other transactions contemplated hereby resulting from the acts of such party (including any legal fees and costs incurred because of a claim for such fees). The provisions of this Section 21 shall survive any expiration or earlier termination of this Lease.
22. Estoppel Certificates. Tenant shall, within ten (10) business days after receipt of written request from Landlord (but not more than twice per calendar year), deliver to Landlord or any prospective mortgagee or purchaser of Landlords interest in the Property, without charge, a certificate certifying that this Lease is in full force and effect, and whether it has been modified (and if there have been modifications, stating them), and whether or not Tenant knows of any default, breach or violation by Landlord under any of the terms of this Lease, and such other matters as may reasonably be requested; and such other matters as may reasonably be requested by Landlord or such prospective mortgagee or purchaser. Landlord shall, within ten (10) business days after receipt of written request from Tenant (but not more than twice per calendar year), deliver to Tenant or any prospective Leasehold Mortgagee or purchaser of Tenants interest in the Property, without charge, a certificate certifying that this Lease is in full force and effect, and whether it has been modified (and if there have been modifications, stating them), and whether or not Landlord knows of any default, breach or violation by Tenant under any of the terms of this Lease, and such other matters as may reasonably be requested by Tenant or any such prospective Leasehold Mortgagee or prospective purchaser. Any estoppel certificate requested hereunder by a mortgagee of Landlord or a Leasehold Mortgagee shall be in such form as may be reasonably requested by the requesting mortgagee, and otherwise in conformance with the terms of this Section 22.
23. Memorandum of Lease. Each of Landlord and Tenant covenant and agree that this Lease shall not be recorded. Upon request by either Landlord or Tenant, the parties hereto shall execute a Memorandum of Lease in the form attached as Schedule 3 hereto (the Memorandum
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of Lease). The cost of recording such Memorandum of Lease shall be borne by Tenant; provided, however, that any real property transfer or similar taxes (Transfer Taxes) arising from or in connection with a transfer of the Property between Tenant and Landlord (or their designees) will be shared fifty percent (50%) by Landlord and fifty percent (50%) by Tenant, if any (it being agreed that Tenant and Landlord believe that no such Transfer Taxes will be due or payable).
24. Landlord Covenants.
(a) Quiet Enjoyment. Landlord covenants that as of the Commencement Date it will have good and marketable leasehold title to, the Property; that Landlord shall have the full right to make this Lease and that so long as Tenant shall pay the Rent herein provided within the respective times provided therefor, and provided and so long as Tenant timely observes and performs all the covenants, terms and conditions on Tenants part to be observed and performed under this Lease, Landlord covenants that Tenant shall peaceably and quietly hold and enjoy the Property for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully claiming by, through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease.
(b) Landlords Access. Landlord and its agents, contractors, and representatives (Landlords Agents) shall be permitted to enter upon the Property upon not less than two (2) days prior written notice, during normal business hours, to examine the condition thereof (subject to the rights of tenants and other occupants), provided that Landlord and Landlords Agents shall use commercially reasonable efforts to prevent any interruption of the conduct of business at the Property; and further provided that a representative of Tenant may accompany Landlord and Landlords Agents on any such entry. In case of emergency, Landlords Agents may enter upon the Property with such prior notice to Tenant as is reasonable under the circumstances.
25. Holdover. Should Tenant hold over in possession of the Property after the expiration of the Term, such holding over shall not be deemed to extend the Term or renew this Lease. Landlords remedies shall be limited solely to the termination of Tenants holdover occupancy and the treatment of Tenants occupancy as a month to month tenancy at a rent equal to 125% of the then fair market rent for the Property as reasonably determined by Landlord. In no event shall Tenant be liable to Landlord under this Lease or at law or in equity for special, consequential, or punitive damages or loss profits.
26. Dispute Resolution.
(a) Representatives. Each Party shall appoint a representative who shall be responsible for administering the dispute resolution provisions in this Section 26 (each, an Appointed Representative). Each Appointed Representative shall have the authority to resolve any Disputes (as defined below) on behalf of the Party appointing such representative.
(b) Arbitration. Any dispute, controversy or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, enforceability, validity, termination or breach of this Lease, whether arising in contract or tort, between the Parties (each, a Dispute and, collectively, Disputes) shall first be referred by either Party for amicable negotiations by the Appointed Representatives by providing written notice of such Dispute in the
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manner provided by Section 18 (a Dispute Notice). All documents, communications and information disclosed in the course of such negotiations that are not otherwise independently discoverable shall not be offered or received as evidence or used for impeachment or for any other purpose, but shall be considered as to have been disclosed for settlement purposes.
(i) If, for any reason, a Dispute is not resolved in writing by the Appointed Representatives within thirty (30) days of the date of delivery of the Dispute Notice, or if a Party fails to appoint an Appointed Representative within the periods specified herein, such Dispute shall be submitted to final and binding arbitration administered by the American Arbitration Association (the AAA) in accordance with its Commercial Arbitration Rules in effect at the time (the AAA Rules), except as modified herein.
(ii) The seat of the arbitration shall be Denver, Colorado.
(iii) The arbitration shall be conducted by three arbitrators. The claimant and respondent shall each appoint one arbitrator within thirty (30) days of receipt by respondent of the demand for arbitration. The two arbitrators so appointed shall appoint the third and presiding arbitrator (the Chairperson) within thirty (30) days of the appointment of the second arbitrator. If any Party fails to appoint an arbitrator, or if the two Party-appointed arbitrators fail to appoint the Chairperson within the time periods specified herein, then any such arbitrator shall, upon any Partys request, be appointed by the AAA in accordance with the AAA Rules. Any arbitrator selected pursuant to this Section shall be neutral and impartial and shall not be affiliated with or an interested person of any Party; further, any arbitrator appointed by AAA shall be a retired judge or a practicing attorney with no less than fifteen (15) years of experience with litigation and arbitration involving the multifamily real estate industry and an experienced arbitrator.
(iv) By electing to proceed under the AAA Rules, the Parties confirm that any dispute, claim or controversy concerning the arbitrability of a Dispute or the jurisdiction of the arbitral tribunal, including whether arbitration has been waived, whether an assignee of this Lease is bound to arbitrate, or as to the existence, scope, validity interpretation or enforceability of the Parties agreement to arbitrate, shall be determined by the arbitration tribunal.
(v) Each Party shall submit its claims according to the timetable established by the arbitral tribunal. With respect to each claim advanced in the arbitration and/or any claim under the indemnification provisions of Section 15, each sides submissions shall specify the proposed determination or resolution that it contends the arbitral tribunal should make (and, if applicable, any monetary relief that it contends that the arbitral tribunal should award) (in each case, the Proposed Award), which Proposed Award, if applicable, may be expressed as zero. As to each claim for monetary relief, each sides Proposed Award shall also state whether pre- or post-award interest should be awarded, and if so, at what interest rate, and the date from which such interest (if any) should be calculated.
(vi) There shall be only two Proposed Awards (one for each side of the claim). Where there are more than two parties to the arbitration, the arbitral tribunal shall have power to make appropriate directions as to which parties shall comprise each side for purposes of submitting Proposed Awards, in every instance to ensure a proper alignment of parties with respect to each such claim.
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(vii) In rendering the award or otherwise making any determination or resolution, the Chairperson shall be limited to choosing, without modification, the Proposed Award of one of the sides, according to its determination of which Proposed Award most comports with its assessment of the case. Insofar as monetary relief is claimed, the arbitral tribunal shall not award any monetary relief of any kind except as set forth in this Section 26, provided that this will not limit the power of the arbitral tribunal: (1) to award relief per paragraph (viii) hereof; (2) to apply any statute of limitation that it determines is applicable to any claim; (3) to dismiss or exclude any claim that it determines is: (A) precluded by any part of this Lease, and/or (B) beyond the scope of this Section 26; (4) to receive and determine dispositive motions in accordance with the AAA Rules; and/or (5) to apportion fees/costs per paragraph (ix) hereof.
(viii) In addition to monetary relief, and/or the making of any other determination or resolution that is primarily at issue in the Dispute, the arbitral tribunal shall be empowered to award equitable relief, including, but not limited to, an injunction and specific performance of any obligation under this Lease, provided that a claim under the indemnification provisions of Section 15 shall at all times be governed by the procedures set forth in paragraphs (v) through (vii) above.
(ix) The arbitral tribunal shall award the prevailing Party its attorneys fees and costs reasonably incurred in the arbitration, including the prevailing Partys share of the arbitrator fees and AAA administrative costs.
(x) The Parties intend that this agreement to arbitrate shall be valid, enforceable and irrevocable, and any determination, resolution and/or award made or rendered by the arbitration tribunal shall be final and binding on the Parties. The Parties agree to comply with any award made in any such arbitration proceedings. Judgment upon any award may be entered in any court of competent jurisdiction, including any court having jurisdiction over any party or any of its assets.
(xi) By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment, or other order in aid of arbitration proceedings and the enforcement of any award. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the Parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any Party to respect the arbitral tribunals orders to that effect. In any such action brought in court for such provisional remedies or enforcement of any award, each of the Parties irrevocably and unconditionally (A) consents and submits to the non-exclusive jurisdiction and venue of the Courts of the State of Colorado and the Federal Courts of the United States of America located within the State of Colorado (the Colorado Courts); (B) waives, to the fullest extent it may effectively do so, any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens or any right of objection to jurisdiction on account of its place of incorporation or domicile, which it may now or hereafter have to the bringing of any such action or proceeding in any Colorado Court; (C) consents to service of process in the manner provided by Section 18 or in any other manner permitted by Law; and (D) WAIVES ANY RIGHT TO TRIAL BY JURY.
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(xii) This arbitration, and all prior, subsequent or concurrent judicial proceedings related thereto and permitted herein, shall be conducted pursuant to the Federal Arbitration Act, found at Title 9 of the U.S. Code. The Parties intend that the arbitration tribunal shall apply the substantive Laws of the State of Delaware to any Dispute hereunder, without regard to any choice of law principles thereof that would mandate the application of the Laws of another jurisdiction.
(xiii) In order to facilitate the comprehensive resolution of related disputes, all claims between the Parties that arise under or in connection with this Lease may be brought in a single arbitration. Upon the request of any Party constituted under this Lease, the arbitral tribunal shall consolidate such arbitration proceeding with any other arbitration proceeding relating to this Lease, if the arbitral tribunal determines that (A) there are issues of fact or law common to the proceedings so that a consolidated proceeding would be more efficient than separate proceedings, and (B) no Party would be unduly prejudiced as a result of such consolidation through undue delay or otherwise. In the event of different rulings on this question by the arbitral tribunal constituted hereunder and another arbitral tribunal constituted under this Lease, the ruling of the arbitral tribunal constituted first in time shall control, and such arbitral tribunal shall serve as the tribunal for any consolidated arbitration.
(xiv) In the event of a Dispute, each Party shall continue to perform its obligations under this Lease in good faith during the resolution of such Dispute as if such Dispute had not arisen, unless and until this Lease is terminated in accordance with the provisions hereof.
(xv) Any arbitration hereunder shall be confidential, and the Parties and their agents agree not to disclose to any third party (A) the existence or status of the arbitration, (B) all information made known and documents produced in the arbitration not otherwise in the public domain, and (C) all awards arising from the arbitration, except and to the extent that disclosure is required by applicable Law or is required to protect or pursue a legal right, and in any such case, the Party making such disclosure shall produce only those materials and information that are necessary and shall take reasonable steps to safeguard the confidentiality of the materials and information.
(c) Binding Agreement. The Parties agree that the provisions of this Section 26 bind themselves and their Affiliates, and further agree to take all measures to lawfully cause their Affiliates to abide and be bound by the terms of this Section 26.
27. Miscellaneous.
(a) Waiver. No delay or failure of Landlord or Tenant in exercising any right, power, or privilege, nor any single or partial exercise thereof or abandonment or discontinuance of steps to enforce such a right, power, or privilege, shall preclude any further exercise thereof. Any waiver, permit, consent, or approval of any kind or character on the part of either party of any breach or default under this Lease, or any waiver of any provision or condition of this Lease, must be in writing and shall be effective only to the extent specifically set forth in such writing.
(b) Severability. Wherever possible, each provision of this Lease shall be interpreted in such manner as to be effective and valid under applicable Law. However, if any
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provision of this Lease is held to be illegal, invalid or unenforceable under present or future Laws, such provisions shall be fully severable, this Lease shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of the contract, and the remaining provisions of this Lease shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Lease. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Lease, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid or enforceable.
(c) Modifications. No modification, amendment, or waiver of any provision of this Lease will be effective unless the same is in writing and signed, and then such modification, amendment, or waiver or consent shall be effective only in the specific instance and for the purpose for which given.
(d) Binding Effect. This Lease shall be binding upon and shall inure to the benefit of the Parties hereto and their respective permitted successors and assigns.
(e) Entire Agreement; Addendum. This Lease, including the exhibits, schedules, documents and instruments attached hereto, constitutes the entire agreement among the Parties hereto and supersedes any and all prior agreements, understandings, letters of intent, negotiations and discussions, whether written or oral, of the Parties with respect to the subject matter of this Lease. Any additional terms of this Lease now or hereafter mutually agreed upon by the Parties, if any, may be set forth on Schedule 5 attached hereto.
(f) Counterparts. This Lease may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one instrument binding on all Parties hereto. The Parties hereto irrevocably and unreservedly agree that this Lease may be executed by way of electronic signatures (including, but not limited to, by way of electronic signatures generated by DocuSign, Adobe Sign or similar programs or replacements thereto) and delivered by electronic transmission. The delivery by electronic means shall constitute effective execution and delivery hereof, and neither this Lease, nor any part or provision of this Lease, shall be challenged or denied any legal effect, validity and/or enforceability solely on the grounds that it is in the form of an electronic record.
(g) Expenses. Except as otherwise set forth herein, whether or not the transactions contemplated by this Lease shall be consummated, all fees and expenses (including, without limitation, attorneys fees, charges and disbursements) incurred by any Party hereto in connection with drafting and negotiating the terms of this Lease shall be borne by such Party.
(h) Interpretation. In this Lease, the singular includes the plural and the plural the singular; words importing any gender include the other genders; the word or shall be deemed to include and/or; the words including, includes and include shall be deemed to be followed by the words without limitation; references to articles, sections, paragraphs (or subdivisions of sections or paragraphs), or exhibits are to those of this Lease unless otherwise indicated; and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Lease.
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Caption and paragraph headings in this Lease are included for convenience of reference only and shall not constitute a part of this Lease for any other purpose. Exhibits to this Lease (including exhibits and schedules to such exhibits), are incorporated into and made a part of this Lease.
(i) No Third-Party Beneficiaries. Except as otherwise set forth herein, this Lease is not intended to, and shall not, confer upon any person other than the parties hereto any rights or remedies hereunder, and no person shall have any right to enforce any rights, duties, or obligations of the parties hereunder other than the parties hereto.
(j) Governing Law and Jurisdiction. This Lease shall be deemed to be made in the state in which the Property is located. THIS LEASE WILL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The Parties hereby irrevocably consent to the exclusive jurisdiction of any state or federal court seated in the state in which the Property is located. The Parties agree that the venue provided above is the most convenient forum.
(k) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW, THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM OR CROSS-COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, OR IN ANY WAY CONNECTED WITH, THIS LEASE, AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM ANY RELATIONSHIP OF THE PARTIES IN CONNECTION WITH THE FOREGOING, OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY LAW, STATUTE OR REGULATION, EMERGENCY OR OTHERWISE, NOW OR HEREAFTER IN EFFECT.
(l) Time of the Essence; Business Days. Time is of the essence of the obligations of the Parties hereto. As used herein, business day or Business Day shall mean any day of the week other than Saturday, Sunday or a day on which banking institutions in the city and state in which the Property is located are obligated or authorized by law or executive action to be closed to the transaction of normal banking business.
(m) Force Majeure. In the event that Landlord or Tenant shall be delayed or hindered in or prevented from doing or performing any act or thing required hereunder (but not because of insolvency, lack of funds, or other financial causes) by reason of any acts of God, governmental restriction, strikes, labor disturbances, shortages of materials or supplies, third party suits which delay or prevent, withdrawal of previously committed governmental grants or governmental funding support (provided such delay, prevention, or withdrawal is not due to the acts or omissions of the party claiming force majeure), the failure of any Governmental Authority to issue permits or approvals in a timely fashion (provided the party claiming force majeure has made application and is diligently pursuing approval of the same) or any third-party appeals or contests with respect to any permits or approvals that have been initiated or supported by Landlord, any epidemic or pandemic, any governmentally required closure resulting from any force majeure
46
event, acts of war or terrorism, during the initial construction of the Improvements, any occurrence that is deemed a force majeure under the Development Agreement (as such force majeure provision is reasonably approved by Landlord) or acts or failures to act by the other parties hereto in breach of such partys obligations (collectively referred to in this Lease as force majeure or Force Majeure), then such party shall not be liable or responsible for any such delays, and the doing or performing of such act or thing shall be excused for the period during which such performance is rendered impossible due to the force majeure, and the time for performance shall be extended accordingly; provided, however, that (i) such party shall, within thirty (30) days after the beginning of any such delay, have first notified the other party in writing of the cause(s) thereof and requested an extension, and (ii) such party must diligently seek removal or avoidance of the hindrance, and (iii) even though the time for performance may be extended as provided in this Section 27(m), the parties shall remain bound by the other terms, covenants, and agreements of this Lease.
(n) [Guaranty. Simultaneously with the execution of this Lease, Tenant shall deliver to Landlord a guaranty in the form attached hereto as Schedule 6, executed by Aimco REIT Sub, LLC, a Delaware limited liability company, as guarantor, said guaranty being an integral part of the consideration to be received by Landlord for entering into this Lease.][Intentionally Omitted.]11
(o) Tax Treatment. The Parties agree that this Lease is intended to be treated as [_________]12 for U.S. federal income tax purposes and will not take any position inconsistent with such treatment.
(p) REIT Protections.
(i) Tenant understands that certain owners of interests in Landlord (each, a Landlord Parent REIT) have elected to be classified real estate investment trusts and, as a result, must comply with certain requirements (the REIT Requirements), including, without limitation, the provisions of Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the Code). Accordingly, Tenant agrees, and agrees to cause its affiliates and any other parties subject to its control by ownership or contract, upon request of Landlord and at the expense of Landlord, to use its commercially reasonable efforts and cooperate in good faith with Landlord to take actions to ensure that the REIT Requirements are satisfied, provided, however, that Tenant shall not be required to take any actions under this Section 27(p) that would have a material adverse effect on Tenant. Tenant shall notify, and cause its affiliates to notify, Landlord immediately after Tenant or its affiliates becomes aware of any occurrence that could have a material impact on Landlords compliance with the REIT Requirements.
(ii) In the event that counsel or independent accountants for any Landlord Parent REIT determine that there exists a material risk that any amounts due to Landlord hereunder would be treated as gross income not described in Section 856(c)(2) or 856(c)(3) of the Code (Nonqualifying Income), the amount paid to Landlord pursuant to this Lease in any tax
11 | NTD: Include first set of bracketed language if guaranty is required in connection with Lease execution; include second set of bracketed language if guaranty will not be required. |
12 | NTD: Tax to advise on intended tax treatment once Lease terms are fully determined. |
47
year may not exceed the maximum amount that can be paid to Landlord in such year without causing such Landlord Parent REIT to fail to meet the REIT Requirements for such year, determined as if the payment of such amount were Nonqualifying Income. If the amount payable for any tax year under the preceding sentence is less than the amount that Tenant would otherwise be obligated to pay to Landlord pursuant to this Lease (the Excess Amount), then Tenant shall place the Excess Amount in escrow and shall not release any portion thereof to Landlord, and Landlord shall not be entitled to any such amount, unless and until Landlord delivers to Tenant, at the sole option of the applicable Landlord Parent REIT, (A) notice that it has received advice of such Landlord Parent REITs tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income, (B) a letter from the independent accountants of such Landlord Parent REIT indicating the maximum amount that can be paid at that time to Landlord without causing such Landlord Parent REIT to fail to meet the REIT Requirements for any relevant taxable year, in which case such maximum amount shall be paid to Landlord, or (C) a private letter ruling issued by the Internal Revenue Service to the applicable Landlord Parent REIT indicating that the receipt of any Excess Amount hereunder would not cause such Landlord Parent REIT to fail to satisfy the REIT Requirements. The obligation to pay any amount which is not paid as a result of this provision shall terminate five years from the original date such amount would have been payable without regard to this provision and Landlord shall have no further right to receive any such amount.
(iii) Tenant covenants and agrees that, to further compliance with the REIT Requirements, anything contained in this Lease to the contrary notwithstanding: (A) no assignment of this Lease, subletting of the Property, change in control of Tenant, sale of substantially all of the assets of Tenant, or other transfer (each, a Lease Transfer) shall be consummated on any basis such that the rental or other amounts to be paid by the transferee thereunder would be based, in whole or in part, on the income or profits of any person; (B) Tenant shall not consummate a Lease Transfer with any person in which Landlord or any entity owning a direct or indirect interest in Landlord owns an interest, directly or indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of the Code); and (C) Tenant shall not consummate a Lease Transfer with any person or in any manner which could cause any portion of the amounts received by Landlord pursuant to this Lease or any occupancy arrangement to fail to qualify as rents from real property within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto or which could cause any other income of Landlord to fail to qualify as income described in Section 856(c)(2) of the Code.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the Parties have executed this Lease as of the day and year first set forth above.
LANDLORD | ||
[_________________], | ||
a[_______________] |
By: |
| |
Name: |
| |
Title: |
|
TENANT | ||
[_________________], | ||
a[_______________] |
By: |
| |
Name: |
| |
Title |
|
[Signature Page to Master Lease Agreement]
EXHIBIT B
Initial Leased Property
Leased Property Name |
Leased Property Address |
Leased Property Description | ||
Prism Apartments | 50 Rogers Street Cambridge, Massachusetts 02142 |
Multifamily residential | ||
The Fremont | 13021 E. 21st Avenue Aurora, Colorado 80045 |
Multifamily residential | ||
Flamingo South Beach, North Tower | 1508 Bay Road Miami Beach, Florida 38139 |
Multifamily residential | ||
707 Leahy Apartments | 707 Leahy Street Redwood City, CA 94061 |
Multifamily residential |
B-1
Exhibit 10.5
PROPERTY MANAGEMENT AGREEMENT
BETWEEN
JAMES-OXFORD LIMITED PARTNERSHIP,
Owner,
AND
AIR PROPERTY MANAGEMENT TRS, LLC,
Manager
Effective as of December 15, 2020
Page | ||||||
ARTICLE 1 | ||||||
APPOINTMENT, TERM AND AUTHORITY | ||||||
1.1 |
Definitions and Construction | 1 | ||||
1.2 |
Appointment | 1 | ||||
1.3 |
Term | 2 | ||||
1.4 |
Properties | 2 | ||||
1.5 |
Authority | 2 | ||||
1.6 |
Relationship | 3 | ||||
1.7 |
Representation of Expertise | 3 | ||||
1.8 |
Cooperation | 3 | ||||
ARTICLE 2 | ||||||
TERMINATION | ||||||
2.1 |
Termination | 4 | ||||
2.2 |
Duties Upon Termination or Expiration | 4 | ||||
2.3 |
Remedies and Survival | 5 | ||||
2.4 |
Limitation of Owners Liability | 5 | ||||
ARTICLE 3 | ||||||
COMPENSATION OF MANAGER | ||||||
3.1 |
Management Fee | 5 | ||||
3.2 |
Construction Management Fee | 5 | ||||
3.3 |
Intentionally Omitted | 6 | ||||
3.4 |
Expenses/Costs | 6 | ||||
3.5 |
REIT Savings Provision | 7 | ||||
ARTICLE 4 | ||||||
RESPONSIBILITIES OF MANAGER | ||||||
4.1 |
Performance of Duties, Generally | 8 | ||||
4.2 |
Specific Duties of Manager | 8 | ||||
4.3 |
Rent Board Hearing | 18 | ||||
4.4 |
Duties of Manager Generally | 18 | ||||
4.5 |
Emergency Expenditures | 19 | ||||
4.6 |
Insurance | 19 | ||||
ARTICLE 5 | ||||||
PERSONNEL | ||||||
5.1 |
Employment of Personnel | 19 |
i
5.2 |
Schedule of Employees | 20 | ||||
ARTICLE 6 | ||||||
COMPLIANCE WITH LAWS | ||||||
6.1 |
Compliance | 20 | ||||
6.2 |
Contests | 20 | ||||
6.3 |
REIT Qualification and Protection | 21 | ||||
ARTICLE 7 | ||||||
ACCOUNTING AND FINANCIAL MATTERS | ||||||
7.1 |
Electronic Records | 21 | ||||
7.2 |
Reporting | 21 | ||||
7.3 |
Periodic Meetings | 22 | ||||
7.4 |
Owners Right to Conduct Audit | 22 | ||||
ARTICLE 8 | ||||||
BANK ACCOUNTS | ||||||
8.1 |
General | 22 | ||||
8.2 |
Closing Bank Accounts | 22 | ||||
8.3 |
Reconciliation | 22 | ||||
8.4 |
Accounts Payable | 23 | ||||
8.5 |
Cash Management | 23 | ||||
ARTICLE 9 | ||||||
ANNUAL BUSINESS PLAN AND BUDGET | ||||||
9.1 |
Annual Business Plan and Budget | 24 | ||||
ARTICLE 10 | ||||||
DUTIES OF OWNER | ||||||
10.1 |
Duties of Owner | 24 | ||||
ARTICLE 11 | ||||||
INDEMNIFICATION AND INSURANCE | ||||||
11.1 |
Indemnification | 25 | ||||
11.2 |
Owners Insurance | 26 | ||||
11.3 |
Managers Insurance | 27 | ||||
11.4 |
Evidence of Insurance | 28 | ||||
11.5 |
General Insurance Provisions | 29 | ||||
11.6 |
Mutual Waiver of Subrogation | 29 | ||||
11.7 |
Managers Duties in Case of Loss | 29 | ||||
11.8 |
Survival | 29 |
ii
ARTICLE 12 | ||||||
NOTICES | ||||||
12.1 |
Notices | 29 | ||||
ARTICLE 13 | ||||||
LIMITATIONS | ||||||
13.1 |
Assignment Restrictions and Rights | 30 | ||||
13.2 |
Limitation of Authority | 31 | ||||
ARTICLE 14 | ||||||
CONFIDENTIALITY | ||||||
14.1 |
Confidentiality | 32 | ||||
ARTICLE 15 | ||||||
LEGAL PROCEEDINGS | ||||||
15.1 |
Applicable Law; Waiver of Jury Trial | 33 | ||||
15.2 |
Arbitration/Dispute Resolution | 33 | ||||
15.3 |
Cooperation by Manager | 36 | ||||
15.4 |
Cooperation by Owner | 36 | ||||
ARTICLE 16 | ||||||
MISCELLANEOUS | ||||||
16.1 |
Entire Agreement | 37 | ||||
16.2 |
Headings | 37 | ||||
16.3 |
Successors and Assigns | 37 | ||||
16.4 |
No Waiver | 37 | ||||
16.5 |
Severability | 37 | ||||
16.6 |
No Third-Party Beneficiary | 37 | ||||
16.7 |
Unavoidable Delays | 38 | ||||
16.8 |
Subordination | 38 | ||||
16.9 |
Joint and Several | 38 | ||||
16.10 |
Exhibits | 38 | ||||
16.11 |
Counterparts | 38 | ||||
16.12 |
Consents and Approvals | 38 | ||||
16.13 |
OFAC Representations, Warranties, and Indemnification | 39 | ||||
16.14 |
Non-Business Days | 39 | ||||
16.15 |
No Personal Data | 39 | ||||
16.16 |
Other Action | 39 |
SCHEDULE 1: |
Defined Terms | |
SCHEDULE 2: |
Non-Reimbursable Expenses | |
SCHEDULE 3 |
Reporting Obligations |
iii
SCHEDULE 4 |
Approved Annual Business Plan and Budget | |
EXHIBIT A: |
Schedule of Managed Properties | |
EXHIBIT B: |
Management Fee and Construction Management Fee |
iv
PROPERTY MANAGEMENT AGREEMENT
THIS PROPERTY MANAGEMENT AGREEMENT (this Agreement) is effective as of December 15, 2020 (the Commencement Date), by and between JAMES-OXFORD LIMITED PARTNERSHIP, a Maryland limited partnership (Owner), and AIR PROPERTY MANAGEMENT TRS, LLC, a Delaware limited liability company (Manager). Owner and Manager shall collectively be referred to herein as the Parties.
RECITALS
A. Owner is the direct or indirect owner of certain residential apartment properties located throughout the United States, as more particularly described in Exhibit A attached hereto (each, a Property and, collectively, the Properties).
B. Manager is in the business of managing and operating properties similar to the Properties, and Manager possesses the personnel, skills and experience necessary for the effective and efficient management and operation of the Properties.
C. Owner desires to engage Manager to provide property management services with respect to the Properties, and Manager desires to accept such engagement, in each case upon the terms, covenants, conditions and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, Owner and Manager agree as follows:
ARTICLE 1
APPOINTMENT, TERM AND AUTHORITY
1.1 Definitions and Construction. All capitalized terms used and not otherwise defined shall have the meanings ascribed to such terms in Schedule 1 attached hereto. The capitalized words Section, Article, Exhibit and Schedule shall refer to a section, article, exhibit or schedule of this Agreement. Paragraph titles or captions contained herein are for reference only and shall in no way define, limit or extend the scope of this Agreement. For purposes of this Agreement: (a) the words include, includes and including shall be deemed to be followed by the words without limitation; (b) references to an agreement, instrument or other document mean such agreement, instrument or other document, as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; (c) references to law or Legal Requirements include any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any governmental authority; and (d) references to a statute mean such statute, as amended from time to time and includes any successor legislation thereto and any regulations and rules promulgated thereunder.
1.2 Appointment. Owner hereby appoints and engages Manager, and Manager hereby accepts the appointment and engagement, as the property manager for the Properties, subject to and upon the terms, covenants, conditions and provisions of this Agreement.
1
1.3 Term. The initial term (the Initial Term) of this Agreement shall commence on the Commencement Date and shall continue in full force and effect until the date that is the first (1st) anniversary of the Commencement Date, unless renewed pursuant to the terms of this Section 1.3 or terminated pursuant to the terms of Section 2.1 hereof. At the conclusion of the Initial Term, this Agreement shall be automatically renewed for periods of one (1) year each (each, a Renewal Term), unless either Party desires not to renew the Term of this Agreement and delivers Notice of the same to the other Party at least sixty (60) days prior to the end of the Initial Term or the then applicable Renewal Term, as the case may be. The word Term shall include the Initial Term and any Renewal Term until the date of expiration or termination of this Agreement (the Expiration Date).
1.4 Properties.
(a) In the event that Owner or any of its Affiliates acquire any New Property, Exhibit A hereto shall be deemed automatically amended to add such New Property as a Property hereunder upon at least one hundred twenty (120) days (or such other period as the Parties may mutually agree) prior Notice from Owner to Manager.
(b) In the event that Owner or Manager terminate this Agreement with respect to any Property pursuant to the terms of Section 2.1 or Section 16.12(b), this Agreement shall automatically terminate with respect to such Property and Exhibit A hereto shall be deemed automatically amended to remove such Property upon at least thirty (30) days prior Notice from Owner to Manager.
(c) Notwithstanding that the foregoing additions and removals are automatically effected upon prior Notice from Owner to Manager as set forth above, the Parties shall endeavor to promptly amend this Agreement to reflect such additions and removals.
1.5 Authority.
(a) Manager is hereby granted the authority to enter upon the Properties and to do such acts as are reasonably necessary to perform its obligations and duties, including the Services, pursuant to this Agreement and the Approved Annual Business Plan and Budget; provided that Manager shall have no right or authority, express or implied, to commit or otherwise obligate Owner in any manner whatsoever except to the extent specifically provided herein or in the Approved Annual Business Plan and Budget. Manager shall perform property management services, including those services more specifically described in this Agreement (collectively, the Services) in accordance with the Approved Annual Business Plan and Budget (subject to Permitted Variances), the Standards of Conduct and the other terms and conditions of this Agreement.
(b) Manager may not delegate or sub-contract all or any part of its authority, duties, responsibilities and obligations under this Agreement except to Property Management LLC or to a Person that is an Affiliate of AIR and is and remains a taxable REIT subsidiary of AIR, as Manager may from time to time deem appropriate; provided, however, that (i) any authority delegated or sub-contracted by Manager pursuant to the terms of this Section 1.5(b) is subject to the limitations on the rights and powers of Manager expressly set forth in this
2
Agreement, (ii) Manager shall remain liable for, and primarily obligated with respect to, the performance of all of its duties, responsibilities and obligations under this Agreement notwithstanding any such delegation or sub-contracting and shall be responsible and liable for any breach of its authority, duties, responsibilities, and obligations by any Person (and/or its and/or their respective officers and employees) to which it delegated or sub-contracted all or any part of its authority, duties, responsibilities, and obligations hereunder, and (iii) any Person providing Services pursuant to this Agreement (other than Manager) shall not be entitled to receive any separate compensation from Owner (or any of Owners Affiliates). Except as set forth in this Section 1.5(b), Manager shall not have the right to (and shall not) delegate or sub-contract the right or obligation to perform Services (or any portion thereof) to any Person or enter into any sub-management arrangement with any Person with respect to the Services hereunder without the prior written consent of Owner. Notwithstanding the foregoing, if Manager engages any third party to provide services in connection with Managers performance of its duties pursuant to this Agreement and such services are not management services or of the type normally performed by a property manager or construction manager, any reasonable and documented costs and expenses of such third party for providing such services shall be the responsibility of Owner; and Manager shall be entitled to reimbursement for the same by Owner.
1.6 Relationship. Manager shall be an independent contractor and shall not be an agent, employee, partner or joint venturer of Owner, and neither Manager nor Owner shall represent to any other person that Managers relationship to Owner hereunder is other than that of an independent contractor. If Manager owns any interest in, or provides other services to Owner, nothing contained herein shall be deemed to modify, amend or diminish the agreements contained herein and Managers responsibilities and duties hereunder shall be considered entirely separate from any other relationship with Owner.
1.7 Representation of Expertise. Manager represents that it is a professional in the field of management of commercial real estate in the areas where the Properties are located and possesses the skills and experience necessary for the effective and efficient management and operation of the Properties, and acknowledges that Owner is relying upon this representation in entering into this Agreement. Owner acknowledges that Manager and its Affiliates engage in various management, leasing and other real estate activities not related to the Properties and may enter into similar activities in the future. Owner acknowledges that the management of a comparable property by Manager or any of its Affiliates shall not be deemed a per se conflict of interest hereunder, provided that Manager complies with its obligations hereunder, including, without limitation, the Standards of Conduct. Manager acknowledges and agrees that it has a fiduciary duty not to divert any existing or potential tenant of any Property to any other building or property in which Manager or any Affiliate has any interest, as a property manager, owner or otherwise, without Owners consent; provided, however, that the foregoing restrictions shall not be deemed or interpreted to prohibit the leasing personnel of Manager or any Affiliate from responding to tenants or prospective tenants of any Property or their agents who initiate contact with such leasing personnel for the purpose of leasing space in any other property or building, including, but not limited to, any other property or building for which Manager or any Affiliate of either of them serves as leasing agent.
1.8 Cooperation. Manager shall consult with Owner and Owner shall consult with Manager at either partys request and to the extent reasonably necessary or appropriate to enable
3
Manager to perform the Services. Manager shall conduct meetings between Owner and Manager from time to time as reasonably necessary or appropriate to enable Manager to perform the Services and its duties and obligations hereunder or as reasonably requested by Owner. Manager shall reasonably cooperate with Owner in all matters relating to the management, operation, maintenance, repair and leasing of the Properties.
ARTICLE 2
TERMINATION
2.1 Termination.
(a) Owner or Manager may terminate this Agreement (or any portion of this Agreement that relates to any single Property) for any reason or no reason whatsoever at any time upon delivery of sixty (60) days prior Notice to the other Party hereunder.
(b) Owner may terminate this Agreement immediately following any Final Determination that Manager committed a Material Breach of its duties and obligations hereunder.
(c) Owner or Manager may terminate this Agreement upon thirty (30) days prior Notice to the other Party in the event a Bankruptcy Action occurs with respect to the other Party.
(d) In the event of termination pursuant to this Section 2.1, Manager shall effect an immediate and orderly transfer of the management and operation of any or all of the Properties to Owner or to an agent designated by Owner or to the new owner of any or all of the Properties, as the case may be, prior to the effective date of such termination.
2.2 Duties Upon Termination or Expiration.
(a) Promptly upon the Expiration Date, in addition to any other requirements set forth in this Agreement, Manager shall deliver to Owner (or Owners designee) all materials, supplies, keys, Leases, contracts, other documents, insurance policies, plans, specifications, permits, licenses, promotional materials, unpaid bills and such other papers and records (including general correspondence, but excluding any of Managers Confidential Information that does not relate to the operation of the Properties) as pertain to this Agreement, the operations of the Properties or the performance of Managers duties hereunder. Manager, without recourse or warranty, shall assign any rights Manager may have in and to any existing contracts relating to the operation and maintenance of the Properties as Owner shall desire or require, to the extent that such contracts are assignable. Manager shall provide Owner with a schedule of, and surrender and assign to Owner, to the extent assignable, any and all licenses, permits, and other authorizations or property required for the operation of the Properties that are in the name of Manager.
(b) Manager shall deliver to Owner a final accounting (prepared in accordance with Owners request) of the Properties and pay over any remaining balance maintained by manager for the benefit of Owner with respect to this Agreement or the Properties as soon as reasonably practicable following the Expiration Date. Such final accounting shall set forth all
4
current income, all current expenses and all other expenses contracted for on Owners behalf but not yet incurred in connection with the Properties. The final accounting shall also include all other items reasonably requested by Owner.
(c) Within thirty (30) days after the Expiration Date, Manager shall deliver to Owner all reports and information required by Section 7.2 for any period prior to the Expiration Date not covered by the reports previously delivered to Owner.
(d) The terms of this Section 2.2 shall survive the Expiration Date.
2.3 Remedies and Survival. If Owner terminates this Agreement pursuant to Section 2.1(b) or Section 2.1(c), Owner may exercise any and all remedies available at law or in equity unless and to the extent expressly limited herein. If Manager terminates this Agreement pursuant to Section 2.1(c), Manager may exercise any and all remedies available at law or in equity unless and to the extent expressly limited herein. Upon the Expiration Date, both parties shall remain liable for all obligations under this Agreement accrued and not fully performed. The terms of this Section 2.3 shall survive the Expiration Date.
2.4 Limitation of Owners Liability. Owners liability to Manager hereunder shall be limited to its interest in the Properties and Manager shall not look to any other property or assets of Owner or the property or assets of any of the Owner Indemnified Parties in seeking either to enforce Owners obligations under this Agreement or to satisfy a judgment for Owners failure to perform such obligations. No Protected Person shall be liable for the performance of Owners obligations under this Agreement. The terms of this Section 2.4 shall survive the Expiration Date.
ARTICLE 3
COMPENSATION OF MANAGER
3.1 Management Fee. In consideration of the Services, Owner shall pay (or shall cause the applicable Property Owner to pay) to Manager the Management Fee specified in Exhibit B attached hereto and made a part hereof. The Management Fee shall be payable monthly in arrears, commencing with the first full calendar month after the month in which the Commencement Date occurs. Manager shall be permitted to issue a check or withdraw funds for payment of the Fees payable hereunder from the Central Account so long as such Fees are specifically permitted by the Approved Annual Business Plan and Budget and Manager has delivered to Owner an invoice documenting such Fees; provided, further, that (a) Manager shall deliver to Owner on the last day of each calendar quarter, a written statement, with reasonably appropriate backup documentation reconciling the amount of Fees due and paid to Manager for such quarter, and (b) Owner shall promptly pay any amounts due to Manager, or Manager shall promptly deposit any overpayment amounts into the Central Account. The Management Fee shall be pro-rated for partial months at the beginning and end of the Term, if applicable.
3.2 Construction Management Fee. If applicable, in consideration of the services performed by Manager as construction manager in an on-site management capacity, including, without limitation, the services described in Section 4.2(e) hereof, with respect to any Material Construction Work performed pursuant to this Agreement, Owner shall pay (or shall cause the
5
applicable Property Owner to pay) to Manager the Construction Management Fee specified in Exhibit B attached hereto. Such Construction Management Fee shall be payable monthly in arrears.
3.3 Intentionally Omitted.
3.4 Expenses/Costs.
(a) Manager shall be responsible for all costs and expenses of Manager not directly associated with its performance of the Services and its duties and obligations hereunder, including, but not limited to, the costs and expenses listed on Schedule 2 or any other costs or expenses specifically allocable to Manager hereunder. Owner hereby acknowledges and agrees that subject to the foregoing sentence, to the extent that the following costs and expenses are incurred, such costs and expenses shall be the responsibility of Owner, and not of Manager, hereunder, in each case to the extent included in the Approved Annual Business Plan and Budget (subject to Permitted Variances), or that are otherwise consented to by Owner in writing:
(i) Operating expenses of each Property, as outlined in the Approved Annual Business Plan and Budget (subject to Permitted Variances) and incurred through renting, servicing, maintaining or repairing each Property, including, but not limited to, labor costs associated with repairs, gas, water, electricity, sewer and other utilities not separately metered or directly addressed to the Tenants of each Property, and such other expenses in connection with the Properties as may be authorized by Owner, and all such operating expenses shall be reimbursed to Manager if advanced and shall be separate and apart from payment of the Fees;
(ii) Real estate taxes, assessments, personal property taxes or charges and any other taxes or assessment levied against any Property;
(iii) Costs to correct any violation of federal, state, county and municipal laws, ordinances, regulations, and orders relative to the leasing, use condition, operation, repair and maintenance of the Properties, or relative to the rules, regulations or orders of the local board of fire underwriters or other similar body, or the requirements of any insurance policy covering any Property, so long as such violations were not caused by the gross negligence, fraud, willful misconduct or criminal act of Manager or any of its employees or agents;
(iv) Costs of collection of delinquent rentals;
(v) Costs and expenses relating to Managers shared service center, accounts payable and procurement, revenue management and any substitute on-site personnel assigned to or required at any Property (typically referred to by Manager as fire fighters);
(vi) Costs and expenses relating to advertising and marketing the Properties in accordance with the terms of this Agreement;
6
(vii) Costs of supplies required for use at any Property for the benefit of such Property, but not including costs of supplies at Managers general corporate office, which shall be considered overhead of Manager;
(viii) Costs of rent and other charges relating to Managers regional offices;
(ix) Costs of capital expenditures;
(x) Bank service charges pertaining to accounts for the Properties;
(xi) Leasing commissions for outside brokers with respect to any residential or retail Leases to the extent the use of an outside broker, and the fee to be paid to such outside broker, is pursuant to the terms of this Agreement;
(xii) Reasonable legal fees of attorneys for services rendered for any Property in accordance with the terms of this Agreement;
(xiii) Costs of Owner-approved consulting fees (including but not limited to tax, elevator, environmental and engineering consultants);
(xiv) Postage, overnight delivery, messenger and similar charges with respect to correspondence related to the Properties;
(xv) Costs and expenses related to Managers preparation and filing of any petitions with the local rent board or other government agency which regulates rents and evictions for certain residential rental units where each Property is located (Rent Board) related to such Property, including, but not limited to, preparing and filing any petitions to passthrough certain costs and expenses to Tenants;
(xvi) Costs and expenses related to Managers attendance at and/or representation of Owner at Rent Board hearings; and
(xvii) Costs, expenses, fees and reimbursements which are expressly reimbursable or payable by Owner pursuant to this Agreement.
(b) The foregoing enumeration of expenses relating to each Property is not intended to be exclusive, and subject to the terms of this Agreement, Manager shall be entitled to make disbursements from the Central Account for other expenses incurred or paid by Manager to the extent those expenses are related to any Property and are set forth in the Approved Annual Business Plan and Budget (subject to Permitted Variances).
3.5 REIT Savings Provision. In the event that counsel or independent accountants for AIR or any REIT investor in AIR (each, a Manager REIT) determine that there exists a material risk that any Manager REIT shall fail to meet the REIT Requirements for a taxable year as a result of payments under this Agreement, the amount paid to Manager pursuant to this Agreement in any tax year may not exceed the maximum amount that can be paid to Manager in such year without causing any Manager REIT to fail to meet the REIT Requirements for such
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year. If the amount payable for any tax year under the preceding sentence is less than the amount that Owner would otherwise be obligated to pay to Manager pursuant to this Agreement (the Excess Amount), then Owner shall place the Excess Amount in escrow and shall not release any portion thereof to Manager, and Manager shall not be entitled to any such amount, unless and until Manager delivers to Owner a letter from the independent accountants of AIR indicating the maximum amount that can be paid at that time to Manager without causing any Manager REIT to fail to meet the REIT Requirements for any relevant taxable year, in which case such maximum amount shall be paid to Manager. The obligation to pay any amount which is not paid as a result of this Section 3.5 shall terminate five (5) years from the original date such amount would have been payable without regard to this Section 3.5 and Manager shall have no further right to receive any such amount.
ARTICLE 4
RESPONSIBILITIES OF MANAGER
4.1 Performance of Duties, Generally. Subject to the provisions of this Agreement, during the Term, Manager agrees, for and in consideration of the Management Fee set forth above, to manage and operate the Properties on behalf of Owner and for the account of Owner, and to perform all Services and all of its duties and obligations hereunder, in each case in accordance with the Standards of Conduct and the Approved Annual Business Plan and Budget (subject to Permitted Variances). Manager agrees to maintain systems and personnel sufficient to enable it to carry out its duties, obligations and functions under this Agreement. Manager shall institute and supervise all operational activities for the Properties, including, but not limited to, cleaning, security, waste removal and maintenance, landscaping, window washing, maintenance and operation of wireless services and equipment, maintenance and operation of central plant and other HVAC equipment, and all necessary maintenance of and repairs to the Properties. Manager shall be responsible for implementing all aspects of access to and security for the Properties as determined by Owner from time to time. If the Central Account does not contain sufficient funds to pay all costs and expenses of Owner, Manager shall promptly deliver written notice of such deficiency to Owner (together with sufficient detail as to the amounts required and the reasons therefor), but Manager shall have no obligation to expend its own funds therefor.
4.2 Specific Duties of Manager. Without limiting the generality of Section 4.1 above, Manager shall have the following duties and shall perform the following Services:
(a) Legal Counsel. Except as expressly set forth herein, Manager shall not retain independent legal counsel on behalf of Owner or any Property Owner without obtaining Owners prior written approval, in each instance, unless such independent legal counsel is otherwise approved as part of the Approved Annual Business Plan and Budget. In addition, Manager shall not expend any legal fees, costs or expenses in excess of the amount approved in the Approved Annual Business Plan and Budget (subject to Permitted Variances) without obtaining Owners prior written approval, in each instance.
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(b) Collection of Revenues and Lease Enforcement.
(i) Manager shall use diligent efforts to demand, collect and receive (A) all rents, utility charges, common area charges, insurance charges, and real estate and personal property tax and assessment charges, (B) all other pass-through or bill-back charges, sums, costs or expenses of any nature whatsoever payable by Tenants under the terms of any or all of the Leases and any other agreements relating to all or any portion of any Property, including, without limitation, any method of calculating a residents utility bill based on factors such as occupancy rate or square footage that may be implemented, and (C) all other revenues, issues and profits accruing from any Property (including, without limitation, any and all license, service or other agreements affecting such Property). All monies so collected shall be deposited into the applicable Property Account in accordance with the terms of this Agreement.
(ii) Manager may terminate any Lease, lock out a Tenant, institute suit relating to use and occupancy, or proceedings for recovery of possession, or take any other material legal action in connection with each Property in accordance with the terms of Section 4.2(a) hereof. All out-of-pocket legal expenses incurred by Manager in bringing any suit or proceeding in accordance with the terms of Section 4.2(a) hereof shall be for Owners account and at the Owners expense.
(iii) Security deposits (whether they are cash, letters of credit, securities or any other form) shall be maintained by Manager in accordance with all Legal Requirements and the applicable terms of the Lease to which such security pertains. A separate account, or one or more separate accounts, shall be opened by Manager (hereinafter the Security Deposit Account), in accordance with the terms hereof. The Security Deposit Account shall be maintained in accordance with Legal Requirements and, shall be with an FDIC-insured banking institution reasonably acceptable to Owner. The Security Deposit Account shall be used only for maintaining Tenant security deposits. The depository shall be informed that the funds are held in trust for Owner. Manager may not under any circumstances write a check on the Security Deposit Account payable to or in favor of Manager or any Affiliate of Manager. Manager shall maintain detailed records of all security deposits relating to each Property. To the extent permitted under Legal Requirements, any interest credited to the Security Deposit Account from time to time shall be paid to Owner. Notwithstanding anything herein contained to the contrary, Manager may, in its reasonable discretion, access and use the security deposits, including funds held in the Security Deposit Account, for the payment of any of the costs and expenses incurred in accordance with the Approved Annual Business Plan and Budget as described in Section 3.4(a) of this Agreement (subject to any Permitted Variances) without Owners prior written approval so long as such amounts are properly booked and recorded and such records are open for inspection at Managers office, at reasonable times, by Owners employees and agents. Such access and use of the security deposits shall not relieve Manager of its duties and obligations to comply with all Legal Requirements regarding security deposits and the applicable terms of the Lease to which security pertains. Manager shall not collect any rents, charges, or revenues more than one (1) month in advance of when the same shall be due and payable
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under any Lease (except to the extent such advance payment is otherwise approved by Owner in writing).
(c) Contracts; Authority to Sign; Contractor Requirements.
(i) Manager agrees to negotiate, enter into in its own name, or as the agent of Owner or the applicable Property Owner, and thereafter supervise the performance of all trade, service and supply contracts that are entered into in accordance with the Approved Annual Business Plan and Budget and are reasonably required in the reasonable and ordinary operation of each Property, including, without limitation, contracts for elevator maintenance, gas, electricity, water, and all other utilities and the maintenance thereof, telephone, cleaning, groundskeeping, snow removal, security, pest control and other services as set forth in the Approved Annual Business Plan and Budget (collectively, the Contracts); provided, however, that Manager shall not enter into or amend, supplement or modify any Material Service Contract without obtaining Owners prior written consent. Unless otherwise provided herein or approved by Owner in writing, Manager shall, at the expense of Owner, in accordance with the Approved Annual Business Plan and Budget, duly and punctually pay and perform on behalf of Owner all obligations under the Contracts and enforce and preserve the rights of the contracting party and the obligations of the other parties under such Contracts, but Manager shall have no obligation to expend its own funds therefor. Manager shall have the right to arrange for the purchase by Owner, at Owners expense, in an economical and efficient manner of all inventories, supplies and equipment which, in the ordinary course of business, are commercially reasonably necessary and appropriate to maintain and operate each Property in accordance with the Standards of Conduct and the Approved Annual Business Plan and Budget (subject to Permitted Variances). No Contracts shall exceed the costs set forth in the Approved Annual Business Plan and Budget (subject to Permitted Variances), unless otherwise approved by Owner in writing. Manager shall promptly deliver original counterparts of all Contracts to Owner at Owners request or, if not so requested, hold the same on Owners behalf.
(ii) Unless otherwise provided herein or in the Approved Annual Business Plan and Budget, Manager shall only have the authority to enter into, modify, amend and terminate Contracts if such Contracts are not Material Service Contracts. If Owner fails to approve or reject any Material Service Contract within five (5) Business Days after receipt of such request from Manager, Owner shall be deemed to have approved such Material Service Contract.
(iii) Manager shall use diligent good faith efforts to ensure that no third parties providing services to or performing work at or in connection with the Properties may do so without a written contract being in effect, including for change orders.
(iv) Manager shall promptly notify Owner upon learning of any material default, or event of default or event which, with the giving of notice or the passage of time or both, would or could be reasonably likely to constitute a material default or a material event of default by any other party under any Contract. In the event of any material default or material event of default by any other party under any Contract,
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Manager shall consult with Owner concerning the action to be taken with respect thereto and, at the expense of Owner, take such action as Owner shall direct with respect to such default or event of default.
(v) Each of Manager and Owner shall promptly notify the other upon receiving any written notice of default by Manager, Owner or Property Owner, as the case may be, under any Contract (and shall furnish a copy of the notice received by it with its notice to the other Party) or upon obtaining actual knowledge of any default, or event of default under any Contract. In the event of any such notice, default or event of default, Manager shall consult with Owner concerning the action to be taken with respect thereto and, at the expense of Owner, shall take such reasonable action with respect thereto as Owner shall direct.
(d) Repairs and Maintenance.
(i) Manager shall use commercially reasonable efforts to keep each Property in good order and repair and in a condition in accordance with standards customary for apartment and retail properties in the cities in which the Properties are located and reasonably acceptable to Owner, and, at Owners expense in accordance with the Approved Annual Business Plan and Budget, to make all repairs and replacements that Owner is obligated to make under the Leases, the Approved Annual Business Plan and Budget, any Loan Documents, Legal Requirements, and/or any insurance requirements. Manager shall arrange for periodic systematic inspections of the building systems by qualified contractors and if appropriate, consult with, and make recommendations to, Owner concerning the condition of each Property and the necessity for maintenance, repair, alteration or restoration thereof, the costs of any such inspections, repairs, alterations or restorations to be at Owners expense in accordance with the Approved Annual Business Plan and Budget. Manager agrees to promptly notify Owner upon obtaining actual knowledge that the condition of any Property fails to meet the above-specified standard of maintenance and repair. Except to the extent that such repairs, maintenance, replacements, substitutions, improvements or additions (x) have been provided for in the Approved Annual Business Plan and Budget (subject to Permitted Variances), (y) relate to an Emergency as provided for in Section 4.5 of this Agreement or (z) shall not exceed the sum of $20,000.00, individually or in the aggregate, all repairs, maintenance, replacements, substitutions, improvements and additions to any Property shall be undertaken or made by Manager only after securing Owners prior written approval (which may be granted or withheld in Owners sole discretion).
(e) Supervision of Construction.
(i) Manager shall use commercially reasonable efforts to manage, supervise, oversee and facilitate all repairs, construction, maintenance, replacements, substitutions, improvements, additions and alterations, including, without limitation, Tenant improvements at the Properties, contemplated by the Approved Annual Business Plan and Budget (collectively, Construction Work).
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(ii) Manager shall publish and distribute work rules for each Property and ensure compliance with such work rules from all contractors, sub-contractors, engineers and people engaged in working on any Property for the benefit of Tenant comfort and non-disturbance and building protection and security without any additional fee or compensation.
(iii) If the cost of any Construction Work is not contemplated by the Approved Annual Business Plan and Budget, Manager shall promptly notify Owner to that effect, which notice shall include a preliminary budget and a detailed description of the scope of the construction management services required to be performed with respect to such Construction Work, and Manager shall not expend any such funds unless the same are approved by Owner.
(iv) Manager shall perform the construction management services with respect to any Construction Work subject to the Approved Annual Business Plan and Budget and Owners direction. Manager shall represent Owner in connection with any architectural renovation, asbestos abatement and life safety/operating system alterations to any Property and any action or process in order to cause any Property to abide by the Legal Requirements.
(v) Manager shall cause any and all necessary permits and approvals for any Construction Work to be obtained and to be in full force and effect for as long as is required by Legal Requirements.
(vi) Manager shall ensure that all appropriate insurance for any Construction Work has been obtained and is in effect and shall oversee the administration of all applicable construction contracts.
(vii) Subject to subsection (iv) above, Managers responsibilities in performing the construction management services it is engaged to perform shall include, without limitation: (1) analyzing plans and specifications and suggesting revisions thereof; (2) suggesting contractors and supervising construction; (3) coordinating, when appropriate, with Owner, Tenants, architects, engineers, contractors and other consultants to prepare and finalize construction plans; (4) identifying and, in accordance with the terms of Section 4.2(c), contracting on behalf of Owner appropriate professional services when required; (5) negotiating all contracts; (6) monitoring the construction schedule and the quality of workmanship (without liability for latent or patent defects); (7) obtaining or causing to be obtained all necessary governmental permits and approvals; (8) obtaining Tenants written approval of construction documents for Tenant improvements; (9) coordinating and directing pre-bid conferences with contractors; (10) establishing or causing to be established a project time schedule; (11) administering and coordinating job site construction meetings as necessary to ensure the timely flow of information between Tenants, space planners and contractors; (12) coordinating labor and material suppliers; (13) managing the change order process, including providing for the payment of any requested change as set forth in any Lease; (14) obtaining and reviewing all necessary lien waivers and releases; (15) reviewing all payment requests pursuant to the contract documents; (16) inspecting the Construction Work; (17) assisting contractors in obtaining
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notices of completion, certificates of occupancy, or equivalent documents; (18) conducting final walk through with Tenants, space planners and contractors; (19) obtaining Tenants written acceptance and acknowledgment of the substantial completion date of the Construction Work, as the case may be; (20) assisting in the preparation of a final punch list which itemizes all work which must be completed or requiring repair or adjustment, and representing Owner during the final inspection of the completed Construction Work; and (21) obtaining from contractors, sub-contractors, material suppliers or other consultants all reasonably available guarantees, instructions, equipment manuals, warranties and all other pertinent documents relating to the Construction Work.
(viii) Manager shall use diligent, commercially reasonable and good-faith efforts to (1) ensure that relations between all Tenants in each Property and Owner during any period of construction in any Property are as good as is possible under the circumstances, and (2) settle any labor disputes which may arise during any period of construction, subject to Section 4.2(a).
(ix) For the avoidance of doubt, any and all contracts entered into pursuant to this Section 4.2(e) shall be subject to the requirements set forth in Section 4.2(c) above.
(x) Owner acknowledges that Manager shall have no responsibility for the actual design and/or performance of Construction Work, and that all liability for the actual performance of such services in accordance with the requirements of the Contracts shall be borne by the third-party service providers pursuant to such Contracts with Owner, except to the extent of Managers fraud, bad faith, gross negligence or willful misconduct.
(xi) The Parties shall meet on a monthly basis (unless the Parties otherwise mutually agree) with all appropriate personnel (including asset managers) to assess and review the status and performance of Construction Work.
(f) Hours. Manager agrees to be available, or cause a representative of Manager to be available, to Tenants of each Property during normal business hours (i.e., from 9:00 A.M. through 5:00 P.M.) on Business Days. Manager shall be on call at all times in the event of an emergency or upon Owners reasonable request.
(g) Certifications. When reasonably requested by Owner, Manager shall provide a certification to Owner in order to enable Owner to certify to a lender, a title insurance company, a prospective purchaser of any Property, and/or any other party which Owner may designate that:
(i) the most recent rent roll prepared by Manager (including a listing of security deposits, if any) is true, correct and complete;
(ii) Manager has not received any notices about and has no actual knowledge of any violations of law at such Property, including, without limitation, violations of any building codes or environmental law (or if Manager has received notice or has such knowledge, specifying the nature and extent of such violations);
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(iii) Manager has not received any notices about and has no actual knowledge of any condemnation or litigation affecting such Property which is pending or has been threatened in writing (or if Manager has received notice or has such knowledge, specifying the nature and extent of such condemnation or litigation); and
(iv) to the knowledge of Manager, no default by Owner exists under this Agreement or any Lease (or if a default exists, specifying the nature of such default).
(h) Leasing.
(i) Subject to the Approved Annual Business Plan and Budget (including any leasing guidelines as set forth therein), Manager is expressly authorized to, and shall use diligent efforts to, facilitate the leasing of all commercial and apartment rental units within each Property, including, without limitation, establishing Tenant screening standards, collecting rent, managing security deposits, negotiating with Tenants and prospective tenants and for Leases and extensions, renewals, modifications, amendments or terminations thereof, enforcing rights under Leases, advertising each Property and maintaining a detailed rent roll. Manager shall maintain a visible management presence and level of service to tenants at each Property (collectively, Tenants). Manager may employ the services of third-party real estate brokers unaffiliated with Manager, subject to the terms and conditions of commission agreement(s) signed with said broker(s). Manager may negotiate and administer such commission agreement(s). Manager shall maintain electronic copies of all Leases.
(ii) All Residential Leases shall be entered into on forms previously agreed to by Owner or that are otherwise approved as part of the Approved Annual Business Plan and Budget (collectively, the Standard Lease Forms); provided, however, that no Residential Lease shall have a term of more than forty-eight (48) months (including any renewal term), unless otherwise approved in writing by Owner or as set forth in the Approved Annual Business Plan and Budget. If Owner fails to approve or reject any such Residential Lease within three (3) Business Days after receipt of such request from Manager, Owner shall be deemed to have approved such Residential Lease.
(iii) Manager shall engage and retain legal counsel to perform, on an annual basis (or as required by Legal Requirements or as reasonably requested by Owner in writing from time to time) and at a reasonable cost to Owner, a thorough legal review of all Standard Lease Forms. Manager shall notify Owner if such legal counsel recommends any update or revision to any Standard Lease Form and shall request Owners approval of such update or revision (which approval shall not be unreasonably withheld, conditioned or delayed).
(iv) Manager shall be available for communications with Owner and shall keep Owner promptly advised of items affecting each Property, including demands, suits or legal proceedings instituted or threatened against Owner, of which Manager has knowledge. Manager shall not take any action that might prejudice Owner in its defense to a claim based on any loss, damage or injury relating to the ownership, operation and maintenance of any Property and related facilities. Manager shall promptly notify Owner
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of: (1) to the extent of Managers knowledge, any material default under any Lease; (2) to the extent of Managers knowledge, any bankruptcy filing or threatened bankruptcy filing affecting a Tenant; (3) to the extent of Managers knowledge, any condemnation or litigation affecting any Property which is pending or threatened; and (4) to the extent of Managers knowledge, any release or threatened release of hazardous substances in or around any Property. In the event of any such condition, default or event of default, Manager shall consult with Owner, and at the expense of Owner, promptly take such actions as Owner shall direct. Manager agrees to log and handle complaints and requests from Tenants and prospective tenants and to notify Owner of any material complaint by a Tenant (which shall include, without limitation, any complaint, communication or state of facts which could give rise to a rental abatement or a right of setoff, termination or other claim, and/or any complaint which would or could reasonably be expected to cause or result in reputational harm to Owner and/or any direct or indirect investor in Owner). Manager shall cause, as fully as practicable, the compliance of Tenants with the terms, covenants and conditions of their Leases and shall keep Tenants informed of, and shall use diligent efforts to cause all Tenants to comply with, all rules, regulations and Legal Requirements affecting the applicable Property.
(v) Without Owners prior written consent, Manager shall not permit any person to occupy any space in any Property unless such occupancy is pursuant to a written Lease (in the case of a Residential Lease, on the Standard Lease Form) or pursuant to the Leases in effect as of the Commencement Date. In addition, unless Manager has obtained Owners prior written consent, Manager shall not permit any Tenant to take occupancy of any space at any Property unless such Tenant has delivered to Manager or Owner (1) the security deposit, if any, required under the terms of such Tenants Lease, (2) a current certificate of insurance in compliance with the terms and provisions of such Tenants Lease, and/or (3) payment of any rent required to be paid prior to the Tenants taking occupancy of its demised premises.
(vi) Manager shall deliver to each of the Tenants all notices required to be delivered on behalf of landlord pursuant to the terms of the applicable Lease.
(i) Assistance with Acquisition and/or Financing.
(i) As reasonably requested by Owner, Manager may, at its option, exercise commercially reasonable efforts to assist Owner or any of its Affiliates with the acquisition process of any New Property, including, without limitation, reviewing diligence materials to develop an operational plan reasonably consistent with the terms, conditions and information set forth in the Approved Annual Business Plan and Budget. If Manager agrees to assist Owner or any of its Affiliates in connection with such acquisition pursuant to the terms of this Section 4.2(i)(i), Owner shall pay to Manager a fee as mutually agreed upon by the Parties (such fee, the Acquisition Diligence Fee). In the event that AIR or any of its Affiliates exercises its right of first offer pursuant to the MLA (the MLA ROFO) and acquires any New Property pursuant to the terms of the MLA ROFO, then Owner shall not be obligated to pay to Manager the Acquisition Diligence Fee. Within forty-five (45) days following the acquisition of any New Property by Owner or any of its Affiliates, Manager shall prepare and submit to Owner
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an operating budget and such other information as Owner may reasonably request for the remainder of the then current fiscal year.
(ii) Manager shall administer and service all financing incurred with respect to Owner and/or the Properties, and periodically review, assess, monitor and supervise the compliance and any non-compliance by Owner with all covenants and all other obligations under or with respect to any Loan Documents, if any, except to the extent such terms and provisions relate solely to the actions or inactions of any Person that is not an Affiliate (or a board member or director appointed by an Affiliate) of Manager. Manager shall perform its duties and obligations hereunder in compliance with any Loan Documents and shall cause Owner and the Properties to comply, at all times, with the terms and conditions of any Loan Documents; provided that Manager is expressly authorized to use its commercially reasonable discretion to establish payment plans with respect to any financing in accordance with the terms and conditions of the Loan Documents and to sell, trade or otherwise transfer any financing subject to the terms and conditions of the Loan Documents. Notwithstanding anything to the contrary in this Section 4.2(i)(ii), in no event shall Manager be in default hereunder for (1) the failure of Owner to satisfy any financial covenants imposed pursuant to any Loan Document, (2) any default or breach under any Loan Document if Owner fails to make sufficient funds available to Manager to service the underlying loan and/or satisfy any other deposits within a reasonable period of time after Manager makes written request therefor, (3) any default or breach under any Loan Document caused by any voluntary transfer of equity interests by Owner or any direct or indirect interest in Owner (other than as a result of any transfer by an Affiliate of Manager), or (4) any actions or inactions of any Person that is not Manager or an Affiliate of Manager, or a board member or director appointed by Manager or an Affiliate of Manager or any Person to whom management duties have been delegated by Manager, so long as Manager acts diligently and reasonably under the circumstances and in accordance with the Standards of Conduct to cause the Owner and the applicable Property Owner, as the case may be, to comply with the Loan Documents as soon as practicable. If the terms of any of the Loan Documents are inconsistent with the terms of this Agreement, Manager shall cause compliance with the Loan Documents. Manager shall promptly notify Owner upon (A) obtaining actual knowledge of any default, or event of default under any financing (mortgage or mezzanine) applicable to any Property, or (B) receiving any written default notice under any financing applicable to any Property (and furnish a copy of the notice received by it with its notice to Owner). In each instance, Manager shall consult with Owner concerning the action to be taken with respect thereto and, at the expense of Owner (unless the same is Managers obligation pursuant to Section 11.1), shall take such action as Owner shall direct.
(j) Taxes and Assessments. Subject to the next succeeding sentence, on Owners behalf and at Owners expense, Manager shall pay in a timely manner in order to receive all available discounts or reductions of tax liability, before delinquency and prior to the addition thereto of any interest or penalties, all real and personal property taxes and assessments relating to each Property (unless otherwise directed by Owner), and shall make any required filings in conjunction therewith. Manager shall not be obligated to pay any state or local property taxes on Owners behalf unless funds are available in the Central Account or Owner has
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provided a check in the amount of such taxes to Manager; provided that Manager shall promptly notify Owner of any such taxes that are due. Promptly after receipt of any real and personal property tax assessments relating to any Property, Manager shall advise and recommend to Owner whether the amount of any such taxes or assessments should be challenged as inequitable, excessive or improper. In the event that Owner elects to contest any property tax assessment, Manager agrees to manage such contest and/or fully cooperate with Owner and with any person or entity designated by Owner to advise, assist or represent Owner in this regard.
(k) Rules and Regulations. Subject to the approval of Owner, Manager agrees to draft and promulgate reasonable rules and regulations relating to the occupancy, use and operation of each Property (including rules related to signage), and to enforce the same as promulgated, as well as such other reasonable regulations Owner may require from time to time, including, but not limited to, Tenant insurance requirements. Manager shall draft and implement standard operating procedures similar to those in other comparable apartment and retail properties in the cities in which the Properties are located, an organization chart, and emergency, contingency and security plans for each Property.
(l) Other Owner Initiatives. Manager, at Owners expense, agrees to respond and comply with, on a timely basis, all other Owner initiatives such as environmental health and safety issues, delivery of an affirmative emergency management plan, completion and filing of applications with applicable utility providers for any available rebates, or other initiatives that are reasonably directed by Owner.
(m) Owner Notification. Manager shall promptly, and in no event later than one (1) Business Day after obtaining knowledge thereof, notify Owner of any of the following:
(i) loss of life;
(ii) life threatening situations;
(iii) legal actions against the Owner or any Property which are pending or threatened in writing;
(iv) fire;
(v) written indoor air quality complaint;
(vi) written notification of significant environmental risk (it being acknowledged by Owner that Manager in discharging these duties does not have special environmental training and qualifications and is not being held to the standard of someone with such special environmental training and qualifications);
(vii) receipt of written notice from any governmental entity relating to the presence or release of any hazardous materials; or
(viii) receipt of any material zoning violations.
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(n) Casualty and Condemnation. Manager shall promptly, and in no event later than one (1) Business Day from the time Manager obtains actual knowledge of any casualty or condemnation (or threatened condemnation), provide Owner with notice in reasonable detail of such casualty or condemnation (or threatened condemnation) and promptly investigate and consult with, and make recommendations to, Owner with respect thereto. In the event of any damage to or destruction of any Property by fire or other casualty, Manager shall use its best efforts to, within one hundred eighty (180) days of such casualty, restore the affected portion of such Property to substantially the same condition they were in prior to such event, using insurance proceeds received by Manager from the policies of insurance maintained by Manager pursuant to this Agreement which pertain in whole or in part to such Property. If the cost of restoration exceeds the amount of insurance proceeds received by Manager from the policies of insurance maintained by Manager, Owner shall be responsible to contribute any excess amount needed to restore such Property, unless such casualty was caused by a Material Breach of Manager, in which case such excess amount shall be the responsibility of Manager. Notwithstanding the foregoing, if (i) Manager determines, in its commercially reasonable discretion, that Manager is unable to perform its restoration obligations pursuant to the terms of this Section 4.2(n) or (ii) any material casualty or material condemnation occurs, as determined in Managers commercially reasonable discretion, either Party shall have the right to terminate this Agreement with respect to such affected Property upon thirty (30) days prior Notice to the non-terminating Party.
4.3 Rent Board Hearing. At Owners request, Manager shall represent Owner at Rent Board hearings as may be required.
4.4 Duties of Manager Generally. During the Term and subject to the provisions hereof, Manager shall perform Owners obligations with respect to each Property and Managers obligations as set forth in this Agreement, including, without limitation, the following, subject to any limitations imposed by the Approved Annual Business Plan and Budget, instructions from Owner, the availability of funds provided by Owner, and actions or failures to act by third parties which are beyond the reasonable control of Manager:
(a) ensure compliance with and performance of all of Owners obligations:
(i) as landlord under all Leases;
(ii) as a party to, or subject to, any and all present and future easements, restrictions, covenants, conditions, mortgages and agreements affecting each Property, including, without limitation, all Loan Documents (if any) (collectively, the Basic Documents);
(iii) as a party to any and all Contracts affecting any Property; and
(iv) under any zoning regulations.
(b) use of diligent efforts to ensure compliance with the covenants and obligations of:
(i) Tenants under all of the Leases;
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(ii) other parties to, or subject to, the Basic Documents; and
(iii) trade and service providers under Contracts affecting each Property.
(c) with the prior written approval of Owner, subject to the conditions hereinafter set forth, enforcing all of Owners rights and remedies in respect of the foregoing.
Manager shall make available to Owner the full benefit of the judgment, experience and advice of Managers senior management. Manager shall perform such other services as may be reasonably requested by Owner which are customary for the management of properties of like size and character as the Properties or as may be required for the efficient and businesslike operation of the Properties.
4.5 Emergency Expenditures. As used herein, the term Emergency means, individually or collectively, an event of an imminent present threat: (a) to the safety of any Property and/or of material damage or loss to any Property; (b) to the safety of Tenants or others; (c) to the necessary utility or life safety system services to any Property; or (d) that could lead to exposure to criminal liability on the part of Owner or any other direct or indirect investor in any Property, or any employee or agents of any of the foregoing. In the case of an Emergency, Manager is authorized to make repairs to any Property for items that are not contained in the Approved Annual Business Plan and Budget without obtaining Owners prior written approval; provided that: (i) reasonable efforts to secure Owners prior approval have been made (it being agreed that sending an e-mail message to Owner or attempting to call and, if voice mail is available, leaving a message for the Owner is a reasonable effort); (ii) the repairs are made solely for the purpose of avoiding, preventing or resolving the Emergency; (iii) written notice of the repairs and/or expenditures is thereafter provided to Owner within twenty four (24) hours of commencement; and (iv) thereafter Owner and Manager shall mutually determine in good faith whether any additions, deletions or other changes shall be required to mitigate any adverse impact to the Approved Annual Business Plan and Budget from such Emergency and the attendant repairs and expenditures.
4.6 Insurance. At Owners sole cost and expense, Manager shall obtain from established insurance brokerage sources, and maintain in full force and effect during the Term, the insurance policies specified in Section 11.2 below.
ARTICLE 5
PERSONNEL
5.1 Employment of Personnel. Except as otherwise provided for in the Approved Annual Business Plan and Budget, Manager agrees to advance all costs to hire, pay salaries of, supervise and discharge, as appropriate, all employees or independent contractors (the Personnel) necessary for the provision of the Services, including, without limitation, the salaries, wages and other compensation and fringe benefits of all Personnel involved directly or indirectly in providing any or all of the Services, including, without limitation, all costs and expenses relating to Personnel and other off-site employees of Manager allocable to time spent on the Properties, and all such costs shall be reimbursable by Owner. Manager shall, in the
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hiring and retention of all Personnel, select qualified, competent and trustworthy Personnel, who shall in all instances be familiar with the operation of assets similar to the Properties. The selection, terms of employment (including rates of compensation) and termination thereof, and the supervision, training and assignment of duties of all Personnel engaged in the operation of the Properties, shall be the duty and responsibility of, and shall be determined solely by, Manager. All on-site personnel at each Property, if any, shall be employees of Manager and/or vendors to Manager (and not employees of Owner).
5.2 Schedule of Employees. To the extent not already included in the Approved Annual Business Plan and Budget, Manager shall provide Owner with a schedule of Personnel to be employed on-site at all times in the direct management of each Property. This schedule shall include the number of employees and their title and salary. Manager shall cause all Personnel to be covered by Managers crime/employee dishonesty insurance in accordance with Section 11.3(d).
ARTICLE 6
COMPLIANCE WITH LAWS
6.1 Compliance. Manager shall abide by, and cause the Properties to be compliant with, in all material respects, all federal, state, municipal, governmental, quasi-governmental and/or Department of Buildings laws, rules, regulations, zoning, requirements, orders, statutes, notices, determinations, and ordinances, including, without limitation, the Ellis Act and any other laws or regulations pertaining to affordable housing or rent control, the Americans With Disabilities Act and all environmental laws, relative to the use, operation, repair and maintenance of the Properties and with the rules, regulation or orders of the local Board of Fire Underwriters or other similar body (the Legal Requirements) of any federal, state or municipal authority to the extent applicable from time to time during the Term with respect to the Properties or the performance of Managers obligations under this Agreement and with all regulations, contracts, leases, permits, licenses, ordinances, declarations, conditions, restrictions, covenants and easements affecting or related to the Properties or the performance of Managers obligations under this Agreement. Manager shall promptly remedy any violation of any such Legal Requirements of which Manager becomes aware, including any Tenant violations, all at Owners expense in accordance with the Approved Annual Business Plan and Budget (subject to Permitted Variances). If the cost of compliance exceeds the Approved Annual Business Plan and Budget and is not an Emergency, Manager shall not take any action with respect to such violation except to notify Owner promptly and obtain Owners approval prior to authorizing the expenditure. When more than such amount is required or if the violation is one for which Owner might be subject to penalty, Manager shall promptly notify Owner. Manager shall immediately with all due diligence eliminate or discontinue such use or condition to the extent any use or condition exists at any Property which violates any Legal Requirements or which void or would void any policy of insurance covering any Property or render any loss incapable of collection thereunder.
6.2 Contests. Manager shall notify Owner of any violation or alleged violation of any of the Legal Requirements immediately after becoming aware of same. Owner shall have the right to contest any such allegation and postpone compliance pending the determination of such contest, if so permitted by law, provided such postponed compliance shall not subject Owner,
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Manager or any partner, member, shareholder, client or employee of Owner or Manager to criminal liability or subject any Property or any part thereof to being condemned or vacated or have the certificate of occupancy for any Property be suspended or threatened to be suspended by result of such non-compliance or by means of such contest.
6.3 REIT Qualification and Protection.
(a) Manager acknowledges that certain Persons owning a direct or indirect interest in Owner (each, an Owner Parent REIT) have elected to be treated as real estate investment trusts (REITs) within the meaning of Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the Code). Manager shall use best efforts to comply with all reasonable requests of Owner related to compliance with any reporting or action required by law of REITs. Accordingly, Manager agrees, and agrees to cause its Affiliates, to use best efforts to: (a) operate the Properties in a manner such that the Properties generate rental income that qualifies as rents from real property under Section 856(d) of the Code and to avoid incurring (x) any tax on prohibited transactions under section 857(b)(6) of the Code and (y) any tax on redetermined rents, redetermined deductions, and excess interest under section 857(b)(7) of the Code (determined as if Owner were a REIT); and (b) provide reporting and projections for purposes of complying with certain REIT requirements, including, without limitation, the provisions of Sections 856 through 860 of the Code (the REIT Requirements).
(b) Without limiting the foregoing, Manager shall avoid having services furnished or rendered to the Tenants of any Property that would cause an Owner Parent REIT to receive impermissible tenant service income within the meaning of Section 856(d)(7) of the Code if performed by an Owner Parent REIT itself, unless such services are furnished or rendered by a taxable REIT subsidiary of each Owner Parent REIT that is paid an arms-length compensation for furnishing or rendering such services.
ARTICLE 7
ACCOUNTING AND FINANCIAL MATTERS
7.1 Electronic Records. Manager shall maintain electronic records, files and accounts relating to the operations of each Property. Such records, files and accounts shall be provided to Owner and its representatives (including Owners accountants, consultants, attorneys, direct and indirect investors and any other party) at reasonable times, upon reasonable prior notice to Manager. Upon request during the Term (which notice may (at Owners option) specify the parties to which such records shall be made available), and upon the Expiration Date, all such records, files and accounts shall be forthwith turned over to Owner so as to ensure the orderly continuance of the operation of the Properties.
7.2 Reporting.
(a) Manager shall comply with the reporting obligations specified in Schedule 3 attached hereto. The Parties may mutually agree to modify or amend such reporting obligations and, upon such agreement, the Parties shall replace Schedule 3 with a new Schedule 3 reflecting such modification or amendment.
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(b) In addition to the reporting requirements contained in this Agreement, Manager shall comply with any and all reporting obligations contained in any Loan Documents.
7.3 Periodic Meetings. After receipt by Owner of the reports referred to in Section 7.2, Owner, Manager and other personnel engaged or involved in the management and operation of each Property shall meet to discuss the results of operations for the preceding month.
7.4 Owners Right to Conduct Audit. Owner shall, at its sole cost and expense, have the right to conduct an audit of any Propertys operations by using its own internal auditors or by employing independent auditors (an Audit). Should Owners employees or agents discover either weaknesses in internal control or errors in record keeping, these shall be communicated to Manager in writing. Manager shall promptly correct such discrepancies either upon discovery or after notification by Owner. Manager shall inform Owner in writing of the action taken and to be taken to correct such Audit discrepancies. The accounts and all other records relating to or reflecting the operations of any Property shall be available to Owner and its auditors at Managers office, at all reasonable times, for examination, audit, inspection, transcription and reproduction. Each of Owner and Manager agrees to pay to the other any adjustments in amounts due and owing from such party within fifteen (15) days following such partys receipt of the Audit. If any Audit discloses overpayments to Manager in excess of five percent (5%) of all amounts paid by Owner to Manager during the applicable period, Manager shall reimburse Owner for all reasonable costs incurred by Owner in connection with such Audit.
ARTICLE 8
BANK ACCOUNTS
8.1 General. Manager shall establish and maintain the Property Accounts, and shall maintain the Central Account, at any FDIC insured banking institution reasonably acceptable to Owner. Owner shall be a signatory to all accounts established and maintained by Manager in connection with its obligations under this Agreement, including, without limitation, the Property Accounts, the Central Account and the Security Deposit Account and shall, at all times, have access to, and the right to withdraw funds from, all such accounts.
8.2 Closing Bank Accounts. Unless directed otherwise by Owner in writing, Manager is not permitted to close any bank accounts related to the Properties. All items relating to bank account closings are to be coordinated through Owner. Manager shall process cash activity at the Expiration Date in accordance with Owners instructions. Manager is responsible for final bank account reconciliation at the time of close out or transfer of any account established hereunder. At the termination of this Agreement, Manager shall verify and pay all appropriate invoices relating to the period of time prior to termination and shall transfer any funds remaining in the Central Account to Owner.
8.3 Reconciliation.
(a) Manager shall reconcile all bank accounts in a timely manner and include such reconciliation(s) with the monthly reporting package by the package due date.
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(b) Any issues relating to timely receipt of the monthly bank account statement (based on the established bank account statement cut-off date) shall be directed by Manager towards the banking institution and promptly brought to the attention of Owner.
8.4 Accounts Payable. All property related invoices are to be paid by Manager, and shall be at Owners expense to the extent such invoices are for expenses incurred pursuant to the performance of obligations under this Agreement and Owner is responsible therefore pursuant to the terms of this Agreement. Manager is responsible for obtaining tax identification numbers for its vendors, for tracking payments made to them during each year and for preparing and mailing Form 1099 to the Internal Revenue Service (IRS), the appropriate recipients and any other state or local agency required by law. Manager shall ensure that the information filed with the IRS, sent to the appropriate recipients and/or filed with any other state or local agency as required by law is correct and filed in a timely manner.
8.5 Cash Management.
(a) All funds collected by or paid to Manager from the operation of each Property should be promptly, and in no event later than three (3) Business Days thereafter, deposited into separate receipt account (each, a Property Account) established for each Property by Manager in accordance with the provisions of Section 8.1 of this Agreement (unless Manager is otherwise directed by Owner with respect to a certain Property). All funds in such separate Property Accounts may be swept into a central account (the Central Account) in Owners name as maintained by Manager, according to the provisions of Section 8.1 of this Agreement. All checks drawn to the order of Owner should be endorsed by Manager for deposit only and deposited in the applicable Property Account. Any interest or other income earned on the assets of the Central Account shall be re-deposited in the Central Account, and shall for federal and state income tax purposes be deemed to be income of the Owner. To the extent funds are available in the Central Account, Manager shall pay the operating expenses of each Property (including, without limitation, (i) amounts required to be paid pursuant to any mortgage or other financial encumbrance, (ii) all taxes, assessments and other impositions and (iii) sums due to Manager under this Agreement subject to notice to Owner pursuant to the terms of this Agreement) and any other payments relative to each Property as required by the terms of this Agreement, unless Manager is otherwise directed by Owner. If at any time funds in the Central Account are not sufficient to pay the expenses incurred in connection with the management and operation of the Properties as expressly authorized by this Agreement, Manager shall submit to Owner a statement of such expenses and the funds that shall be required to satisfy the same, and Owner shall, in its sole discretion, deposit sufficient funds into the Central Account to pay such expenses. Manager shall have no liability to Owner for any amounts in the Central Account which are lost or not covered by insurance if the depository institution at which the Central Account is maintained fails or is otherwise placed in the control of a governmental or quasi-governmental authority and the assets of the Central Account are thereby forfeited in whole or in part, provided such depository institution was selected in accordance with this Section 8.5 or was otherwise previously approved by Owner.
(b) Manager shall not be obligated to make any advance to or for the account of the Owner, or to pay any sum, except out of funds held or provided as set forth in this Agreement, nor shall Manager incur any liability or obligation to Owner, any of its Affiliates or
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any third party for Damages to the extent arising out of, resulting from or relating to such insufficient funds (including any interest or penalties relating to late or insufficient payments and/or the costs of any returned checks).
ARTICLE 9
ANNUAL BUSINESS PLAN AND BUDGET
9.1 Annual Business Plan and Budget.
(a) The Approved Annual Business Plan and Budget shall be proposed, approved and implemented annually in accordance with the terms of Schedule 4. The Parties agree to reasonably cooperate and consult with each other in connection with the preparation and approval of the Approved Annual Business Plan and Budget. The Parties may mutually agree to modify or amend the process and procedures for proposing, approving and implementing the Approved Annual Business Plan and Budget and, upon such agreement, the Parties shall replace Schedule 4 with a new Schedule 4 reflecting such modification or amendment.
(b) Notwithstanding anything in this Agreement to the contrary, Manager shall use diligent good faith efforts to cause the actual costs of operating and maintaining each Property (in total and on a line item basis (as used in this Agreement, a line item shall refer to a major budget category (e.g., payroll, cleaning, and utilities))) not to exceed the Approved Annual Business Plan and Budget (subject to Permitted Variances). Except with respect to an Emergency (as set forth in Section 4.5), Manager shall not, without Owners prior written approval, incur any costs or expenses or make any capital expenditures not specifically contemplated by the Approved Annual Business Plan and Budget (subject to Permitted Variances). To the extent reasonably ascertainable in advance, Manager shall notify Owner of any projected variance from the Approved Annual Business Plan and Budget (either in total or in any line item), including any Permitted Variances. Manager shall not transfer any amounts from one expense line item to another (other than from any contingency item to a permitted specific line item or as otherwise approved by Owner in writing). Manager shall notify Owner immediately (or as soon as otherwise reasonably possible) of the necessity for, the nature of, and the cost of, any Emergency.
ARTICLE 10
DUTIES OF OWNER
10.1 Duties of Owner. Owners duties and obligations shall include the following:
(a) In the event any governmental agency, authority or department should order the repair, alteration or removal of any structure or matter on any Property, and if, after written notice of the same to Owner from such body, Owner fails to authorize Manager or others to make such repairs, alterations or removal, Manager shall be released from any responsibility in connection therewith, and shall not be answerable to such body for any and all penalties and fines whatsoever imposed because of such failure on Owners part.
(b) Owner agrees to fund the Central Account as required under this Agreement and reimburse Manager to the full extent of all monies advanced by Manager with
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Owners approval or at Owners direction in carrying out the purpose of this Agreement; provided, however, that nothing contained herein shall oblige Manager to make such advances.
ARTICLE 11
INDEMNIFICATION AND INSURANCE
11.1 Indemnification.
(a) Managers Indemnification. Manager shall indemnify, defend and hold harmless Owner and its Affiliates and its and their respective officers, directors and employees (each, an Owner Indemnified Party and, collectively, the Owner Indemnified Parties) from and against any and all actual losses, damages, liabilities and expenses, including fees and disbursements of counsel (collectively, Damages) incurred by any Owner Indemnified Party (including relating to any claims, actions, suits, proceedings, demands, and/or complaints (including any claim or other such matter by a third party)) (collectively, Proceedings) in connection with or otherwise caused by or arising out of or attributable to (i) any default by Manager with respect to any of the terms, covenants or conditions of this Agreement (including, without limitation, any breach of the Standards of Conduct or any failure to obtain any consent or approval required pursuant to the terms of this Agreement), (ii) any action by any Manager Indemnified Party (as hereinafter defined) that is beyond the scope of authority conferred upon Manager pursuant to the terms of this Agreement (including, without limitation, fraud, willful misconduct, commission of a criminal act, gross negligence, or acting without authorization hereunder), or (iii) any Bankruptcy Action occurring with respect to Manager.
(b) Owners Indemnification. Owner shall indemnify, defend and hold harmless Manager and its Affiliates and its and their respective officers, directors and employees (each, a Manager Indemnified Party and, collectively, the Manager Indemnified Parties) from and against any and all Damages incurred by any Manager Indemnified Party (including relating to any Proceedings) in connection with or otherwise caused by or arising out of or attributable to this Agreement (including the provision of the Services to Owner), excluding however, (and Owner shall have no liability or obligation to any Manager Indemnified Party for or with respect to) Damages incurred by any Manager Indemnified Party in connection with or otherwise caused by or arising out of or attributable to (i) any default by Manager with respect to any of the terms, covenants or conditions of this Agreement (including, without limitation, any breach of the Standards of Conduct and/ or any failure to obtain any consent or approval required pursuant to the terms of this Agreement), (ii) any action by any Manager Indemnified Party that is beyond the scope of authority conferred upon Manager pursuant to the terms of this Agreement (including, without limitation, fraud, willful misconduct, commission of a criminal act, gross negligence, or acting without authorization hereunder), and/or (iii) any Bankruptcy Action occurring with respect to Manager.
(c) Each of Owner and Manager (or the applicable Indemnified Party) shall notify the applicable Indemnifying Party in writing promptly after it receives notice of the commencement of any claim or Proceeding as to which such Indemnified Party is entitled to indemnification hereunder, provided that the failure to give timely notice shall not affect the Indemnifying Partys obligation to provide indemnification hereunder except to the extent that the failure to give timely notice is prejudicial to the Indemnifying Party. If requested in writing
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by any Indemnified Party, the Indemnifying Party shall assume the defense of any Proceeding including by engaging counsel reasonably approved by such Indemnified Party and the payment of the reasonable costs and expenses of such counsel. In the event any Indemnified Party determines, in its reasonable judgment, that there is a conflict of interest by reason of having a common counsel, or if any Indemnifying Party fails to defend any Proceeding promptly following receipt of notice of such Proceeding, then the Indemnified Party may engage separate counsel reasonably selected by such Indemnified Party, and the Indemnifying Party shall pay, as incurred, the reasonable costs and expenses of such counsel. Indemnified Party means a Manager Indemnified Party or an Owner Indemnified Party, as applicable. Indemnifying Party means Manager or Owner, as applicable, with the indemnification obligation to any Indemnified Party pursuant to the terms of Section 11.1(a) or Section 11.1(b), respectively.
(d) In no event shall any Indemnifying Party be liable for Damages that are exemplary or special, indirect, consequential or punitive damages, unless such Damages (i) are the reasonably foreseeable result of a breach of a representation, warranty, covenant or agreement hereunder or any other matter, circumstance or condition giving rise to the indemnification obligations, or (ii) are awarded pursuant to a third-party claim.
(e) Each Indemnified Party shall look only to the Indemnifying Party and its assets for the collection of any judgment (or other judicial process) requiring the payment of money by the Indemnifying Party in the event any claim is made pursuant to the terms of this Agreement by an Indemnified Party, and no other Person and no other property or assets of any other Person (including (i) any direct or indirect owner of an interest in any Indemnifying Party and (ii) any officers, directors, partners, members, other principals or employees of any Indemnifying Party or any such direct or indirect owner (each, a Protected Person)), shall be subject to levy, execution or other enforcement procedures for the satisfaction of any such judgment (or other judicial process). In furtherance of the foregoing, if party hereto (or any related Indemnified Party) shall acquire a lien on any property or assets of any Protected Person, by judgment or otherwise, the other party hereto shall promptly release (or use commercially reasonable efforts to cause to be released) such lien.
(f) The provisions of this Section 11.1 shall survive the expiration or earlier termination of this Agreement.
11.2 Owners Insurance. At Owners discretion, Manager shall obtain and keep in full force and effect, and at Owners cost, the following insurance or such additional insurance as may be required under the terms of any Loan Documents:
(a) Commercial property insurance on special form protecting against physical loss to each Property, including business interruption losses and terrorism losses, in an amount equal to the full replacement cost of each Property. Such property insurance shall contain appropriate clauses pursuant to which the insurance carrier shall waive all rights of subrogation against Manager with respect to losses payable under such policy; any deductible or self-insured retention amounts with respect to such insurance shall be the sole and exclusive responsibility of Owner.
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(b) Commercial General Liability Insurance, including personal injury liability coverage, naming Manager and any mortgagee or superior lessor as an additional named insured and includes the following minimum primary limits with umbrella/excess liability of $5,000,000 in excess thereof: $1,000,000 each occurrence; and $2,000,000 general aggregate.
(c) Workers Compensation in an amount of coverage which is not less than applicable statutory limits of the state(s) in which any employee resides, is hired and in which the Services are being performed.
(d) Employers Liability Insurance in the amount of $1,000,000 each accident for bodily injury by accident, $1,000,000 each employee for bodily injury by disease, and $1,000,000 policy limit for bodily injury by disease, or such other amount as may be required by umbrella policy to effect umbrella coverage and Manager shall obtain and deliver to Owner waivers of subrogation.
Any deductible with respect to such insurance shall be primary and the sole and exclusive responsibility of Owner, except to the extent that such liability relates to Managers gross negligence or willful misconduct or any act of Manager which is beyond the scope of Managers authority under this Agreement. Such liability insurance policies shall be primary and non-contributory with any similar insurance carried by Manager for its account except to the extent that such liability relates to Managers indemnification obligations found above. All such policies shall name Manager as additional insured, and shall be endorsed with appropriate waivers of subrogation rights against Manager.
11.3 Managers Insurance. Manager throughout the Term, shall maintain in full force and effect, and at its cost, the following kinds of insurance, covering its performance of its obligations in respect of the Properties:
(a) Property insurance for the full replacement value of Managers equipment, data, furniture and other personal property kept at any Property or used in connection with Managers services. Manager hereby waives all claims against Owner and Tenants at any Property, and, with respect to each of the foregoing, its employees, officers, shareholders, directors, agents, and representatives, for loss or damage to these items, regardless of whether the loss or damage is covered by insurance.
(b) Commercial General Liability Insurance, including coverage for Premises-Operations, Products-Completed Operations, Independent Contracts, Blanket Contractual liability, Personal Injury and Broad form Property Damage, and including Cross Liability and Severability of Interests, with the following minimum limits: $1,000,000 each occurrence; and $1,000,000 general aggregate.
Such policy shall provide coverage on a per occurrence and per location basis and shall be primary and non-contributory per Managers indemnification obligations. The contractual liability insurance shall include coverage sufficient to meet the indemnity obligations in this Agreement. Owner and Owners lenders and all other parties otherwise designated by the Owner from time to time shall each be added as an additional insured upon request.
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(c) Commercial Automobile Liability Insurance, including coverage for owned, non-owned, leased and hired autos, in the minimum amount of $1,000,000 combined single limit for Bodily Injury and Property Damage if automobiles are used in the performance of Managers obligations hereunder.
(d) All persons designated by Manager as authorized signatories or who otherwise handle funds for any Property shall be covered by comprehensive fidelity, employee crime and dishonesty insurance maintained by Manager with coverage in the minimum amount of $1,000,000. Owner, in the exercise of its reasonable discretion, may require Manager to increase the amount of such bond at Owners expense if Owner determines that circumstances reasonably warrant such increase in view of the risks involved. This policy or bond must include coverage for employee dishonesty, forgery or alteration, money and securities (in and out), computer fraud, funds transfer fraud, and third-party client coverage for Owners property. Owner and any other entity as applicable shall be named as loss payee under this policy.
(e) Managers Professional Liability Insurance (Errors & Omissions) Minimum of $1,000,000 limit. This insurance must provide coverage for services performed at any time during the Term. If this policy is claims-made it must include a retroactive date of no later than the Commencement Date.
(f) Employment practices liability insurance covering wrongful acts associated with employment, including wrongful termination, discrimination, and sexual harassment, and a third-party endorsement covering discrimination and sexual harassment, with limits of not less than $1,000,000 general aggregate. If this policy is claims-made it must include a retroactive date of no later than the Commencement Date.
(g) The above-referenced insurance shall be maintained and carried in amounts stated above and with coverages approved by Owner, in Owners reasonable judgment, with insurance carriers having an A.M. Bests insurance rating of A-, VIII or better, which companies shall be authorized to do business in the states in which the Properties are located, and, notwithstanding anything to the contrary set forth in this Agreement, such insurance amounts and coverages are consistent with insurance carried by leading management companies for similar buildings and properties of similar quality in the metropolitan areas where the Properties are location. All such policies shall name Owner as an additional insured, with the exception of sub-sections (d), (e) and (f) above, and shall be endorsed with appropriate waivers of subrogation rights against Owner, with the exception of sub-sections (d), (e) and (f) above.
(h) Any insurance limits required by this Agreement are minimum limits only and not intended to restrict the liability imposed on Manager for work performed under this Agreement.
11.4 Evidence of Insurance. Manager shall provide Owner with certificates of insurance or other satisfactory documentation, which evidence that the insurance required under this Agreement is in full force and effect at all times. Policies required to be obtained pursuant to Section 11.2 and Section 11.3 must provide that thirty (30) days advance written notice of cancellation or non-renewal, except in the event of cancellation due to non-payment of premium wherein ten (10) days advance written notice shall be given. In addition, Manager shall provide
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Owner with certificates of insurance or other satisfactory documentation in advance of the expiration of any insurance coverage, which shall evidence a renewal or replacement of said policy is in full force and effect.
11.5 General Insurance Provisions. All insurance maintained by Manager pursuant to this Agreement shall be maintained in effect throughout the Term. Manager shall, with regard to the coverages required of it, deliver certificates of insurance to Owner evidencing the required coverages within ten (10) days after the date of this Agreement. If and to the extent the insurance requirements set forth in the documents evidencing or securing any loan made to Owner or any mortgage financing secured by any Property exceed the requirements set forth in this Section 11.5, the more stringent requirements set forth in such Loan Documents shall govern.
11.6 Mutual Waiver of Subrogation. Each of Owner and Manager shall waive all rights of subrogation under their insurance policies referred to in this Section 11.6 and such waiver of subrogation shall not affect the effective date of coverage of such policies and Manager shall obtain an endorsement for policies required pursuant to Sections 11.2 and 11.3, except as expressly set forth herein, if necessary to confirm that the waiver of subrogation herein granted shall in no manner affect the coverage of such policies.
11.7 Managers Duties in Case of Loss.
(a) Manager shall notify Owner in writing and Owners insurance carrier or property insurance adjuster, according to the carriers reporting protocol, of any fire or other damage to any Property that is reasonably expected to exceed $10,000. Manager shall then arrange for an insurance adjuster to view such Property before repairs are started, but in no event shall Manager settle any loss, complete any loss report, adjust any loss, or endorse any loss draft without Owners written consent; provided, however, that Manager may settle any loss, complete any loss report, adjust any loss, or endorse any loss draft without Owners consent for an amount not to exceed $250,000.00, including the execution of proofs of loss.
(b) Manager shall promptly notify Owner in writing and Owners insurance carrier, according to the carriers reporting protocol, of any bodily injury or property damage claimed by any Tenant or third party on or with respect to any Property; forward originals to Owner with a copy to Owners counsel of any summons, subpoena, or the like legal document served upon Manager relating to actual or alleged potential liability of Owner, Manager or any Property.
11.8 Survival. The provisions of this Article 11 shall survive the Expiration Date.
ARTICLE 12
NOTICES
(a) In order to be effective, all notices, demands, requests, consents, approvals, disapprovals or other communications required or permitted by this Agreement to be given (any of the foregoing, a Notice) must be in writing and (i) delivered by a nationally
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recognized overnight delivery service, (ii) placed in the United States mail, certified with return receipt requested, properly addressed and with the full postage prepaid, (iii) sent by electronic mail, or (iv) personally delivered by hand. Any Notice shall be deemed to have been received: (A) on the date of sending by e-mail if sent prior to 5:00 P.M. (Eastern Standard Time) on a Business Day (otherwise on the next Business Day), (B) three (3) days after the date such Notice is mailed, (C) one (1) Business Day after delivery to a reputable overnight courier service if delivered prior to 5:00 P.M. (Eastern Standard Time) on a Business Day (otherwise on the next Business Day) and (D) on the date of delivery by hand if delivered prior to 5:00 P.M. (Eastern Standard Time) on a Business Day (otherwise on the next Business Day)
(b) All Notices must be addressed as follows:
If to Manager, to: | c/o Apartment Income REIT Corp. 4582 South Ulster Street, Suite 1700 | |||
Attention: Lisa Cohn, President and General Counsel | ||||
And to: | c/o Apartment Income REIT Corp. 4582 South Ulster Street, Suite 1700 Attention: Paul Beldin, Executive Vice President and Chief Financial Officer | |||
If to Owner, to: | c/o Apartment Investment and Management Company | |||
4582 South Ulster Street, Suite 1450 | ||||
Denver, CO 80237 | ||||
Attention: Jennifer Johnson, General Counsel and Chief Administrative Officer | ||||
And to: | c/o Apartment Investment and Management Company | |||
4582 South Ulster Street, Suite 1450 | ||||
Denver, CO 80237 Attention: Lynn Stanfield, Chief Financial Officer |
Notices shall be valid only if delivered in the manner provided above. Each party shall be entitled to change its address for purposes of Notice in writing, communicated in accordance with the provisions of this Section 12.1. Notices given on behalf of a party by its attorneys in the manner provided for in this Section 12.1 shall be considered validly given.
ARTICLE 13
LIMITATIONS
13.1 Assignment Restrictions and Rights.
(a) Except for delegation and sub-contracting rights pursuant to Section 1.5(b), Manager shall not assign or otherwise transfer any of its rights and/or obligations
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under this Agreement to any Person without the prior written consent of Owner (and the Parties agree that it shall be a default hereunder by Manager if a Change of Control of Manager or its publicly traded parent occurs); provided, however, that Manager may, without the prior written consent of Owner, assign or otherwise transfer any of its rights and/or obligations under this Agreement to any of its Affiliates (but only for so long as such Affiliate remains an Affiliate of Manager).
(b) Owner shall not assign or otherwise transfer any of its rights and/or obligations under this Agreement to any Person without the prior written consent of Manager; provided, however, that Owner may, without the prior written consent of Manager, assign or otherwise transfer any of its rights and/or obligations under this Agreement to any of its Affiliates (but only for so long as such Affiliate remains an Affiliate of Owner).
13.2 Limitation of Authority. Manager shall not, without the prior written approval of Owner:
(a) Make any expenditure, whether from the Central Account or otherwise, or incur any obligation on behalf of Owner, except for (i) expenditures or obligations approved by Owner, (ii) expenditures made and obligations incurred directly pursuant to the Approved Annual Business Plan and Budget (subject to any Permitted Variances) or (iii) expenditures made for an Emergency in accordance with Section 4.5;
(b) Convey or otherwise transfer, pledge, hypothecate, encumber or permit a lien on any Property or any other property or asset of Owner;
(c) Except as set forth in Section 4.2(a), institute or defend lawsuits or other legal or arbitration or mediation proceedings on behalf of Owner without Owners approval;
(d) Pledge the credit of Owner;
(e) Obligate Owner for the payment of any fee or commissions to any real estate agent or broker, other than those expressly permitted in this Agreement or in the Approved Annual Business Plan and Budget;
(f) Borrow money or execute any promissory note or other obligation or mortgage, deed of trust, security agreement or other encumbrance in the name of or on behalf of Owner; and
(g) Enter into any dealings concerning any Property or with Tenants of space in any Property for Managers own account except as expressly permitted herein; and
The limitations set forth in this Section 13.2 shall be in addition to all other restrictions on the scope and authority of Manager set forth in this Agreement. The terms of this Section 13.2 shall survive the Expiration Date.
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ARTICLE 14
CONFIDENTIALITY
(a) Each Party hereto shall keep confidential and shall not disclose, or permit its Affiliates to disclose, (i) any non-public information or materials relating to Owner, any of its Affiliates and/or their respective investments and activities (including the terms of this Agreement and any information relating to the Properties and their operations; provided that Manager shall be allowed to utilize information related to the Properties in its marketing materials, including, without limitation, characteristics of the Properties and overall performance of the Manager) or (ii) any other information exchanged between or among Owner, any of its Affiliates, and/or Manager (including, without limitation, information relating to any party hereto or its Affiliates) in connection herewith or therewith (collectively, Confidential Information). Notwithstanding the foregoing, a Party may disclose such Confidential Information (a) upon prior Notice to the other party to the extent the disclosure of such information or materials is expressly required by applicable Legal Requirements, or (b) if the information or materials become publicly known other than through the actions or inactions of such Party or its Affiliates, or any of their respective officers, directors, shareholders, partners, members, employees, representatives, agents or attorneys or violations of this Agreement or any other obligations of confidentiality of any such parties. In addition, each Party may disclose Confidential Information to its Affiliates, and its and their respective officers, directors, shareholders, partners, members, employees, representatives, consultants, agents, attorneys, advisors, financial sources, actual or potential investors, and/or permitted transferees and their respective attorneys and advisors (in each case, whose compliance with this Section 14.1 is warranted by the disclosing Party (provided that such Party shall be deemed to have breached this Section 14.1 if such recipient makes a disclosure that such Party is not permitted to make under this Section 14.1)).
(b) In the event that any Party that is restricted from disclosing Confidential Information pursuant to this Section 14.1 is required to disclose any Confidential Information pursuant to Section 14.1(a) above, such Party shall provide prompt Notice to the other parties so that such other parties may seek a protective order or other appropriate remedy, and the Party required to disclose the Confidential Information shall use reasonable efforts (but without expense to such party) to cooperate with the other parties in any effort undertaken to obtain a protective order or other similar remedy. In the event that such protective order or other remedy is not obtained, the disclosing Party shall only furnish that portion of the Confidential Information that is required pursuant to Section 14.1(a), and such Party shall exercise all reasonable efforts to obtain reasonably reliable assurances that the Confidential Information shall be accorded confidential treatment. For the avoidance of doubt, no Party shall be required to take (or not take, as the case may be) any action that would, or could reasonably be expected to, expose such Party or its Affiliates, or its or their respective officers, directors, shareholders, partners, members or employees, to legal sanctions.
(c) No Party shall, and each Party shall direct and cause its Affiliates and its and their respective representatives not to, without the prior written consent of the other Party, directly or indirectly, issue any press release or make any public comment, statement or
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communication with respect to this Agreement or any of the terms, conditions or other aspects of this Agreement and/or the transactions contemplated by this Agreement. In addition to the foregoing, no public announcement or communication by any such Party using any other Partys name or the name of any other Partys Affiliates shall be made without the prior written consent of such other Party.
ARTICLE 15
LEGAL PROCEEDINGS
15.1 Applicable Law; Waiver of Jury Trial. This Agreement shall, with respect to each Property, be construed in accordance with the laws of the State in which such Property is located, without regard to any conflicts of law provisions that would result in the application of the laws of any other jurisdiction.
TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED BY LEGAL REQUIREMENTS, EACH OF THE PARTIES HERETO HEREBY WAIVES TRIAL BY JURY IN ANY CLAIM. THE PROVISIONS OF THIS SECTION 15.1 SHALL SURVIVE THE CLOSING OR TERMINATION OF THIS AGREEMENT.
15.2 Arbitration/Dispute Resolution.
(a) Appointed Representative. Each Party shall appoint a representative who shall be responsible for administering the dispute resolution provisions in this Section 15.2 (each, an Appointed Representative). Each Appointed Representative shall have the authority to resolve any Disputes (as defined below) on behalf of the Party appointing such representative.
(b) Notwithstanding anything to the contrary contained herein, any dispute, controversy or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, enforceability, validity, termination or breach of this Agreement, whether arising in contract or tort, between the Parties (each, a Dispute and, collectively, Disputes) shall first be referred by either Party for amicable negotiations by the Appointed Representatives by providing written notice of such Dispute in the manner provided by Section 12.1 (a Dispute Notice). All documents, communications and information disclosed in the course of such negotiations that are not otherwise independently discoverable shall not be offered or received as evidence or used for impeachment or for any other purpose, but shall be considered as to have been disclosed for settlement purposes.
(i) If, for any reason, a Dispute is not resolved in writing by the Appointed Representatives within thirty (30) days of the date of delivery of the Dispute Notice, or if a Party fails to appoint an Appointed Representative within the periods specified herein, such Dispute shall be submitted to final and binding arbitration administered by the American Arbitration Association (the AAA) in accordance with its Commercial Arbitration Rules in effect at the time (the AAA Rules), except as modified herein.
(ii) The seat of the arbitration shall be Denver, Colorado.
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(iii) The arbitration shall be conducted by three (3) arbitrators. The claimant and respondent shall each appoint one (1) arbitrator within thirty (30) days of receipt by respondent of the demand for arbitration. The two (2) arbitrators so appointed shall appoint the third (3rd) and presiding arbitrator (the Chairperson) within thirty (30) days of the appointment of the second (2nd) arbitrator. If any Party fails to appoint an arbitrator, or if the two (2) Party-appointed arbitrators fail to appoint the Chairperson within the time periods specified herein, then any such arbitrator shall, upon any Partys request, be appointed by the AAA in accordance with the AAA Rules. Any arbitrator selected pursuant to this Section 15.2 shall be neutral and impartial and shall not be affiliated with or an interested person of any party to the Dispute; further, any arbitrator appointed by AAA shall be a retired judge or a practicing attorney with no less than fifteen (15) years of experience with litigation and arbitration involving the multifamily real estate industry and an experienced arbitrator.
(iv) By electing to proceed under the AAA Rules, the parties to the Dispute confirm that any dispute, claim or controversy concerning the arbitrability of a Dispute or the jurisdiction of the arbitral tribunal, including whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the existence, scope, validity interpretation or enforceability of the parties agreement to arbitrate, shall be determined by the arbitration tribunal.
(v) Each Party shall submit its claims according to the timetable established by the arbitral tribunal. With respect to each claim advanced in the arbitration, including, without limitation, any claim under the indemnification provisions of Article 11 hereof, each sides submissions shall specify the proposed determination or resolution that it contends the arbitral tribunal should make (and, if applicable, any monetary relief that it contends that the arbitral tribunal should award) (in each case, the Proposed Award), which Proposed Award, if applicable, may be expressed as zero. As to each claim for monetary relief, each sides Proposed Award shall also state whether pre- or post-award interest should be awarded, and if so, at what interest rate, and the date from which such interest (if any) should be calculated.
(vi) There shall be only two (2) Proposed Awards (one for each side of the claim), including, without limitation, any claim for monetary relief and/or any claim under the indemnification provisions of Article 11 hereof. Where there are more than two (2) parties to the arbitration, the arbitral tribunal shall have power to make appropriate directions as to which parties shall comprise each side for purposes of submitting Proposed Awards, in every instance to ensure a proper alignment of parties with respect to each such claim.
(vii) In rendering the award or otherwise making any determination or resolution (including, without limitation, as to monetary relief and/or relief under the indemnification provisions of Article 11 hereof), the Chairperson shall be limited to choosing, without modification, the Proposed Award of one of the sides, according to its determination of which Proposed Award most comports with its assessment of the case. Insofar as monetary relief is claimed, the arbitral tribunal shall not award any monetary relief of any kind except as set forth in this Section 15.2; provided that this will not limit
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the power of the arbitral tribunal: (1) to award relief per paragraph (viii) hereof; (2) to apply any statute of limitation that it determines is applicable to any claim; (3) to dismiss or exclude any claim that it determines is: (A) precluded by any part of this Agreement, and/or (B) beyond the scope of this Section 15.2; (4) to receive and determine dispositive motions in accordance with the AAA Rules; and/or (5) to apportion fees/costs per paragraph (ix) hereof.
(viii) In addition to monetary relief, and/or the making of any other determination or resolution that is primarily at issue in the Dispute, the arbitral tribunal shall be empowered to award equitable relief, including, but not limited to, an injunction and specific performance of any obligation under this Agreement; provided that a claim under the indemnification provisions of Article 11 shall at all times be governed by the procedures set forth in paragraphs (v) through (vii) above.
(ix) The arbitral tribunal shall award the prevailing party its attorneys fees and costs reasonably incurred in the arbitration, including the prevailing partys share of the arbitrator fees and AAA administrative costs.
(x) The Parties intend that this agreement to arbitrate shall be valid, enforceable and irrevocable, and any determination, resolution and/or award made or rendered by the arbitration tribunal shall be final and binding on all the parties to the Dispute. The parties to the dispute agree to comply with any award made in any such arbitration proceedings. Judgment upon any award may be entered in any court of competent jurisdiction, including any court having jurisdiction over any party or any of its assets.
(xi) By agreeing to arbitration, the parties to the Dispute do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment, or other order in aid of arbitration proceedings and the enforcement of any award. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any party to respect the arbitral tribunals orders to that effect. In any such action brought in court for such provisional remedies or enforcement of any award, each of the parties to the Dispute irrevocably and unconditionally: (A) consents and submits to the non-exclusive jurisdiction and venue of the Courts of the State of Colorado and the Federal Courts of the United States of America located within the State of Colorado (the Colorado Courts); (B) waives, to the fullest extent it may effectively do so, any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens or any right of objection to jurisdiction on account of its place of incorporation or domicile, which it may now or hereafter have to the bringing of any such action or proceeding in any Colorado Court; (C) consents to service of process in the manner provided by this Agreement or in any other manner permitted by Legal Requirements; and (D) WAIVES ANY RIGHT TO TRIAL BY JURY.
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(xii) This arbitration, and all prior, subsequent or concurrent judicial proceedings related thereto and permitted herein, shall be conducted pursuant to the Federal Arbitration Act, found at Title 9 of the U.S. Code. The parties to the Dispute intend that the arbitration tribunal shall apply the substantive Laws of the State of Delaware to any Dispute hereunder, without regard to any choice of law principles thereof that would mandate the application of the Laws of another jurisdiction.
(xiii) In order to facilitate the comprehensive resolution of related disputes, all claims between any of the parties to the Dispute that arise under or in connection with this Agreement may be brought in a single arbitration. Upon the request of any party to an arbitration proceeding constituted under this Agreement, the arbitral tribunal shall consolidate such arbitration proceeding with any other arbitration proceeding relating to this Agreement, if the arbitral tribunal determines that (A) there are issues of fact or law common to the proceedings so that a consolidated proceeding would be more efficient than separate proceedings, and (B) no party to the Dispute would be unduly prejudiced as a result of such consolidation through undue delay or otherwise. In the event of different rulings on this question by the arbitral tribunal constituted hereunder and another arbitral tribunal constituted under this Agreement, the ruling of the arbitral tribunal constituted first in time shall control, and such arbitral tribunal shall serve as the tribunal for any consolidated arbitration.
(xiv) In the event of a Dispute, each party to the Dispute shall continue to perform its obligations under this Agreement in good faith during the resolution of such Dispute as if such Dispute had not arisen, unless and until this Agreement is terminated in accordance with the provisions hereof.
(xv) Any arbitration hereunder shall be confidential, and the Parties and their agents agree not to disclose to any third party (A) the existence or status of the arbitration, (B) all information made known and documents produced in the arbitration not otherwise in the public domain, and (C) all awards arising from the arbitration, except and to the extent that disclosure is required by applicable Law or is required to protect or pursue a legal right, and in any such case, the Party making such disclosure shall produce only those materials and information that are necessary and shall take reasonable steps to safeguard the confidentiality of the materials and information.
(c) Binding Agreement. The Parties agree that the provisions of this Section 15.2 bind themselves and their Affiliates, and further agree to take all measures to lawfully cause their Affiliates to abide and be bound by the terms of this Section 15.2.
15.3 Cooperation by Manager. Manager shall reasonably cooperate, and shall cause all its employees to reasonably cooperate, in connection with the prosecution or defense of all legal proceedings affecting the Properties or arising in connection with the indemnity obligations of Owner provided for in Section 11.1(b) hereof (but subject to the limitations and allocation of costs therein). The duty of Manager to cooperate shall survive the Expiration Date.
15.4 Cooperation by Owner. Owner shall reasonably cooperate, and shall cause all its employees, agents and representatives to reasonably cooperate, in connection with the
36
prosecution or defense of all legal proceedings arising in connection with the indemnity obligations of Manager provided for in Section 11.1(a) hereof (but subject to the limitations and allocation of costs therein). Owners duty to cooperate shall survive the Expiration Date.
ARTICLE 16
MISCELLANEOUS
16.1 Entire Agreement. This Agreement contains the entire agreement among the Parties, and supersedes all prior representations, agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof.
16.2 Headings. The headings of the various articles and sections of this Agreement have been inserted for convenient reference only and shall not have the effect of modifying or amending the express terms and provisions of this Agreement.
16.3 Successors and Assigns. This Agreement shall be binding upon and, as to permitted or accepted successors, transferees and assigns, inure to the benefit of Manager and Owner and their respective heirs, successors, transferees and assigns, in all cases whether by the laws of descent and distribution, merger, reverse merger, consolidation, sale of assets, other sale, operation of law or otherwise. Nothing contained in this Section 16.3 shall be construed to modify the provisions of Article 13 of this Agreement.
16.4 No Waiver. No failure by any Party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach or any such covenant, duty, agreement or condition. No obligation, covenant, agreement, term or conditions of this Agreement, and no breach of this Agreement shall be waived, altered or modified, except by written instrument. No waiver of any breach shall affect or alter this Agreement, but each and every obligation, covenant, agreement, term and condition of this Agreement shall continue in full force and effect with respect to any other then-existing or subsequent breach of this Agreement. Time is of the essence in connection with each and every provision of this Agreement.
16.5 Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction or in any respect, then the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and the parties shall use their commercially reasonable efforts to amend or substitute such invalid, illegal or unenforceable provision with enforceable and valid provisions which would produce as nearly as possible the rights and obligations previously intended by the parties without renegotiation of any material terms and conditions stipulated herein.
16.6 No Third-Party Beneficiary. Subject to the terms of Section 11.1 (and the rights of any Person thereunder), (a) no entity other than Owner and Manager is or shall be entitled to bring any action to enforce any provision of this Agreement, and (b) the provisions of this Agreement are solely for the benefit of and shall be enforceable only by Owner and Manager and their respective successors and assigns as permitted hereunder.
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16.7 Unavoidable Delays. Each Party shall be excused from performing its obligations under this Agreement for so long as and to the extent that performance is prevented or delayed by Unavoidable Delay; provided, however, that (a) such Party shall, within thirty (30) days after the beginning of any such Unavoidable Delay, have first notified the other Party in writing of the cause(s) thereof and requested an extension, (b) such Party must diligently seek removal or avoidance of the hindrance, and (c) even though the time for performance may be extended as provided in this Section 16.7, the parties shall remain bound by the other terms, covenants, and agreements of this Agreement.
16.8 Subordination. This Agreement, the rights of Manager hereunder, including the right for Manager to receive any fees hereunder, shall be subordinated to any financing on any Property and to all of the terms, conditions and provisions of the loan documents thereof, and to any renewal, substitution, extension, modification, or replacement thereof. In the event of the foreclosure (or deed in lieu of foreclosure) of any mortgage or deed of trust on any Property, the purchaser of such Property at any such foreclosure sale or grantee under any deed in lieu of such foreclosure may, without any cost or liability to such purchaser or grantee, terminate this Agreement and Managers rights hereunder upon thirty (30) days written notice to Manager. In no event shall any such purchaser or grantee have any liability for any of the obligations of Owner hereunder arising prior to the date such party acquires any Property. Manager agrees to execute from time to time upon the request of Owner or any such mortgagee such agreements as any such mortgagee of any Property may require in order to further evidence or confirm such subordination and the other provisions of this Section 16.8. Any such subordination shall permit Manager to receive and retain fees earned prior to an event of default under the applicable loan document.
16.9 Joint and Several. If Manager at any time consists of more than one entity, the obligation of all such entities under this Agreement shall be joint and several.
16.10 Exhibits. The exhibits referred to in and attached to this Agreement are incorporated herein in full by reference.
16.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. All signatures of the parties to this Agreement may be transmitted by PDF attached to an email, and such PDF shall, for all purposes, be deemed to be the original signature of such Party whose signature it reproduces, and shall be binding upon such Party.
16.12 Consents and Approvals.
(a) Unless as otherwise expressly set forth herein, if Manager requests the approval or consent of Owner pursuant to this Agreement and Owner does not respond within the requisite time period set forth herein, then Owner shall be deemed to have disapproved such request.
(b) If the consent or approval of any lender or other unaffiliated third party is required in connection with the execution of this Agreement with respect to any Property, (i) Manager shall use commercially reasonable efforts to obtain such consent or approval, (ii) the
38
Parties shall each pay fifty percent (50%) of any related and reasonable out-of-pocket costs and expenses (including reasonable attorneys fees, costs and disbursements) incurred in obtaining such consent or approval, and (iii) the effectiveness of this Agreement with respect to such Property shall be contingent upon obtaining such consent or approval. If any lender or other unaffiliated third party requires Owner to enter into a separate property management agreement with Manager with respect to any Property, the Parties agree to enter into such separate property management agreement, which separate property management agreement shall be substantially the same as this Agreement except it shall relate solely to such Property.
16.13 OFAC Representations, Warranties, and Indemnification. Owner and Manager each represents and warrants that it is not a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of OFAC of the Department of the Treasury (including those named on OFACs Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or under any other law, rule, order, or regulation that is enforced or administered by OFAC.
16.14 Non-Business Days. Whenever action must be taken (including the giving of notice or the delivery of documents) under this Agreement during a certain period of time or by a particular date that ends or occurs on a day other than a Business Day, then such period or date shall be extended until the immediately following Business Day.
16.15 No Personal Data. Notwithstanding anything to the contrary contained in this Agreement, Manager acknowledges and agrees that, in performing its obligations to provide information to Owner hereunder, Manager shall not (and shall cause its Affiliates and its and their employee and representatives to not) without the prior written consent of Owner, provide or make available or accessible to Owner any Personal Data. For the avoidance of doubt, the foregoing restrictions do not apply to any information that is anonymized, or to the street addresses of, and rent amounts payable by Tenants with respect to, any Property. Personal Data means a natural persons name, street address, telephone number, e-mail address, photograph, social security number or tax identification number, drivers license number, passport number, credit card number, bank information or biometric information or any other piece of information that allows the identification of such natural person, or any other data which is considered personal data (or any similar concept thereto) as defined under applicable privacy laws.
16.16 Other Action. Subject to the terms and conditions of this Agreement, each of the Parties shall cooperate with the other and use (and shall cause their respective Affiliates to use) their respective commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary to consummate and make effective the terms, conditions or other aspects of this Agreement and/or the transactions contemplated by this Agreement.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
OWNER: | ||||
JAMES-OXFORD LIMITED PARTNERSHIP, a Maryland limited partnership |
By: | /s/ Lynn Stanfield | |||
Name: | Lynn Stanfield | |||
Title: | Authorized Person |
MANAGER: | ||||
AIR PROPERTY MANAGEMENT TRS, LLC, a Delaware limited liability company |
By: | /s/ Paul Beldin | |||
Name: | Paul Beldin | |||
Title: | Authorized Person |
Signature Page to Property Management Agreement
EXHIBIT A
SCHEDULE OF MANAGED PROPERTIES
Property Name |
Property Address | |||
1. | AIMCO 118-122 West 23rd Street | 118-122 West 23rd Street, New York, NY 10011 | ||
2. | Hillmeade | 6800 Highway 70 S, Nashville, TN 37221 | ||
3. | 1045 on the Park Apartment Homes | 1045 Piedmont Ave NE, Atlanta, GA 30309 | ||
4. | Plantation Gardens | 7616 NW 5th St., Plantation, FL 33324 | ||
5. | Elm Creek | One Elm Creek Dr., Emhurst, IL 60126 | ||
6. | Willow Bend | 2850 Southampton Dr., Rolling Meadows, IL 60008 | ||
7. | Evanston Place | 1715 Chicago Ave., Evanston, IL 60201 | ||
8. | Yorktown Apartments | 2233 S Highland Ave., Lombard, IL 60148 | ||
9. | Hyde Park Tower | 5140 S Hyde Park Blvd., Chicago, IL 60615 | ||
10. | 2200 Grace | 2200 S. Grace Street, Lombard, IL 60148 | ||
11. | Bank Lofts | 817 17th St., Denver, CO 80202 | ||
12. | Cedar Rim | 7920 110th Avenue SE, Newcastle, WA 98056 | ||
13. | Pathfinder Village | 39800 Fremont Blvd., Fremont, CA 94538 | ||
14. | 2900 on First Apartments | 2900 1st Ave., Seattle, WA 98121 | ||
15. | AIMCO 173 East 90th Street | AIMCO 165-173 East 90th Street, New York, NY 10128 | ||
16. | AIMCO 237 Ninth Avenue | 237 Ninth Avenue, New York, NY 10001 |
A-1
EXHIBIT B
MANAGEMENT FEE AND CONSTRUCTION MANAGEMENT FEE
A. Owner shall pay (or shall cause the applicable Property Owner to pay) to Manager a monthly management fee (the Management Fee) equal to three percent (3%) of Gross Operating Revenue (as defined below) from each Property, monthly in arrears, prorated on a daily basis for any partial month as and when provided in Section 3.1 of this Agreement.
B. For all purposes hereof, Gross Operating Revenue means all monthly revenues actually received, on a cash basis, derived from the operations of each Property, including, without limitation:
(i) | Tenant rentals and other amounts collected with respect to Leases for each month during the Term, including collections from the apartment Tenants for water, sewer and trash reimbursements, if any, in accordance with any Residential Lease provisions; |
(ii) | insurance proceeds (if any) attributable to rental loss or business interruption; |
(iii) | parking fees, garage, carport, and storage closet rentals, if any, not included with Residential Leases; |
(iv) | revenue from coin-operated machines; |
(v) | Owners share of vendor income proceeds from Contracts; and |
(vi) | any and all other income related to Managers management of any Property, including, without limitation, air rights fees, pet fees, late rental fees, lease termination fees, cleaning fees, security fees and damage fees. |
Gross Operating Revenue shall not include:
(i) | capital contributions by Owner or any interest thereon; |
(ii) | proceeds from the refinancing of any loan or any voluntary conversion, sale, exchange or other disposition of any Property or any portion thereof; |
(iii) | casualty insurance proceeds (exclusive of rental loss or business interruption proceeds); |
(iv) | proceeds of condemnation awards; |
(v) | any deposits including rental, security, damage, or cleaning deposits, including any such amounts forfeited by Tenants (unless applied to unpaid rent); |
B-1
(vi) | abatement or refund of real estate taxes or other taxes; and |
(vii) | discounts and dividends on insurance policies. |
C. If applicable, Owner shall pay (or shall cause the applicable Property Owner to pay) to Manager a construction management fee (the Construction Management Fee) equal to 7.5% of the Costs (as hereinafter defined) relating to any Material Construction Work. Costs means, collectively, all actual, direct and indirect, costs relating to such Material Construction Work, including, without limitation, (i) all costs and expenses relating to the actual construction, including labor, materials, finishes and utility installations, (ii) all costs and expenses associated with the planning, design and coordination of the project, including architectural, planning and engineering fees, legal fees, permit fees and other similar costs and/or fees (including related professional services and any supervisory on-site personnel) and (iii) any expenditure capitalized in accordance with GAAP as applied by Manager. In the event any Tenant is required to pay a fee to Owner or Manager for any Tenant improvement work performed by Manager (or its sub-manager(s)) under an approved Lease, then the amount of the Construction Management Fee due from Owner to Manager shall be offset by the amount of any such fee due from the applicable Tenant, and Manager shall be entitled to collect the full amount of such fee due from the applicable Tenant.
B-2
Exhibit 10.6
Execution Version
Aimco JO Intermediate Holdings, LLC
$534,127,075
5.2% Secured Mezzanine Notes due January 31, 2024
Mezzanine Note Agreement
Dated as of December 14, 2020
Page | ||||||
Section 1. Authorization of Notes |
1 | |||||
Section 2. Transfer and Issuance of Notes |
1 | |||||
Section 3. Closing |
1 | |||||
Section 4. Deliverables at Closing |
1 | |||||
Section 4.1. |
Delivery of Transferred Interests | 1 | ||||
Section 4.2. |
Pledge Agreement and Collateral | 2 | ||||
Section 4.3. |
James Oxford Operating Agreement | 2 | ||||
Section 5. Representations and Warranties of the Company |
2 | |||||
Section 5.1. |
Organization; Power and Authority | 2 | ||||
Section 5.2. |
Authorization, Etc. | 2 | ||||
Section 5.3. |
Organization and Ownership of Shares of Certain Subsidiaries | 2 | ||||
Section 5.4. |
REIT Representations | 3 | ||||
Section 5.5. |
Title to Property | 3 | ||||
Section 5.6. |
Existing Indebtedness; Restrictions on Indebtedness and Liens | 3 | ||||
Section 6. Notices From the Company |
3 | |||||
Section 7. Payment and Prepayment of the Notes |
4 | |||||
Section 7.1. |
Maturity; Payment of Interest | 4 | ||||
Section 7.2. |
Mandatory Prepayments | 4 | ||||
Section 7.3. |
Other Prepayments | 4 | ||||
Section 7.4. |
Allocation of Partial Prepayments | 4 | ||||
Section 7.5. |
Maturity; Surrender, Interest on Prepayments, Etc. | 5 | ||||
Section 7.6. |
Payments Due on Non-Business Days | 5 | ||||
Section 7.7. |
Late Charges | 5 | ||||
Section 7.8. |
Make-Whole Amount | 5 | ||||
Section 8. Affirmative Covenants |
5 | |||||
Section 8.1. |
Existence, Etc. | 6 | ||||
Section 8.2. |
REIT Covenants | 6 | ||||
Section 8.3. |
Maintenance of Properties | 6 | ||||
Section 8.4. |
Maintenance of Insurance | 6 | ||||
Section 8.5. |
Compliance with Laws | 6 | ||||
Section 8.6. |
Compliance with Mortgage Loan Documents | 6 | ||||
Section 9. Negative Covenants |
7 | |||||
Section 9.1. |
Merger, Consolidation, Etc. | 7 | ||||
Section 9.2. |
Liens | 7 | ||||
Section 9.3. |
Indebtedness | 8 | ||||
Section 9.4. |
Dispositions | 8 | ||||
Section 9.5. |
Sale and Leaseback Transactions | 9 | ||||
Section 9.6. |
Change in Nature of Business | 9 |
i
Section 10. Events of Default |
9 | |||||
Section 11. Remedies on Default, Etc. |
10 | |||||
Section 11.1. |
Acceleration | 10 | ||||
Section 11.2. |
Other Remedies | 11 | ||||
Section 11.3. |
Rescission | 11 | ||||
Section 11.4. |
No Waivers or Election of Remedies, Expenses, Etc. | 11 | ||||
Section 12. Collateral Matters |
11 | |||||
Section 12.1. |
Collateral | 11 | ||||
Section 12.2. |
Collateral Agent | 11 | ||||
Section 13. Registration; Exchange; Substitution of Notes |
12 | |||||
Section 13.1. |
Registration of Notes | 12 | ||||
Section 13.2. |
Transfer and Exchange of Notes | 13 | ||||
Section 13.3. |
Replacement of Notes | 13 | ||||
Section 14. Payments on Notes |
13 | |||||
Section 14.1. |
Place of Payment | 13 | ||||
Section 14.2. |
Payment by Wire Transfer | 14 | ||||
Section 14.3. |
Withholding | 14 | ||||
Section 15. Survival of Representations and Warranties; Entire Agreement |
14 | |||||
Section 16. Amendment and Waiver |
15 | |||||
Section 16.1. |
Requirements | 15 | ||||
Section 16.2. |
Binding Effect, Etc. | 15 | ||||
Section 16.3. |
Notes Held by Company, Etc. | 15 | ||||
Section 17. Notices |
15 | |||||
Section 18. Miscellaneous |
16 | |||||
Section 18.1. |
Successors and Assigns | 16 | ||||
Section 18.2. |
Accounting Terms | 16 | ||||
Section 18.3. |
Severability | 16 | ||||
Section 18.4. |
Construction, Etc. | 16 | ||||
Section 18.5. |
Counterparts | 17 | ||||
Section 18.6. |
Governing Law | 17 | ||||
Section 18.7. |
Jurisdiction and Process; Waiver of Jury Trial | 17 |
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Schedules | ||||
Schedule A | | Defined Terms | ||
Schedule 1 | | Form of 5.2% Secured Mezzanine Note due January 31, 2024 | ||
Schedule 2 | | Equity Interests Exchanged for Notes | ||
Schedule 5.3 | | James Oxford Subsidiaries | ||
Schedule 5.6 | | Existing Indebtedness | ||
Purchaser Schedule | | Information Relating to Purchasers |
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AIMCO JO INTERMEDIATE HOLDINGS, LLC
4582 South Ulster Street, Suite 1400
Denver, Colorado 80237
5.2% Secured Mezzanine Notes due January 31, 2024
As of December 14, 2020
To Each of the Purchasers Listed in the Purchaser Schedule Hereto:
Ladies and Gentlemen:
Aimco JO Intermediate Holdings, LLC, a Delaware limited liability company (the Company), agrees with each of the Purchasers as follows:
Section 1. Authorization of Notes. The Company has authorized the issue of $534,127,075 aggregate principal amount of its 5.2% Secured Mezzanine Notes due January 31, 2024 (the Notes) in exchange for the Equity Interests in James Oxford described on Schedule 2. The Notes shall be substantially in the form set out in Schedule 1. Certain capitalized and other terms used in this Agreement are defined in Schedule A and, for purposes of this Agreement, the rules of construction set forth in Section 18.4 shall govern.
Section 2. Transfer and Issuance of Notes. Subject to the terms and conditions of this Agreement, the Company will issue to each Purchaser, in exchange for the Equity Interests transferred from each Purchaser to the Company as listed on Schedule 2 (such Equity Interests, the Transferred Interests), at the Closing provided for in Section 3, Notes in the principal amount specified opposite such Purchasers name in the Purchaser Schedule. The Purchasers obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.
Section 3. Closing. The issuance of the Notes to be issued to each Purchaser shall occur at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 155 N. Wacker Dr., Chicago, Illinois 60606, at a closing (the Closing) on December 14, 2020. At the Closing, the Company will deliver to each Purchaser the Notes to be issued to such Purchaser in the form of a single Note dated the date of the Closing and registered in such Purchasers name, against delivery by such Purchaser to the Company of the Transferred Interests owned by such Purchaser. In addition, at the Closing, the Company shall be admitted as a partner in James Oxford.
Section 4. Deliverables at Closing. At the Closing the following shall occur:
Section 4.1. Delivery of Transferred Interests. Each Purchaser shall transfer to the Company ownership in the Transferred Interests, and the Company shall be admitted to James Oxford as a partner.
Section 4.2. Pledge Agreement and Collateral. The Company shall deliver to the Collateral Agent, for the benefit of each Purchaser, an executed counterpart of the Pledge Agreement and certificates representing the Transferred Interests, if any such certificates exist.
Section 4.3. James Oxford Operating Agreement. The Company shall deliver to such Purchaser executed counterparts of the limited partnership agreement of James Oxford, which shall permit the Collateral Agent or a purchaser at a foreclosure sale to, pursuant to the remedies available to each such Person under the Pledge Agreement, be admitted to James Oxford as a partner during an Event of Default hereunder.
Section 5. Representations and Warranties of the Company. The Company represents and warrants to each Purchaser that:
Section 5.1. Organization; Power and Authority. The Company is a limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign limited liability company and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the limited liability company power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the other Note Documentation and to perform the provisions hereof and thereof.
Section 5.2. Authorization, Etc. This Agreement, the Pledge Agreement and the Notes have been duly authorized by all necessary limited liability company action on the part of the Company, and this Agreement, the Pledge Agreement and the Notes constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 5.3. Organization and Ownership of Shares of Certain Subsidiaries.
(a) As of the Closing and after giving effect to the transfer of the Transferred Interests by the Purchasers, the Company will own all of the outstanding Equity Interests in James Oxford, except for the Minority Common Interests. As of the Closing and after giving effect to the transactions contemplated hereby, Brookwood is the owner of the Minority Common Interests. As of the Closing, James Oxford directly or indirectly owns all of the outstanding Equity Interests in each James Oxford Subsidiary listed on Schedule 5.3. All of the outstanding Equity Interests of James Oxford owned by the Company have been validly issued, are fully paid and non-assessable and are owned by the Company free and clear of any Lien that is prohibited by this Agreement.
(b) All of the outstanding Equity Interests of each James Oxford Subsidiary have been validly issued, are fully paid and non-assessable and are owned directly or indirectly by James Oxford free and clear of any Lien that is prohibited by this Agreement.
(c) James Oxford, each James Oxford Entity and each James Oxford Subsidiary is a corporation, limited partnership, limited liability company or other legal entity duly organized, validly existing and, where applicable, in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation, limited partnership, limited liability company or other legal entity and, where applicable, is in good standing in each jurisdiction in which such qualification is required by
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law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. James Oxford, each James Oxford Entity and each James Oxford Subsidiary has the corporate, limited partnership, limited liability company or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.
Section 5.4. REIT Representations. As of the date of this agreement and at all times thereafter while any portion of any Note remains outstanding, James Oxford will hold real property (within the meaning of Treasury Regulation section 1.856-3(d)).
Section 5.5. Title to Property. The Company has good title to, and is the record and beneficial owner of, the Collateral free and clear of all Liens other than Liens expressly permitted hereunder. James Oxford has good title to, and is the record and beneficial owner of, directly or indirectly, all Equity Interests in each James Oxford Subsidiary. Each James Oxford Subsidiary has good and marketable title to the Specified Property listed opposite its name on Schedule 5.3, in each case free and clear of Liens prohibited by this Agreement, except for those defects in title that, individually or in the aggregate, would not have a Material Adverse Effect.
Section 5.6. Existing Indebtedness; Restrictions on Indebtedness and Liens.
(a) Schedule 5.6 sets forth a complete and correct list of all outstanding Indebtedness for borrowed money of the Company, James Oxford, each James Oxford Entity and each James Oxford Subsidiary as of the Closing. Neither the Company, James Oxford nor any James Oxford Entity or any James Oxford Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any such Indebtedness and no event or condition exists with respect to any such Indebtedness that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.
(b) Neither the Company, James Oxford nor any James Oxford Entity or James Oxford Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company, James Oxford, such James Oxford Entity or such James Oxford Subsidiary, any agreement relating thereto or any other agreement (including its charter or any other organizational document) which would prohibit the incurrence of Indebtedness hereunder or the granting of Liens on the Collateral.
Section 6. Notices From the Company. The Company shall deliver to each holder of a Note promptly, and in any event within 15 Business Days (or 10 Business Days in the case of (x) a merger or consolidation of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary or (y) a Change of Control) after a Responsible Officer becoming aware of the existence of any (i) Default or Event of Default, (ii) default or event of default under any document evidencing Indebtedness for borrowed money secured by a mortgage, deed of trust, assignment of rents or other security interest on any Specified Property or of the Equity Interests in any Person that owns, directly or indirectly, any Specified Property, (iii) Disposition of any Specified Property, (iv) Casualty or Condemnation Event with respect to any Specified Property, (v) merger or consolidation of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary or (vi) Change of Control, written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto.
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Section 7. Payment and Prepayment of the Notes.
Section 7.1. Maturity; Payment of Interest.
(a) The entire unpaid principal balance of each Note shall be due and payable on the Maturity Date.
(b) The Company shall pay interest (computed on the basis of a 360-day year of twelve 30-day months) on (i) the unpaid balance of each Note at the rate of 5.2% per annum from the date hereof, payable quarterly, on the first day of January, April, July and October in each year, commencing on April 1, 2021, and on the Maturity Date, until the principal of each Note shall have been paid in full, and (ii) to the extent permitted by law, any overdue payment of interest, at the Default Rate pursuant to Section 7.1(c) below.
(c) (1) If any amount due in respect of the Notes (other than amounts due on the Maturity Date) remains past due for thirty (30) days or more, interest on such unpaid amount(s) shall accrue from the date payment was due at the Default Rate and shall be payable upon demand by any Purchaser and (2) if any amount due in respect of the Notes is not paid in full on the Maturity Date, then interest shall accrue at the Default Rate on all such unpaid amounts from the Maturity Date until fully paid and shall be payable upon demand by the Purchasers.
Section 7.2. Mandatory Prepayments. Promptly, and in any event within 15 Business Days, following a Disposition by (including, without limitation, a Casualty or Condemnation Event) or merger, consolidation or similar event or transaction of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary, the Company shall prepay or cause to be prepaid the Notes in an amount equal to the Net Cash Proceeds of such Disposition or merger, consolidation or similar event or transaction, which prepayment shall be accompanied by the Make-Whole Amount determined for the prepayment date with respect to such amount; provided that no such prepayment shall be required if the Remaining Collateral Value Test is satisfied and the Company elects to reinvest such Net Cash Proceeds in accordance with the Reinvestment Conditions; provided further, if the Company elects to pursue such reinvestment option and such reinvestment does not occur within 180 days of the receipt of such Net Cash Proceeds, the Company shall prepay or cause to be prepaid the Notes on such 180th day.
Section 7.3. Other Prepayments. Except as provided in Section 7.2 or Section 11.1, the Notes shall not be prepaid in whole or in part prior to the Maturity Date and the Purchasers shall have no obligation to accept any such attempted prepayment prior to the Maturity Date. The Company expressly acknowledges and agrees that (a) the prohibition on prepayments is reasonable and is the product of an arms length transaction between sophisticated business people, (b) it shall be estopped hereafter from claiming differently than as agreed to in this paragraph, (c) its agreement to a prohibition on prepayments as herein described is a material inducement to the Purchasers decision to enter into this Agreement and (d) upon a prepayment of the Notes in violation of this Section 7.3, the Purchasers would suffer substantial harm, and any prepayment received and accepted in violation of this Section 7.3 shall be accompanied by the Make-Whole Amount. This Section 7.3 shall not prejudice the rights of the Purchasers to accelerate the Notes pursuant to Section 11 hereof.
Section 7.4. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes pursuant to Section 7.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.
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Section 7.5. Maturity; Surrender, Interest on Prepayments, Etc. Each prepayment of Notes made pursuant to Section 7.2 shall be accompanied by all accrued and unpaid interest in the amount so prepaid and the applicable Make-Whole Amount. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.
Section 7.6. Payments Due on Non-Business Days. Anything in the Note Documentation to the contrary notwithstanding, (x) except as set forth in clause (y), any payment of interest on any Note that is due on a date that is not a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; and (y) any payment of principal of or Make-Whole Amount on any Note (including principal due on the Maturity Date of such Note) that is due on a date that is not a Business Day shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.
Section 7.7. Late Charges. If any scheduled interest payment is not received by the holder of any Note within 10 Business Days after the applicable payment date, inclusive of the date on which such amount is due, the Company shall pay to the applicable holder, immediately without demand by such holder, the Late Charge.
Section 7.8. Make-Whole Amount.
The term Make-Whole Amount means, with respect to any Note, an amount equal to the Remaining Scheduled Payments with respect to the Called Principal of such Note. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:
Called Principal means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 7.2 or has become or is declared to be immediately due and payable pursuant to Section 11.1, as the context requires.
Remaining Scheduled Payments means, with respect to the Called Principal of any Note, all payments of interest on such Called Principal that would be due after the Settlement Date and on or prior to the Maturity Date if no payment of such Called Principal were made prior to its scheduled due date; provided that if such Settlement Date is not a date on which interest payments are due to be made under the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 7.2 or Section 11.1.
Settlement Date means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 7.2 or has become or is declared to be immediately due and payable pursuant to Section 11.1, as the context requires.
The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the obligation to pay the Make-Whole Amount set forth herein is intended to provide compensation for the deprivation of such right under such circumstances. The right to receive the Make-Whole Amount upon any prepayment or acceleration is a material inducement to the Purchasers decision to enter into this Agreement.
Section 8. Affirmative Covenants. The Company covenants that so long as any of the Notes are outstanding:
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Section 8.1. Existence, Etc. Subject to Section 9.1, the Company will at all times preserve and keep its limited liability company existence in full force and effect. Subject to Section 9.1, the Company will at all times cause to be preserved and kept in full force and effect the limited partnership, limited liability company or corporate existence of James Oxford, each James Oxford Entity and each James Oxford Subsidiary and all rights and franchises of the Company, James Oxford, the James Oxford Entities and the James Oxford Subsidiaries unless, in the case of each James Oxford Entity and each James Oxford Subsidiary, the termination of or failure to preserve and keep in full force and effect such existence, right or franchise would not, individually or in the aggregate, have a Material Adverse Effect.
Section 8.2. REIT Covenants.
(a) At all times after the Closing while any portion of any Note remains outstanding, James Oxford will hold real property (within the meaning of Treasury Regulation section 1.856-3(d)).
(b) Except for such regulatory notices, consents, or approvals as may be required under applicable law, James Oxford has taken all steps necessary such that, upon default and foreclosure of the Note, the registered holders will replace the Company as a partner in James Oxford, and Brookwood has agreed that, in such circumstances, it will not unreasonably oppose the admission of the registered holders as partners therein.
Section 8.3. Maintenance of Properties. The Company will, and shall cause James Oxford, each of the James Oxford Entities and each of the James Oxford Subsidiaries to, (a) maintain, preserve and protect all of its properties and equipment necessary in the operation of its business, ordinary wear and tear, force majeure, casualty events and transactions not prohibited by this Agreement excepted, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities, taken as a whole.
Section 8.4. Maintenance of Insurance. Except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, the Company will maintain or cause to be maintained, such insurance coverage with respect to liabilities, losses or damage in respect of the assets, properties and business of the Company, James Oxford, the James Oxford Entities and the James Oxford Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses (as determined in good faith by the Company), in each case in such amounts, with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons.
Section 8.5. Compliance with Laws. The Company, James Oxford, each James Oxford Entity and each James Oxford Subsidiary will comply, and shall cause their respective Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority, except to the extent the failure of the Company, James Oxford, such James Oxford Entity, such James Oxford Subsidiary or such other Subsidiary to comply could not reasonably be expected to have a Material Adverse Effect.
Section 8.6. Compliance with Mortgage Loan Documents. Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, the Company will, and shall cause James Oxford, each of the James Oxford Entities and each of the James Oxford Subsidiaries to, comply with the provisions of any document evidencing Indebtedness for borrowed money secured by a mortgage, deed of trust, assignment of rents or other security interest on any Specified Property or of the
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Equity Interests in any Person that owns, directly or indirectly, any Specified Property or any mezzanine Indebtedness incurred by the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary.
Section 9. Negative Covenants. The Company covenants that so long as any of the Notes are outstanding:
Section 9.1. Merger, Consolidation, Etc. The Company will not and will not permit James Oxford, any James Oxford Entity or any James Oxford Subsidiary to consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person, consummate a Division as the Dividing Person, or liquidate or dissolve, unless (i) the Company, James Oxford, such James Oxford Entity or such James Oxford Subsidiary receives consideration (A) at least equal to the fair market value (such fair market value to be determined (i) on the date of contractually agreeing to such merger, consolidation or other transaction and (ii) in good faith by the Company), of the Company, James Oxford, such James Oxford Entity or such James Oxford Subsidiary, as applicable, which such fair market value shall be a positive number, and (B) that is 100% in the form of cash; provided that for purposes of determining cash consideration, any assumption of Indebtedness or other liabilities by buyer shall be deemed cash consideration, so long as seller is released from such Indebtedness or other liabilities, and (ii) the Company prepays or causes to be prepaid the Notes to the extent required by Section 7.2.
No such Disposition of assets or property shall have the effect of releasing the Company or any successor corporation, limited partnership, limited liability company or other entity that shall theretofore have become such in the manner prescribed in this Section 9.1, from its liability under the Note Documentation.
Section 9.2. Liens. (a) The Company will not directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any of the Collateral, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits, except:
(i) Liens arising under the Note Documentation; or
(ii) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings in the circumstances, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP.
(b) The Company will not permit James Oxford, any James Oxford Entity or any James Oxford Subsidiary to, directly or indirectly, create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any of its property or assets, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits, except:
(i) Liens existing on the date hereof that secure Indebtedness listed on Schedule 5.6 hereto and any renewals or extensions thereof; provided that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefitted thereby is permitted pursuant to Section 9.3;
(ii) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings in the circumstances, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;
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(iii) carriers, warehousemens, mechanics, materialmens, repairmens or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings in the circumstances, if adequate reserves with respect thereto are maintained on the books of the applicable Person to the extent required in accordance with GAAP;
(iv) easements, rights-of-way, restrictions and other similar encumbrances affecting real property and other minor defects or irregularities in title and other similar encumbrances including the reservations, limitations, provisos and conditions, which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property of James Oxford, any James Oxford Entity or any James Oxford Subsidiary, as applicable, or materially interfere with the ordinary conduct of the business of the applicable Person;
(v) statutory rights of set-off arising in the ordinary course of business;
(vi) with respect to any real property, immaterial title defects or irregularities that do not, individually or in the aggregate, materially impair the use of such real property;
(vii) Liens on any cash earnest money deposits or other escrow arrangements made in connection with any letter of intent or purchase agreement; and
(viii) Liens arising under the Note Documentation.
Section 9.3. Indebtedness. (a) The Company will not directly or indirectly create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to any Priority Debt other than Indebtedness hereunder.
(b) The Company will not permit James Oxford, any James Oxford Entity or any James Oxford Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to any Indebtedness, except:
(i) Indebtedness outstanding on the date hereof that is listed on Schedule 5.6 hereto and any refinancings, refundings, renewals or extensions thereof; provided the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder; and
(ii) other Indebtedness not permitted in clause (b)(i) above in an aggregate principal amount not to exceed $5,000,000.
Section 9.4. Dispositions. The Company will not and will not permit James Oxford, any James Oxford Entity or any James Oxford Subsidiary to make any Disposition (other than the incurrence of any Lien not prohibited under Section 9.2), unless:
(a) with respect to any Casualty or Condemnation Event, the Company prepays or causes to be prepaid the Notes to the extent required by Section 7.2; or
(b) with respect to any other Disposition, (i) the Company, James Oxford, such James Oxford Entity or such James Oxford Subsidiary receives consideration (A) at least equal to the fair
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market value (such fair market value to be determined (x) on the date of contractually agreeing to such Disposition and (y) in good faith by the Company), of the property subject to such Disposition and (B) that is 100% in the form of cash; provided that for purposes of determining cash consideration, any assumption of Indebtedness or other liabilities by buyer shall be deemed cash consideration, so long as seller is released from such Indebtedness or other liabilities, and (ii) the Company prepays or causes to be prepaid the Notes to the extent required by Section 7.2; or
(c) in the case of a Disposition of a Specified Property or a Disposition of all or any portion of the Equity Interests of the owner of such Specified Property, (i) contemporaneously with such Disposition, real property with, or Equity Interests of an owner of real property with, similar cash flows and comparable fair market value to the Specified Property Disposed of or owned by such Person whose Equity Interests are Disposed of is exchanged or otherwise substituted for such Specified Property or such owner of Specified Property and (ii) each Purchaser provides prior written consent to such Disposition, which consent is not to be unreasonably withheld.
Upon the occurrence of any Disposition contemplated by Section 9.4(c), any real property exchanged or substituted for a Specified Property shall become a Specified Property for all purposes under this Agreement and the other Note Documentation and such original Specified Property shall cease to be a Specified Property under this Agreement and the other Note Documentation.
Section 9.5. Sale and Leaseback Transactions. The Company will not and will not permit James Oxford, any James Oxford Entity or any James Oxford Subsidiary to enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property (real or personal) used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred (each such transaction, a Sale/Leaseback Transaction), unless (a) such Disposition is permitted under Section 9.2, (b) the Company complies with Section 7.2, and (c) such lease is not required to be capitalized in accordance with GAAP and is not otherwise Indebtedness.
Section 9.6. Change in Nature of Business. The Company will not and will not permit James Oxford, any James Oxford Entity or any James Oxford Subsidiary to engage in any material line of business substantially different from those lines of business currently conducted by the Company, James Oxford, such James Oxford Entity or such James Oxford Subsidiary on the date hereof or any business substantially related or incidental or ancillary thereto.
Section 10. Events of Default. An Event of Default shall exist if any of the following conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal, Late Charge or Make-Whole Amount on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for more than 30 Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in Sections 10(a) or (b)) and such default is not remedied within 60 days after the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a notice of default and to refer specifically to this Section 10(c)); or
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(d) the Company (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or
(e) a court or other Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Company, James Oxford or any Material Subsidiary, as applicable, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company, James Oxford or such Material Subsidiary, as applicable, or any such petition shall be filed against the Company, James Oxford or such Material Subsidiary, as applicable, and such petition shall not be dismissed within 60 days; or
(f) one or more final judgments or orders for the payment of money aggregating in excess of $50,000,000, including any such final order enforcing a binding arbitration decision, are rendered against James Oxford, any James Oxford Entity and/or any James Oxford Subsidiary and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay.
Section 11. Remedies on Default, Etc.
Section 11.1. Acceleration. (a) If an Event of Default with respect to the Company described in Section 10(d) or (e) (other than an Event of Default described in clause (i) of Section 10(d) or described in clause (vi) of Section 10(d) by virtue of the fact that such clause encompasses clause (i) of Section 10(d)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in Section 10(a) or (b) has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.
(d) Upon any Notes becoming due and payable under this Section 11.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon (including interest accrued thereon at the Default Rate) and (y) the Make-Whole Amount determined in respect of such principal amount, shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an
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Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. The right to receive the Make-Whole Amount upon any prepayment or acceleration is a material inducement to the Purchasers decision to enter into this Agreement.
Section 11.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 11.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise; provided that only the Collateral Agent shall be entitled to exercise remedies with respect to the Collateral pursuant to the Pledge Agreement.
Section 11.3. Rescission. At any time after any Notes have been declared due and payable pursuant to Section 11.1(b) or (c), the Required Holders, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all due or overdue interest on the Notes, all principal of and Make-Whole Amount on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount and (to the extent permitted by applicable law) any Late Charge or overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any other Person shall have paid any amounts which have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 16, and (d) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 11.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.
Section 11.4. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holders rights, powers or remedies. No right, power or remedy conferred by this Agreement or any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. The Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 11, including reasonable attorneys fees, expenses and disbursements.
Section 12. Collateral Matters.
Section 12.1. Collateral. At the time of the Closing, the Company shall grant to the Collateral Agent for the benefit of the Purchasers a first lien, priority security interest in the Equity Interests it owns or at any time hereafter acquires in James Oxford and all proceeds thereof by executing and delivering the Pledge Agreement.
Section 12.2. Collateral Agent.
(a) Each Purchaser hereby appoints AIR OP to act on behalf of the Purchasers as collateral agent (in such capacity, together with its successors and assigns, the Collateral Agent) under the Pledge Agreement and to exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by the terms of this Agreement and the Pledge Agreement, and AIR OP agrees to act as such. In taking any action pursuant to the provisions of the Pledge Agreement, and in exercising any rights or remedies set forth therein, the Collateral Agent shall act at the direction of the Required Holders,
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and any such actions taken at the direction of the Required Holders shall be binding upon all Purchasers. Notwithstanding any provision to the contrary contained elsewhere in this Agreement and the Pledge Agreement, the duties of the Collateral Agent shall be ministerial and administrative in nature, and the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein and in the Pledge Agreement, nor shall the Collateral Agent have or be deemed to have any trust or fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement and the Pledge Agreement or otherwise exist against the Collateral Agent.
(b) Subject to the provisions of the Pledge Agreement, each Purchaser agrees that the Collateral Agent shall execute and deliver the Pledge Agreement and all agreements, powers of attorney, documents and instruments incidental thereto, and act in accordance with its terms.
(c) The Collateral Agent shall have no obligation whatsoever to the Purchasers to assure that the Collateral exists or is owned by the Company or is cared for, protected, or insured or has been encumbered, or that the Collateral Agents Liens have been properly or sufficiently or lawfully created, perfected, protected, maintained or enforced or are entitled to any particular priority, or to determine whether all of the Companys property constituting Collateral has been properly and completely listed or delivered, as the case may be, or the genuineness, validity, marketability or sufficiency thereof or title thereto, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the rights, authorities, and powers granted or available to the Collateral Agent pursuant to this Agreement or the Pledge Agreement, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Collateral Agent shall have no other duty or liability whatsoever to the Purchasers as to any of the foregoing.
(d) The Collateral Agent may resign at any time by notice to each Purchaser and the Company, such resignation to be effective upon the acceptance by each Purchaser of a successor agent to its appointment as Collateral Agent. If no successor collateral agent is appointed prior to the intended effective date of the resignation of the Collateral Agent (as stated in the notice of resignation), the Collateral Agent may appoint, after consulting with each Purchaser, subject to the consent of the Company (which shall not be unreasonably withheld and which shall not be required during a continuing Event of Default), a successor collateral agent. Upon the acceptance of its appointment as successor collateral agent hereunder, such successor collateral agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent, and the term Collateral Agent shall mean such successor collateral agent, and the retiring Collateral Agents appointment, powers and duties as the Collateral Agent shall be terminated. Promptly following the acceptance of the appointment of any successor Collateral Agent, the Company shall cause assignments of filings existing on the date of such assignment related to the Collateral to be filed or recorded sufficient to reflect the successor Collateral Agent, as secured party of record in accordance with applicable law related to each portion of the Collateral. After the retiring Collateral Agents resignation hereunder, the provisions of this Section 12.2 shall continue to inure to its benefit and the retiring Collateral Agent shall not by reason of such resignation be deemed to be released from liability as to any actions taken or omitted to be taken by it while it was the Collateral Agent under this Agreement.
Section 13. Registration; Exchange; Substitution of Notes.
Section 13.1. Registration of Notes. The Company will maintain, in electronic format or otherwise, at its principal place of business, a register of the names and addresses of the holder(s) of this Note and the principal amount (and stated interest) owing to each holder (the Register), and will update the Register to reflect any permitted assignments or transfers subsequent to the date hereof. The Company will make payments of principal and interest as specified hereunder to the holder(s) named as
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such in the Register. The holder(s) shall notify the Company in writing prior to any assignment, transfer or other disposition of this Note (or any portion hereof) or such holder(s) rights or interests hereunder, with such written notice to be delivered to the Company not later than one Business Day prior to any such assignment, transfer or disposition and which notice shall specify the principal amount hereunder that is the subject of such assignment, transfer or disposition. Any assignment, transfer or other disposition of this Note (or any portion thereof) shall be effective only upon appropriate entries with respect thereto being made in the Register, which shall be made promptly upon receipt of such written notice. Notwithstanding anything to the contrary herein, the entries in the Register shall be conclusive, absent manifest error; the Company and each holder shall treat the person whose name is recorded in the Register as the owner of its portion of the Note for all purposes of this Note, notwithstanding notice to the contrary; and the registered owner of this Note (or any portion hereof) as indicated on the Register shall be the party with the exclusive right to receive payment of any principal amount and accrued and unpaid interest thereon under this Note. The Register shall be available for inspection by any holder, at any reasonable time and from time to time upon reasonable prior notice. This provision is intended to constitute a book entry system within the meaning of Treasury Regulations Section 5f.103-1(c)(1)(ii) and shall be interpreted consistently with such intent.
Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in Section 17(iii)), for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holders attorney duly authorized in writing and accompanied by the relevant name, address and other information for notices of each transferee of such Note or part thereof), within 10 Business Days thereafter, the Company shall execute and deliver, at the Companys expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Schedule 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes.
Section 13.3. Replacement of Notes. Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 17(iii)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note, and
(a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it, or
(b) in the case of mutilation, upon surrender and cancellation thereof, within 10 Business Days thereafter, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
Section 14. Payments on Notes.
Section 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount and interest becoming due and payable on the Notes shall be made in Denver, Colorado at the principal office of the Company in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be
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either the principal office of the Company in the United States or the principal office of a bank or trust company in the United States.
Section 14.2. Payment by Wire Transfer. So long as any Purchaser shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount interest and all other amounts becoming due hereunder by the method and at the address specified for such purpose below such Purchasers name in the Purchaser Schedule, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other Disposition of any Note held by a Purchaser, such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2.
Section 14.3. Withholding.
(a) To the extent required by law, each party hereto hereby authorizes each other party (each, a Withholding Party) to deduct or withhold any foreign, federal, state or local tax from any amount transferred under this Agreement. Each Withholding Party shall timely pay the full amount deducted or withheld to the relevant governmental authority in accordance with the applicable law. Amounts so deducted or withheld, if any, shall be treated as paid to the applicable party in respect of which such amounts were deducted or withheld.
(b) By acceptance of any Note, the holder of such Note agrees that such holder will with reasonable promptness duly complete and deliver to the Company, or to such other Person as may be reasonably requested by the Company, from time to time (a) in the case of any such holder that is a United States Person, such holders United States tax identification number or other Forms reasonably requested by the Company necessary to establish such holders status as a United States Person under FATCA and as may otherwise be necessary for the Company to comply with its obligations under FATCA and (b) in the case of any such holder that is not a United States Person, such documentation prescribed by applicable law (including as prescribed by section 1471(b)(3)(C)(i) of the Code) and such additional documentation as may be necessary for the Company to comply with its obligations under FATCA and to determine that such holder has complied with such holders obligations under FATCA or to determine the amount (if any) to deduct and withhold from any such payment made to such holder. Nothing in this Section 14.3 shall require any holder to provide information that is confidential or proprietary to such holder unless the Company is required to obtain such information under FATCA and, in such event, the Company shall treat any such information it receives as confidential.
Section 15. Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a Note. This Agreement, the Notes and the Pledge Agreement embody the entire agreement and understanding between each Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.
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Section 16. Amendment and Waiver.
Section 16.1. Requirements. This Agreement, the Notes and the Pledge Agreement may be amended, and the observance of any term hereof or of the Notes or the Pledge Agreement may be waived (either retroactively or prospectively), only with the written consent of the Company and the Required Holders, except that:
(a) no amendment or waiver of any of Sections 1, 2, 3, 4, or 5 hereof, or any defined term (as it is used therein), will be effective as to any Purchaser unless consented to by such Purchaser in writing; and
(b) no amendment or waiver may, without the written consent of each Purchaser and the holder of each Note at the time outstanding, (i) subject to Section 11 relating to acceleration or rescission, change the amount or time of any payment or prepayment of principal of, or reduce the rate or change the time of payment or method of computation of (x) interest on the Notes or (y) the Make-Whole Amount on the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any amendment or waiver, or (iii) amend any of Section 7 and Sections 10(a), 10(b), 11 or 16.
Section 16.2. Binding Effect, Etc. Any amendment or waiver consented to as provided in this Section 16 or the Pledge Agreement applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and any holder of a Note and no delay in exercising any rights hereunder or under any Note or the Pledge Agreement shall operate as a waiver of any rights of any holder of such Note.
Section 16.3. Notes Held by Company, Etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement, the Pledge Agreement or the Notes, or have directed the taking of any action provided herein or in the Pledge Agreement or the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.
Section 17. Notices. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by an internationally recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by an internationally recognized overnight delivery service (charges prepaid). Any such notice must be sent:
(i) if to any Purchaser, to such Purchaser at the address specified for such communications in the Purchaser Schedule, or at such other address as such Purchaser shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or
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(iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of General Counsel of Apartment Investment and Management Company, or at such other address as the Company shall have specified to the holder of each Note in writing.
Notices under this Section 17 will be deemed given only when actually received.
Section 18. Miscellaneous.
Section 18.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and registered assigns (including any subsequent holder of a Note) whether so expressed or not, except that, (i) subject to Section 9.1, the Company may not assign or otherwise transfer any of its rights or Obligations hereunder or under the Notes without the prior written consent of each holder, which written consent is not to be unreasonably withheld, and (ii) each holder may not assign or otherwise transfer any of its rights or obligations hereunder or under the Notes without the prior written consent of the Company, which consent is not to be unreasonably withheld; provided that notwithstanding the foregoing, each holder may assign or otherwise transfer any of its rights or obligations hereunder or under the Notes without the prior written consent of the Company during an Event of Default. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto and their respective successors and assigns permitted hereby) any legal or equitable right, remedy or claim under or by reason of this Agreement.
Section 18.2. Accounting Terms. All accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP. Except as otherwise specifically provided herein, all computations made pursuant to this Agreement shall be made in accordance with GAAP.
Section 18.3. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.
Section 18.4. Construction, Etc. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. Defined terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise (a) any definition of or reference to any of the Note Documentation or any other agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein) and, for purposes of the Notes, shall also include any such notes issued in substitution therefor pursuant to Section 13, (b) subject to Section 18.1, any reference herein to any Person shall be construed to include such Persons successors and assigns, (c) the words herein, hereof and hereunder, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision
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hereof, (d) all references herein to Sections and Schedules shall be construed to refer to Sections of, and Schedules to, this Agreement, and (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.
Section 18.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.
Section 18.6. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Section 18.7. Jurisdiction and Process; Waiver of Jury Trial. (a) The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. To the fullest extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(b) The Company agrees, to the fullest extent permitted by applicable law, that a final judgment in any suit, action or proceeding of the nature referred to in Section 18.7(a) brought in any such court shall be conclusive and binding upon it subject to rights of appeal, as the case may be, and may be enforced in the courts of the United States of America or the State of New York (or any other courts to the jurisdiction of which it or any of its assets is or may be subject) by a suit upon such judgment.
(c) The Company consents to process being served by or on behalf of any holder of Notes in any suit, action or proceeding of the nature referred to in Section 18.7(a) by mailing a copy thereof by registered, certified priority or express mail (or any substantially similar form of mail), postage prepaid, return receipt or delivery confirmation requested, to it at its address specified in Section 17 or at such other address of which such holder shall then have been notified pursuant to said Section. The Company agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to it. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.
(d) Nothing in this Section 18.7 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
(e) The parties hereto hereby waive trial by jury in any action brought on or with respect to this Agreement, the Notes or any other document executed in connection herewith or therewith.
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If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of this Agreement and return it to the Company, whereupon this Agreement shall become a binding agreement between you and the Company.
Very truly yours, | ||
Aimco JO Intermediate Holdings, LLC, a Delaware limited liability company, as the Company | ||
By: Aimco REIT Sub, LLC, a Delaware limited liability company, its sole member |
By: | /s/ Lynn C. Stanfield | |
Name: Lynn C. Stanfield Title: Authorized Person |
[Signature Page to Mezzanine Note Agreement]
This Agreement is hereby accepted and agreed to as of the date hereof. | ||
AIMCO Properties, L.P., a Delaware limited partnership, as a Purchaser | ||
By: AIMCO-GP, Inc., a Delaware corporation, its general partner |
By: | /s/ Paul Beldin | |
Name: Paul Beldin Title: Authorized Person |
AIMCO/Bethesda Holdings, Inc., a Delaware corporation, as a Purchaser |
By: | /s/ Paul Beldin | |
Name: Paul Beldin Title: Authorized Person |
AIMCO Properties, L.P., a Delaware limited partnership, as the Collateral Agent | ||
By: AIMCO-GP, Inc., a Delaware corporation, its general partner |
By: | /s/ Paul Beldin | |
Name: Paul Beldin Title: Authorized Person |
[Signature Page to Mezzanine Note Agreement]
Schedule A
Defined Terms
As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:
Affiliate means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person; provided that neither AIMCO/Bethesda nor AIR OP shall be considered Affiliates of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary for the purposes of the Note Documentation. Unless the context otherwise clearly requires, any reference to an Affiliate is a reference to an Affiliate of the Company.
Agreement means this Mezzanine Note Agreement, including all Schedules attached to this Agreement.
AIMCO/Bethesda means AIMCO/Bethesda Holdings, Inc., a Delaware corporation, as such entity may be renamed from time to time.
AIR OP means AIMCO Properties, L.P., a Delaware limited partnership, as such entity may be renamed from time to time.
Business Day means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City, Baltimore or Denver are required or authorized to be closed.
Brookwood means Brookwood Limited Partnership, an Illinois limited partnership.
Capital Lease means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.
Cash Collateral Account means a deposit account as defined in the Uniform Commercial Code as in effect in the State of New York, at a bank reasonably acceptable to the Collateral Agent in the name of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary for the benefit of the Purchasers that is subject to a Cash Collateral Account Control Agreement.
Cash Collateral Account Control Agreement means a deposit account control agreement in a form reasonably satisfactory to the Collateral Agent, executed by the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary, as applicable, the Collateral Agent and the relevant depositary institution.
Casualty or Condemnation Event means the receipt by the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary of any cash insurance proceeds or
condemnation award payable by reason of theft, loss, physical destruction or damage, taking, expropriation or similar event with respect to any of their respective property.
Change of Control means the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) of Equity Interests in the Company pursuant to which Aimco OP L.P., a Delaware limited partnership, ceases to directly or indirectly own through one or more wholly-owned subsidiaries all of the Equity Interests of the Company (other than the Company Initial Preferred Interests).
Closing is defined in Section 3.
Code means the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder from time to time.
Collateral has the meaning set forth in the Pledge Agreement.
Collateral Agent is defined in Section 12.2(a).
Company is defined in the first paragraph of this Agreement.
Company Initial Preferred Interests means the up to 125 Series A preferred units of the Company issued in connection with the Restructuring (as defined in the Separation Agreement).
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms Controlled and Controlling shall have meanings correlative to the foregoing.
Debtor Relief Laws means the Bankruptcy Code of the United States, or any other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Default means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.
Default Rate means that rate of interest per annum that is 2% above the rate of interest stated in clause (a) of the first paragraph of the Notes.
Disposition or Dispose means (i) the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, directly or indirectly, and whether voluntary or involuntary, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, (ii) a Casualty or Condemnation Event with respect to any property or
asset, and (iii) the issuance or sale of Equity Interests, in the case of each of clauses (i), (ii) and (iii), whether in a single transaction or series of related transactions.
Dividing Person has the meaning assigned to it in the definition of Division.
Division means the division of the assets, liabilities and/or obligations of a Person (the Dividing Person) among two or more Persons (whether pursuant to a plan of division or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.
Equity Interests means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other similar rights entitling the holder thereof to purchase or acquire any of the foregoing.
Event of Default is defined in Section 10.
FATCA means (a) sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), together with any current or future regulations or official interpretations thereof, (b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the United States of America and any other jurisdiction, which (in either case) facilitates the implementation of the foregoing clause (a), and (c) any agreements entered into pursuant to section 1471(b)(1) of the Code.
GAAP means generally accepted accounting principles as in effect from time to time in the United States of America.
Governmental Authority means
(a) | the government of |
(i) | the United States of America or any state or other political subdivision thereof, or |
(ii) | any other jurisdiction in which the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary, or |
(b) | any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. |
Guaranty means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including obligations incurred through an agreement, contingent or otherwise, by such Person:
(a) | to purchase such indebtedness or obligation or any property constituting security therefor; |
(b) | to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; |
(c) | to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or |
(d) | otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. |
In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.
holder means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1.
Indebtedness with respect to any Person means, at any time, without duplication,
(a) | its liabilities for borrowed money; |
(b) | its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); |
(c) | (i) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases and (ii) all liabilities which would appear on its balance sheet in accordance with GAAP in respect of Synthetic Leases assuming such Synthetic Leases were accounted for as Capital Leases; |
(d) | all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); |
(e) | all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); |
(f) | the aggregate Swap Termination Value of all Swap Contracts of such Person; and |
(g) | any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. |
Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.
James Oxford means James-Oxford Limited Partnership, a Maryland limited partnership.
James Oxford Entity means any wholly-owned subsidiary through which James Oxford indirectly owns any James Oxford Subsidiary.
James Oxford Subsidiary means, as of the Closing, each entity listed on Schedule 5.3; provided that any entity exchanged or substituted for a James Oxford Subsidiary pursuant to the terms of this Agreement and the other Note Documentation shall be considered James Oxford Subsidiary for all purposes hereunder and thereunder.
Late Charge means an amount equal to the delinquent amount then due under the Agreement multiplied by 5%.
Lien means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of any Equity Interest, the granting of any option or agreement to sell) or any agreement to enter into any of the foregoing.
Make-Whole Amount is defined in Section 7.8.
Material Adverse Effect means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company, James Oxford, the James Oxford Entities or the James Oxford Subsidiaries taken as a whole, (b) the ability of the Company to perform its Obligations under this Agreement, the Notes and the Pledge Agreement, or (c) the validity or enforceability of this Agreement, the Notes or the Pledge Agreement.
Material Subsidiary means, at any date of determination, any Subsidiary of the Company that (i) as of the most recently ended fiscal quarter of the Company, has total assets with a value in excess of 10% of the consolidated total assets of the Company and its Subsidiaries for such date or (ii) during the most recently completed four fiscal quarters of the Company, has gross revenues exceeding 10% of the consolidated gross revenues of the Company and its Subsidiaries, in each case determined in accordance with GAAP.
Maturity Date is defined as January 31, 2024.
Minority Common Interests means the common interests in James Oxford that continue to be owned by Brookwood immediately after Closing.
Net Cash Proceeds means (1) the aggregate cash or cash equivalents proceeds received by or on behalf of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary in respect of any Disposition or consideration received in connection with a merger or consolidation, net of (A) direct costs incurred in connection therewith (including, without limitation, reasonable and customary selling expenses, legal, accounting and investment banking fees and sales commissions), (B) taxes paid or payable as a result thereof, (C) amounts required to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness secured by the assets subject to such Disposition as a result of such Disposition and (D) amounts provided in good faith as a reserve against (x) any liabilities under any indemnification obligations or purchase price adjustment associated with such Disposition or merger or consolidation or (y) any other liabilities retained by the Company, James Oxford, the applicable James Oxford Entity or the applicable James Oxford Subsidiary associated with the properties sold (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (2) the aggregate cash or cash equivalents proceeds received by the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary in respect of the incurrence of Indebtedness or the issuance or contribution of Equity Interests, net of all taxes paid or payable as a result thereof, together with any fees, commissions, costs and other customary expenses incurred in connection therewith; it being understood that Net Cash Proceeds shall include, without limitation, any cash or cash equivalents received upon the sale or other Disposition of any non-cash consideration received by the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary in any Disposition, merger or consolidation, issuance or contribution of Equity Interests or incurrence of Indebtedness.
Net Insurance/Condemnation Proceeds means the aggregate cash or cash equivalents proceeds received by or on behalf of the Company, James Oxford, any James Oxford Entity or any James Oxford Subsidiary in respect of any Casualty or Condemnation Event, net of (1) direct costs incurred by the Company, James Oxford, such James Oxford Entity or such James Oxford Subsidiary in connection with the adjustment, settlement or collection of any claims of the Company, James Oxford, such James Oxford Entity or such James Oxford Subsidiary in respect thereof (including, without limitation, reasonable and customary selling expenses, legal, accounting and investment banking fees and sales commissions), (2) taxes paid or payable as a result thereof, (3) amounts required to be applied to the repayment of principal, premium (if any) and interest on Indebtedness secured by the assets subject to such Casualty or Condemnation Event as a result of such Casualty or Condemnation Event, (4) in the case of a taking, the reasonable out-of-pocket costs of putting any affected property in a safe and secure position, and (5) amounts provided in good faith as a reserve against (x) any liabilities under any indemnification obligations or purchase price adjustment associated with such Casualty or Condemnation Event or (y) any other liabilities retained by the Company, James Oxford, the applicable James Oxford Entity or the applicable James Oxford Subsidiary associated with the properties sold (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Insurance/Condemnation Proceeds).
Note Documentation means, collectively, this Agreement, the Notes, the Pledge Agreement and each other amendment, agreement or instrument delivered by the Company in accordance with such documentation.
Notes is defined in Section 1.
Obligations means all advances to, and debts, liabilities and obligations of, the Company arising under the Note Documentation, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Company or any of its Affiliates of any proceeding under any Debtor Relief Law naming such
Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
Person means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, business entity or Governmental Authority.
Pledge Agreement means that certain Pledge Agreement, to be dated the date hereof, by the Company in favor of the Collateral Agent for the benefit of the Purchasers.
Priority Debt means Indebtedness of the Company secured by a Lien on the Collateral.
property or properties means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate.
Purchaser or Purchasers means each of the purchasers that has executed and delivered this Agreement to the Company and such Purchasers successors and assigns (so long as any such assignment complies with Section 13.2), provided, however, that any Purchaser of a Note that ceases to be the registered holder or a beneficial owner of such Note as the result of a transfer thereof pursuant to Section 13.2 shall cease to be included within the meaning of Purchaser of such Note for the purposes of this Agreement upon such transfer.
Purchaser Schedule means the Purchaser Schedule to this Agreement listing the Purchasers of the Notes and including their notice and payment information.
Register is defined in Section 13.1.
Reinvestment Conditions means, with respect to the reinvestment of Net Cash Proceeds or Net Insurance/Condemnation Proceeds stemming from a Disposition, Casualty or Condemnation Event or merger, consolidation or similar event or transaction, that (i) no Default or Event of Default has occurred and is continuing, (ii) such reinvestment consists of the acquisition, lease, construction or improvement of real property (within the meaning of Treasury Regulation section 1.856-3(d)) useful in the business of the Company or its Subsidiaries that the Company believes will enhance the value of or create value in the Company, James Oxford or their respective Subsidiaries (as reasonably determined by the Company in good faith) and (iii) such reinvestment occurs within 180 days of receipt of such Net Cash Proceeds or Net Insurance/Condemnation Proceeds.
Remaining Collateral Value Test means, with respect to a Disposition, Casualty or Condemnation Event or merger, consolidation or similar event or transaction, that the aggregate fair market value of all real property (within the meaning of Treasury Regulation section 1.856-3(d)) owned by James Oxford and its Subsidiaries after giving effect to such Disposition, Casualty or Condemnation Event or merger, consolidation or similar event or transaction exceeds (after subtracting senior secured Indebtedness) the then-outstanding principal amount of the Notes.
Required Holders means at any time on or after the Closing, the holders of at least 50 in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates).
Responsible Officer means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement.
Sale/Leaseback Transaction is defined in Section 9.6.
SEC means the Securities and Exchange Commission of the United States of America.
Securities Act means the Securities Act of 1933 and the rules and regulations promulgated thereunder from time to time in effect.
Senior Financial Officer means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company.
Separation Agreement means that certain Separation and Distribution Agreement, effective as of December 15, 2020, by and among Apartment Investment and Management Company, a Maryland corporation, Aimco OP L.P., a Delaware limited partnership, Apartment Income REIT Corp., a Maryland corporation, and AIR OP.
Specified Property means, as of the Closing, each property listed in the column titled Address of Specified Property Owned by such James Oxford Subsidiary on Schedule 5.3; provided that any property exchanged or substituted for a Specified Property pursuant to the terms of this Agreement and the other Note Documentation shall be considered Specified Property for all purposes hereunder and thereunder.
Subsidiary means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries).
Swap Contract means (a) any and all interest rate swap transactions, basis swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward foreign exchange transactions, cap transactions, floor transactions, currency options, spot contracts or any other similar transactions or any of the foregoing (including any options to enter into any of the foregoing), and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc. or any International Foreign Exchange Master Agreement.
Swap Termination Value means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amounts(s) determined as the mark-to-market values(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts.
Synthetic Lease means, at any time, any lease (including leases that may be terminated by the lessee at any time) of any property (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such Person is the lessor.
Transferred Interests is defined in Section 2.
United States Person has the meaning set forth in Section 7701(a)(30) of the Code.
Withholding Party is defined in Section 14.3(a).
Schedule 1
Form of Note
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS NOTE OR ANY INTEREST OR PARTICIPATION THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS AND, IN THE CASE OF THIS CLAUSE (B), PROVIDED THAT, IF THE COMPANY REQUESTS, THE COMPANY RECEIVES AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
Aimco JO Intermediate Holdings, LLC
5.2% Secured Mezzanine Note Due January 31, 2024
No. [ ] | [Date] | |
$[ ] | PPN[ ] |
For value received, the undersigned, Aimco JO Intermediate Holdings, LLC (herein called the Company), a limited liability company organized and existing under the laws of the State of Delaware, hereby promises to pay to [ ] (the Purchaser), or registered assigns, the principal sum of [ ] U.S. dollars on January 31, 2024 (the Maturity Date), with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance hereof at the rate of 5.2% per annum from the date hereof, payable quarterly, on the first day of January, April, July and October in each year, commencing on April 1, 2021, and on the Maturity Date, until the principal hereof shall have been paid in full. In addition, the Company agrees to pay a Make-Whole Amount, Late Charges and interest at the Default Rate, as provided in the Note Agreement referenced below.
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the Denver, Colorado office of the Company or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Agreement referred to below.
This Note is one of a series of Secured Mezzanine Notes (herein called the Notes) issued pursuant to the Mezzanine Note Agreement, dated as of December 14, 2020 (as from time to time amended, the Note Agreement), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Agreement.
This Note is a registered Note and, as provided in the Note Agreement, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or such holders attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
The Company will make required payments of principal on the dates and in the amounts specified in the Note Agreement. This Note is subject to mandatory prepayment at the times and on the terms specified in the Note Agreement. This Note may not be prepaid at the option of the Company at any time prior to the Maturity Date. The Companys agreement to a prohibition on optional prepayments is a material inducement to the Purchasers decision to enter into the Note Agreement. The Companys Obligations under this Note and the Note Agreement are secured pursuant to the Pledge Agreement.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Agreement.
This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Aimco JO Intermediate Holdings, LLC | ||
By: | Aimco REIT Sub, LLC, a Delaware limited liability company, its sole member | |
By: |
| |
Title |
Exhibit 10.8
APARTMENT INCOME REIT CORP.
EXECUTIVE SEVERANCE POLICY
Effective
TABLE OF CONTENTS
PAGE | ||||||
Section 1. |
Background | 1 | ||||
Section 2. |
Definitions | 1 | ||||
Section 3. |
Term of Policy | 4 | ||||
Section 4. |
Termination by Company Group without Cause or by Executive for Good Reason | 4 | ||||
Section 5. |
Termination without Cause in Connection with Change in Control | 5 | ||||
Section 6. |
Termination by Reason of Death or Disability | 5 | ||||
Section 7. |
Termination by the Company Group for Cause | 5 | ||||
Section 8. |
Voluntary Termination; Retirement | 5 | ||||
Section 9. |
Release | 6 | ||||
Section 10. |
Restrictive Covenants | 6 | ||||
Section 11. |
Claims Procedures | 6 | ||||
Section 12. |
Compliance with Section 409A | 7 | ||||
Section 13. |
Withholding Taxes | 8 | ||||
Section 14. |
Parachute Payments | 8 | ||||
Section 15. |
Administration | 8 | ||||
Section 16. |
Amendment and Termination | 8 | ||||
Section 17. |
Other Provisions | 9 | ||||
EXHIBIT A |
A-1 |
ii
APARTMENT INCOME REIT CORP.
EXECUTIVE SEVERANCE POLICY
Section 1. Background. This Apartment Income REIT Corp. Executive Severance Policy has been adopted by the Compensation and Human Resources Committee to apply to selected Executives of the Company Group. Executives will be eligible for coverage under the Policy for the payment of severance benefits upon termination of employment under certain circumstances, subject to the conditions set forth below. This Policy shall be effective as of the Effective Date as provided herein.
This Policy supersedes any prior plan, policy or practice involving the payment of severance benefits to eligible Executives. While the Policy is in effect, any severance benefits provided to an eligible Executive must be paid pursuant to this Policy or pursuant to another express written agreement between the Company or any member of the Company Group and the eligible Executive (including but not limited to an employment agreement), which agreement must be signed by such Executive and a duly authorized officer of the Company or Company Group.
Section 2. Definitions. As used herein, the following terms shall have the following respective meanings:
2.1 Accrued Rights shall have the meaning given in Section 4.5 hereof.
2.2 Board means the Board of Directors of the Company.
2.3 Bonus means the short-term incentive bonus payable to Executive under the Company Groups short-term incentive (S compensation plan, which provides for annual cash incentive bonuses, or any successor bonus program approved by the Compensation Committee in which Executive participates from time to time.
2.4 Base Salary means the annual base salary in effect for the payroll period during which Executives employment is termi Bonuses, commissions, incentive pay and any taxable or nontaxable fringe benefits or payments are not included in the calculation of Base Salary.
2.5 Cause means the termination of an Executives employment because of the occurrence of any of the following, as deter by the Board in accordance with the procedure below:
(i) the refusal by the Executive to attempt in good faith to perform his or her duties as assigned to the Executive by the Chief Executive Officer (CEO) or to follow the lawful direction of the CEO (other than due to the Executives physical or mental incapacity); provided, however, that the CEO shall have provided the Executive with written notice of such failure and the Executive has been afforded at least fifteen (15) day to cure same;
( ) the Executives conviction of, or plea of guilty or nolo contendere to, a felony or any other serious crime involving moral turpitude or dishonesty;
(i) the Executives willfully engaging in misconduct in the performance of his or her duties for the Company Group (including fraud, embezzlement, securities law violations, a material violation of the Company Groups code of conduct or a material violation of other material written policies) that is demonstrably injurious to the Company Group, monetarily or otherwise;
(ii) the Executives willfully engaging in misconduct unrelated to the performance of his or her duties for the Company Group demonstrably injurious to the Company Group, monetarily or otherwise;
(iii) the Executives breach of any fiduciary obligation to the Company or Company Group or the Executives material breach obligation of confidentiality,
noncompetition or nonsolicitation; provided, however, that the CEO shall have provided the Executive with written notice of any such breach and the Executive shall have failed to cure such breach within fifteen (15) days of such notice.
For purposes of this Section 2.5, no act, or failure to act, on the part of the Executive shall be considered willful unless done, or omitted to be done, by him or her in bad faith and without reasonable belief that his or her action or omission was in the best interest of the Company Group. No action or inaction by the Executive shall be treated as Cause if it was taken at the direction of counsel to the Company or Company Group. Any termination shall be treated as a termination for Cause only if (A) the Executive is given at least five (5) business days written notice of termination specifying the allege Cause event and shall have the opportunity to appear (with counsel) before the Chairman of the Compensation and Human Resources Committee to present information regarding his or her views on the Cause event, and (B) after such hearing, Executive is terminated for Cause by the CEO after review by the Chairman of the Compensation and Human Resources Committee. After providing the notice of termination in the foregoing sentence, the CEO may suspend the Executive with full pay and benefits until a final determination pursuant to this section has been made.
2.6 Change in Control means the consummation of any of the following events:
(i) An acquisition (other than directly from the Company) of any voting securities of the Company (the Voting Securities) b person (as the term person is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the Exchang Act)) immediately after which such person has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) (Beneficial Ownership) of 50% or more of the combined voting power of the Companys then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities that are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition that would cause a Change in Control. Non-Control Acquisition shall mean an acquisition (A) by or under an employee benefit plan (or a trust forming a part thereof) maintained by (1) the Company or (2) any corporation, partnership or other person of which a majority of voting power or its equity securities or equity interest is owned directly or indirectly by the Company or in which the Company serves as a general partner or manager (a Subsidiary), (B) the Company or any Subsidiary, or (C) any person in connection with a Non-Control Transaction (as hereinafter defined). Non-Control Transaction shall mean a merger, consolidation, share exchange or reorganization involving the Company in which (1) the stockholders of the Company, immediately before such merger, consolidation, share exchange or reorganization, own, directly or indirectly immediately following such merger, consolidation, share exchange or reorganization, at least 50% of the combined voting power of the outstanding voting securities of the corporation that is the successor in such merger, consolidation, share exchange or reorganization (the Surviving Company) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation, share exchange or reorganization, and (2) th individuals who were members of the Board immediately prior to the execution of the agreement providing for such merger, consolidation, share exchange or reorganization constitute at least 50% of the members of the board of directors of the Surviving Company;
(ii) The individuals who constitute the Board as of the Effective Date (the Incumbent Board) cease for any reason to const least 50% of the Board; provided, however, that if the election, or nomination for election by the Companys stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; provided, further, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened election contest (as described in Rule 14a-11 promulgated under the Exchange Act) (an Election Contest) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board (a Proxy Contest) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(iii) The consummation of any of the following: (A) a merger, consolidation, share exchange or reorganization involving the Company (other than a Non-Control Transaction); (B) a complete liquidation or dissolution of the Company; or an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary).
2
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person (a Subject Person) acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company that, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, such Subject Person becomes the Beneficial Owner of any additional Voting Securities that increases the percentage of the then outstanding Voting Securities Beneficially Owned by such Subject Person, then a Change in Control shall occur.
2.7 Company means Apartment Income REIT Corp., a Maryland corporation.
2.8 Code means the Internal Revenue Code of 1986, as amended.
2.9 Company Group means the Company, the Partnership, AIMCO/Bethesda Holdings, Inc. and other entities through whi operations of the Company are conducted.
2.10 Compensation Committee means the Compensation and Human Resources Committee of the Board.
2.11 Date of Termination means the effective date of the relevant Executives termination of employment with the Company Group.
2.12 Disability means, in the reasonable and good faith judgment of the Company, the Executive is totally and permanently disabled and is unable to return to or perform his or her duties on a full-time basis.
2.13 Effective Date means December 14, 2020.
2.14 Executive means the following executive employees of the Company Group who are eligible to participate in the Policy: each Executive Vice President and also the Senior Vice President Chief Investment Officer as of the Effective Date, as determined on the records of the Company Group.
2.15 Good Reason means Executives voluntary resignation due to (i) a material reduction in Executives Base Salary; (ii) material diminution in Executives title or responsibilities; or (iii) relocation of Executives primary place of employment more than fifty miles; provided, however, that Executive may only terminate employment for Good Reason by delivering written notice to the Board within 90 days following the date on which Executive first knows of the event constituting Good Reason, which notice specifically identifies the facts and circumstances claimed by Executive to constitute Good Reason, and the Company Group has failed to cure such facts and circumstances within 30 days after receipt of such notice; and provided further, however, that if Executive is party to an employment agreement with the Company Group that provides a definition of Good Reason, such definition shall apply instead of the foregoing provisions of this Section 2.15.
2.16 Partnership means AIMCO Properties, L.P., a Delaware limited partnership.
2.17 Policy means this Apartment Income REIT Corp. Executive Severance Policy.
2.18 Pro-Rata Bonus means an amount equal to the product of (i) the Bonus, if any, that Executive would have earned for bonus cycle in which the Date of Termination occurs, subject to attainment of such corporate targets, and disregarding any individual performance targets, as shall be established by the Compensation Committee for such bonus cycle, and (ii) a fraction, the numerator of which is the number of days Executive was employed by the Company Group during the bonus cycle in which the Date of Termination occurs, and the denominator of which is the number of days in such bonus cycle. The Pro-Rata Bonus shall be paid on the date that Bonuses are normally paid, but in no event later than March 15th of the year following the year in which the Date of Termination occurs.
3
Section 3. Term of Policy.
The term of this Policy shall begin on the Effective Date and shall continue in effect until modified or terminated by the Company pursuant to Section 16 hereof.
Section 4. Termination by Company Group without Cause or by Executive for Good Reason.
If the Company Group terminates Executives employment during the term of the Policy without Cause, or if Executive terminates his or her employment during the term of the Policy for Good Reason, then, subject to Sections 9 and 10 below, Executive shall be entitled to the following rights and benefits under this Section 4:
4.1 Severance Payment. The Company Group will pay Executive an amount (the Severance Payment) equal to the sum of (A annual Base Salary for the calendar year of the Date of Termination, plus (B) the average annual Bonus paid to Executive in the most recent three (3) years (or, if the Executives employment period is less than three years, the average during the Executives employment period and, if the Executive has not been eligible for a Bonus in any prior years, then the Executives target annual Bonus for the year in which the Date of Termination occurs). The Severance Payment will be paid in one lump sum payment, less required withholdings, on the 50th day following the Date of Termination, subject to the requirements of Sections 9 and 10.
4.2 Treatment of Equity Awards. The vesting and exercise of any equity awards that may be held by Executive as of the Date Termination shall be determined in accordance with the applicable equity incentive plan and grant documentation for that Executive.
4.3 Continued Health Benefit Coverage. Until the earlier of eighteen (18) months following Executives Date of Termination date Executive becomes employed with another employer and is eligible to receive similar benefits under that employers health and welfare plans (the COBRA Subsidy Period), the Company Group shall pay 100% of the monthly COBRA premiums for the continued coverage of Executive and his or her covered dependents under the Company Groups medical, dental, prescription drug and vision care group health plans as in effect from time to time, provided Executive elects COBRA coverage and returns the enrollment documents within the specified timeframe under such plans. Such payments will
be paid monthly as such premium payments are due.
4.4 COBRA. Executive shall be eligible for continuation of coverage for Executive and Executives eligible dependents under COBRA continuation of coverage provisions of the Company Groups group health plans, at Executives sole expense at applicable COBRA rates, beginning upon the expiration of the COBRA Subsidy Period, for any remaining period required under COBRA.
4.5 Accrued Rights. As soon as administratively practicable following the Date of Termination, the Company Group will pay provide Executive with (i) all accrued but unpaid base salary through the Date of Termination, (ii) vacation pay accrued but not used in accordance wit the Company Groups vacation pay policy, (iii) any previously awarded but unpaid Bonus for a completed bonus cycle prior to the Date of Termination, (iv) any unreimbursed business expenses that are reimbursable under the Company Groups business expense policy, (v) all rights and benefits under employee benefit plans of the Company Group in which Executive is then participating, as provided under such plans, and (vi) any other payments as may be required under applicable law (collectively, the Accrued Rights).
4.6 No Additional Rights. Except as provided in this Section 4, Executives participation under any benefit plan, program, p arrangement sponsored or maintained by the Company Group shall cease and be terminated on the Date of Termination. Without limiting the generality of the foregoing, Executives eligibility for and active participation in any tax qualified 401(k) plan maintained by the Company Group will end as of the Date of Termination and Executive will earn no additional benefits under that plan after that date. Executive shall be treated as a terminated employee for purposes of all such benefit plans and programs effective as of the Date of Termination, and shall receive all payments and benefits due under such plans and programs in accordance with the terms and conditions thereof.
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Section 5. Termination without Cause in Connection with Change in Control.
In the event that the Company Group terminates the employment of Executive during the term of the Policy without Cause, or if Executive terminates his or her employment during the term of the Policy for Good Reason, and the applicable Date of Termination occurs (i) within six (6) month prior to and in connection with a Change in Control, or (ii) within twelve (12) months following such Change in Control, then, subject to Sections 9 and below, Executive shall be entitled to the following rights and benefits under this Section 5:
5.1 Enhanced Severance Payment. In lieu of the Severance Payment provided in Section 4.1, the Company Group will pay E a payment equal to two times the sum of (A) the annual Base Salary for the calendar year of the Date of Termination, and (B) the average annual cash performance bonus paid to Executive in the most recent three (3) years (or, if the Executives employment period is less than three years, the average during the Executives employment period and, if the Executive has not been eligible for a cash performance bonus in prior years, then the Executives target annual cash performance bonus for the year in which the Date of Termination occurs). The Enhanced Severance Payment will be paid in one lump sum payment, less required withholdings, on the 50th day following the Date of Termination, subject to the requirements of Sections 9 and 10.
5.2 Treatment of Equity Awards, Continued Health Benefit Coverage, COBRA, Accrued Rights, No Additional Rights. The provisions of Sections 4.2, 4.3,4.4, 4.5 and 4.6 will apply to terminations of employment described in this Section 5; provided, however, that any equity awards held by the Executive as of his or her Date of Termination under this Section 5 will be 100% vested upon such termination if such Date of Termination occurs within twelve (12) months after a Change in Control.
Section 6. Termination by Reason of Death or Disability.
In the event that the employment of Executive is terminated during the term of the Policy by reason of Executives death or Disability, then, subject to Sections 9 and 10 below, Executive shall be entitled to the following rights and benefits under this Section 6:
6.1 Bonus. The Company Group will pay Executive the Pro-Rata Bonus, which shall be paid on the date that Bonuses are nor paid, but in no event later than March l5th of the year following the year in which the Date of Termination occurs.
6.2 Treatment of Equity Awards. The vesting and exercise of any equity awards that may be held by Executive as of the Date Termination shall be determined in accordance with the applicable equity incentive plan and grant documentation for that Executive.
6.3 Accrued Rights. As soon as administratively practicable following the Date of Termination, the Company Group will pay provide Executive with the Accrued Rights.
Section 7. Termination by the Company Group for Cause.
The Company Group may terminate the employment of the Executive for any reason and at any time, with or without Cause. In the event that the Company Group terminates the employment of Executive during the term of the Policy for Cause, the Company Group will pay or provide Executive with the Accrued Rights as soon as administratively practicable after such Date of Termination.
Section 8. Voluntary Termination; Retirement.
Executive shall not be entitled to any payments or benefits under this Policy by reason of Executives voluntary termination of employment from the Company Group. Any payments or benefits to a retiring executive shall be handled on an individualized basis or in accordance with a separate policy. This Policy shall have no effect
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on the rights and benefits to which an Executive is entitled upon retirement under (without limitation) any retirement or savings plan of the Company Group, nor under any of the Companys equity incentive compensation plans (including applicable award agreements), each of which shall be governed exclusively by the terms of such plans and agreements, as applicable.
Section 9. Release.
To the extent permitted under applicable law, as a condition precedent to receiving any payments and benefits as provided under this Policy, Executive must execute a general release of claims (the Release), substantially in the form attached as Exhibit A hereto, and such Release must become irrevocable, by the sixtieth (60th) day following the Date of Termination. If Executive fails to execute and deliver the Release, or revokes the Release, Executive agrees that he or she shall not be entitled to receive the payments and benefits described herein (except for the Accrued Rights and COBRA rights at the Executives expense). For purposes of this Policy, the Release shall be considered to have been executed by Executive if it is signed by Executives legal representative in the case of legal incompetence or on behalf of Executives estate in the case of Executives death.
Section 10. Restrictive Covenants.
10.1 Restrictive Covenant Agreement. Each Executive, as a condition of participation in this Policy, shall be required to have to and executed the Non-Solicitation and Non-Disclosure Agreement or the Non-Competition and Non-Solicitation Agreement, as appropriate for the Executives position (the Restrictive Agreement), as determined and provided by the Company Group. In the event of a breach by an Executive of the Restrictive Agreement, the Executive will forfeit any right to separation pay or separation benefits under this Policy, will not be entitled to any further payment or right under this Policy and, with respect to any separation payment that has been made to or on behalf of the Executive under this Policy, the Executive will repay to the Company Group the amount of any such prior payment plus interest on such amount at the prime rate of interest reported in the Wall Street Journal as of the date of such prior payment through the date that the amount is repaid to the Company Group, such payment to be due within ten (10) days after written demand from the Company Group.
10.2 Transfer of Duties. Executive must cooperate with the orderly transfer of his or her duties as requested by the Company
10.3 Return of Property. Executive must return all Company property by a date specified by the Company Group.
Section 11. Claims Procedures.
A Participant or the Participants beneficiary must make any claim with respect to any disputed benefits under the Plan as follows:
11.1 Claims For Benefits. Claims for disputed benefits under the Plan must be made in writing to the Compensation Committee such claim for disputed benefits is wholly or partially denied, the Compensation Committee will, within a reasonable period of time, but no later than ninety (90) days after receipt of the claim, notify the claimant of the denial of the claim. Such notice of denial will: (i) be in writing; (ii) be written in a manner calculated to be understood by the claimant; and (iii) contain (A) the specific reason or reasons for denial of the claim, (B) a specific reference the pertinent Plan provisions upon which the denial is based, (C) a description of any additional material or information necessary for the claimant to perfect the claim, along with an explanation of why such material or information is necessary, and (D) an explanation of the Plans claim review procedur
11.2 Request For Review Of Denial Of Claim. Within one hundred twenty (120) days of the receipt by the claimant of the wr notice of denial of the claim, or such later time as may be deemed reasonable by the Compensation Committee, taking into account the nature of the benefit subject to the claim and any other attendant circumstances, or if the claim has not been granted within a reasonable period of time, the claimant may file a written request with the Compensation Committee that it conduct a full and fair review of the denial of the claimants claim for benefits, including the conducting of a hearing, if deemed necessary by the Compensation
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Committee. In connection with the claimants appeal of the denial of his or her benefit, the claimant may review documents reasonably determined by the Compensation Committee to be pertinent, and may submit issues and comments in writing.
Section 12. Compliance with Section 409.A
12.1 The Company Group and Executive intend that, to the maximum extent possible, any amounts paid pursuant to this Polic qualify as a short-term deferral pursuant to Code Section 409A or as separation pay exempt from Code Section 409A. Without limiting the foregoing, t the extent that the provisions of Code Section 409A or any Treasury regulations promulgated thereunder are applicable to any amounts payable hereunder, the Company Group and Executive intend that this Policy will meet the requirements of such Code section and regulations and that the provisions hereof will be interpreted in a manner that is consistent with such intent. Executive will cooperate with the Company Group in taking such actions as the Company Group may reasonably request to assure that this Policy will meet the requirements of Code Section 409A and any regulations promulgated thereunder.
12.2 Unless otherwise permitted under Code Section 409A, all in-kind benefits, expenses or other reimbursements paid purs this Policy that are taxable income to Executive (i) will be paid no later than the end of the calendar year next following the calendar year in which Executive incurs such expense; (ii) will not be subject to liquidation or exchange for another benefit; and (iii) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.
12.3 For purposes of Code Section 409A, Executives right to receive any installment payments under this Policy (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.
12.4 With respect to any amount that becomes payable to Executive under this Policy upon Executives separation from serv as defined below, for any reason, notwithstanding any other provision of this Policy to the contrary, if the Company determines in good faith that
Executive is a specified employee under Code Section 409A then, to the extent required under Code Section 409A, any amount that otherwise would payable to Executive during the six (6) month period following Executives separation from service shall be suspended until the lapse of such six (6) month period (or, if earlier, the date of death of Executive). The amount that otherwise would be payable to Executive during such period of suspension shall be paid in a single payment on the day following the end of such six (6) month period (or, if such day is not a business day, on the nex succeeding business day) or within thirty (30) days following the death of Executive during such six (6) month period, provided that the death of Executive during such six (6) month period shall not cause the acceleration of any amount that otherwise would be payable on any date during such six (6) month period following the date of Executives death. Any amounts not subject to the suspension described in the preceding sentence shall be paid as otherwise provided in this Policy. A separation from service means a separation from service with the Company Group and all other persons or entities with whom the members of the Company Group would be considered a single employer under Section 414(b) or 414(c) of the Code, applying the eighty percent (80%) threshold used in such Code sections and the Treasury Regulations thereunder, all within the meaning of Code Section 409A.
12.5 To the extent required to avoid the imposition of additional taxes and penalties under Code Section 409A, amounts pay under this Policy on termination of employment will not be paid until Executive experiences a separation from service within the meaning of Code Section 409A as specified above.
12.6 In no event will the Company Group be liable for any additional tax, interest or penalties that may be imposed on Executi under Code Section 409A or for any damages for failing to comply with Code Section 409A.
12.7 Notwithstanding any provision of this Policy to the contrary, in no event shall the timing of Executives execution of the Release, directly or indirectly, result in Executive designating the calendar year of payment, and if a payment pursuant to this Policy that is subject to execution of the Release could be made in more than one (1) taxable year, based on timing of the execution of the Release, payment shall be made in the later taxable year.
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Section 13. Withholding Taxes.
All compensation payable pursuant to this Policy shall be subject to reduction by all applicable withholding, social security and other federal, state and local taxes and deductions, and the Company Group shall be authorized to make all such withholdings to the extent it determines necessary under applicable law.
Section 14. Parachute Payments.
Notwithstanding anything in this Policy to the contrary, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Code Section 280G(b)(2)) to or for the benefit of Executive, whether paid or payable pursuant to this Policy or otherwise would be subject to the excise tax imposed by Code Section 4999, then Executive shall be entitled to receive (i) the greatest amount so that n portion the payments shall be an excess parachute payment (the Limited Amount), or (ii) if the amount of payments otherwise paid or provided (witho regard to clause (i)) reduced by all taxes applicable thereto (including, for the avoidance of doubt, the excise tax imposed by Code Section 4999) would b greater than the Limited Amount reduced by all taxes applicable thereto, then the amount of payments shall be the amount otherwise payable. Any reductions described in the preceding sentence shall be done in the manner that is least economically disadvantageous to Executive. Where the decision to cut back between two (2) amounts is economically equivalent, but the amounts are payable at different times, the amounts will be reduced on a pro rat basis.
Section 15. Administration.
The Compensation Committee is responsible for the administration of this Policy and shall have all powers and duties necessary to fulfill its responsibilities. The Compensation Committee shall determine any and all questions of fact, resolve all questions of interpretation of the Policy which may arise, and exercise all other powers and discretion necessary to be exercised under the terms of the Policy which it is herein given or for which no contrary provision is made. The Compensation Committee shall have full power and discretion to interpret the Policy and related documents, to resolve ambiguities, inconsistencies and omissions, to determine any question of fact, and to determine the rights and benefits, if any, of any Executive or other employee, in accordance with the provisions of the Policy. The Compensation Committee shall also have the authority to waive any restrictions with respect to participation in the Policy or the maturity of benefits under the Policy for any specific Executive where, in the opinion of the Compensation Committee, it is reasonable to do so and does not prejudice the rights of the particular Executive under the Policy and it does not cause the Executive to be subject to adverse tax treatment under Code Section 409A. The Compensation Committees decision with respect to any matter shall be final and binding on all parties concerned. The validity of any such interpretation, construction, decision, or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly arbitrary or capricious. The Compensation Committee may, from time to time, by action of its appropriate officers, delegate to designated persons or entities the right to exercise any of its powers or the obligation to carry out its duties under the Policy.
Section 16. Amendment and Termination.
This Policy will continue in effect, subject to amendment, until terminated by the Board. The Board may terminate or amend the Policy at any time except that: ninety (90) days prior notice to affected Participants will be required for any termination of the Plan or amendment that materially and adversely affects the rights of such Participants, no termination or amendment will materially and adversely affect the rights of any Participant whose employment terminated prior to the date of such amendment or termination, and a Participants right to receive payments or benefits with respect to a termination occurring in connection with or within twelve (12) months after a Change of Control shall not be adversely affected by an amendment or termination of the Plan that is made within 6 months before or twelve (12) months after the Change of Control date.
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Section 17. Other Provisions.
17.1 Acknowledgment. Executive acknowledges that this Policy does not constitute a contract of employment or impose on t Company Group any obligation to retain Executive as an employee and that this Policy does not prevent Executive from terminating employment at any time.
17.2 Non-Duplication of Benefits. The benefits under this Policy are not intended to duplicate any other benefits provided by Company Group in connection with the termination of an employees employment, such as wage replacement benefits, pay-in-lieu-of-notice, severance pay, or similar benefits under any other benefit plans, severance programs, employment contracts, or applicable federal or state laws, such as the WARN Acts. Should such other benefits be payable, the benefits under this Policy will be reduced accordingly or, alternatively, benefits previously paid under this Policy will be treated as having been paid to satisfy such other benefit obligations. In either case, the Company Group will determine how to apply this provision and may override other provisions in this Policy in doing so.
17.3 Arbitration. Subject to satisfaction of the Claims Procedures set forth in Section 11, any dispute or controversy arising in connection with this Policy or the Executives employment with the Company Group shall be subject to the Arbitration Agreement entered into by the Company Group and the Executive.
17.4 Construction. This Policy shall be governed and enforced in accordance with the laws of the State of Colorado, and any litigation between the parties relating to this Policy shall be conducted in the courts of the City and County of Denver, including where necessary for federal court matters.
17.5 Severability. If any provision of this Policy, or the application of such provision to any person or in any circumstance, is by a court of competent jurisdiction to be unenforceable for any reason, such provision may be modified or severed from this Policy to the extent necessary to make such provision unenforceable against such person or in such circumstance. Neither the unenforceability of such provision nor the modification or severance of such provision will affect (i) the enforceability of any other provision of this Policy or (ii) the enforceability of such provision against any person or in any circumstance other than those against or in which such provision is found to be unenforceable.
17.6 Records. The records of the Company Group with respect to the determination of eligibility, employment history, Accrue Rights, Base Salary, Bonus, and any and all other relevant matters shall be conclusive for all purposes of this Policy.
17.7 Entire Agreement. The Company and Executive understand and agree that this Policy shall constitute the entire underst between them regarding the subject matter contained herein, and that all prior understandings or agreements regarding these matters are hereby superseded and replaced; except as may be specifically provided in any employment agreement between the Company Group and Executive.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned, being duly authorized by the Company, has signed this Apartment Income REIT Corp. Executive Severance Policy to be effective as of the date first above-written.
APARTMENT INCOME REIT CORP. |
By: |
Title: |
EXHIBIT A
SEPARATION AGREEMENT AND GENERAL RELEASE
The purpose of this Separation Agreement and General Release (this Agreement) is to confirm the terms regarding your separation of employment from an affiliate or subsidiary of Apartment Income REIT Corp. (AIR or the Company).
Provided that you sign this Agreement, do not revoke it, and comply with all of its terms and the terms of the Apartment Income REIT Corp. Executive Severance Policy (the Policy), the Company will provide the severance benefits described below to you (the Severance Benefits):
1. | Definitions. |
a. | You and Your shall refer to . |
b. | The Separation Date shall be , 202 _. |
c. | The Severance Payment shall be $ , which will be paid in one lump sum payment, less applicable tax d. You are over forty (40) years of age, and the provisions of Section 6.c. hereof apply to this Agreement. The additional amount paid to Yo in consideration for Your execution of a waiver under the Age Discrimination in Employment Act (the ADEA Amount) shall be $ , such amount being equal to 1 week of Your current base pay. |
e. | If You timely elect COBRA coverage for Yourself and Your covered dependents following the Separation Date, the Company will pay 100% of the premiums required for COBRA continuation coverage for You and Your covered dependents for 18 months (the COBRA Benefit). |
2. | Separation of Employment. Your employment with AIR will terminate effective as of the Separation Date. From and after the Separation Date, You shall have no authority and shall not represent Yourself as an employee or agent of any of the AIR Parties (as defined below). |
3. | Severance Payment and Benefits. In exchange for the mutual covenants set forth in this Agreement and in the Policy, as soon as practical after Companys receipt of a signed original counterpart of this Agreement (the Effective Date) and after the tenth (10th) day following Your execution of this Agreement, AIR shall: |
a. | Provide You with separation pay equal to the Severance Payment plus the ADEA Amount in one lump sum payment on the Companys next regularly scheduled payroll date. Additionally, AIR shall provide You with the COBRA Benefit should you timely elect COBRA coverage following the Separation Date, as set forth in Section 1(e) above. Subject to the timing restrictions above, payment may be made in accordance with the Companys ordinary payroll practices at the conclusion of regularly scheduled pay periods. |
b. | Additionally, regardless of whether You sign this Agreement: |
(i) | You will be paid all accrued and unused vacation. |
(ii) | If You are covered by the Companys medical and/or dental insurance plans on the Separation Date, these benefits will continue through the end of the month of the Separation Date. You will have the right to continue Your medical insurance thereafter pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (C OBRA). The COBRA qualifying event shall be deemed to have occurred on the Separation Date. If this Agreement is not signed |
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or does not become effective, following the end of the month of the Separation Date, You shall be required to pay the full COBRA premium rate. |
You acknowledge and agree that the separation pay provided under this Section 3(a) of this Agreement (hereafter, the Separation Pay) is not otherwise due or owing to You under any employment agreement (oral or written) with any of the AIR Parties or Company policy or practice, and that the foregoing separation pay to be provided to You is not intended to, and shall not constitute, a severance plan, and shall confer no benefit on anyone other than the parties hereto. You further acknowledge that except for (i) th specific financial consideration set forth in this Agreement, and (ii) any accrued but unused vacation time as of the Separation Date, which will be paid to You promptly, You are not entitled to any additional consideration from the Company or any of the AIR Parties.
4. | Return of Company Property, Confidentiality, Offset of Debt. You expressly acknowledge and agree to the following: |
a. | that You have returned to AIR all AIR Party documents (and any copies thereof) and property (including without limitation all keys, badges, credit cards, phone cards, cellular phones, computers, software, etc.); and |
b. | that all information relating in any way to this Agreement, including the terms and amount of financial consideration provided for in this Agreement, shall be held confidential by You and shall not be publicized or disclosed to any person (other than an immediate family member, legal counsel or financial advisor, provided that any such individual to whom disclosure is made agrees to be bound by these confidentiality obligations), business entity or government agency (except as mandated by state or federal law). Notwithstanding any provision herein to the contrary, You (and Your representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment of any and all transaction(s) contemplated herein and all materials of any kind (including opinions or other tax analyses) that are or have been provided to You (or Your representative or other agent) relating to such tax treatment. For purposes of this Agreement, tax treatment means the federal income tax treatment of the Separation Pay. This authorization of disclosure is not intended to permit disclosure of any other information, including but not limited to (i) any portion of any materials to the extent not related to the tax treatment of the Separation Pay, (ii) the existence or status of any negotiations, and (iii) any other term or detail not related to the tax treatment of the Separation Pay; and |
c. | that any and all amounts for which You are indebted to the Company may be offset and deducted by the Company from any Separation Amount otherwise payable hereunder prior to paying the Separation Amount to You, including, without limitation, any amount pledged as recourse for a loan pursuant to the terms of the employee stock purchase plan and/or executive stock purchase program sponsored by the Company; provided, however, that this section shall apply only if other existing documentation of the amount(s) owed does not specifically prohibit such offset. |
5. | Non-Competition and Non-Solicitation Agreement / Non-Solicitation and Non-Disclosure Agreement. You expressly acknowledge and agree that the Non-Competition and Non-Solicitation Agreement / Non-Solicitation and Non-Disclosure Agreement executed by You and dated which is incorporated herein by reference, shall remain in full force and effect. |
6. | Release of Claims. You hereby agree and acknowledge that by signing this Agreement You, on behalf of Yourself and Your heirs, successors, agents, assigns, executors, administrators, dependents and family members (collectively, including You, the Employee Parties) hereby generally, completely, absolutely |
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and unconditionally release, waive, acquit, forever discharge, indemnify and hold harmless the AIR Parties (as defined below) from and against any and all Claims (as defined below) against any or all of the AIR Parties whatsoever for any alleged action, inaction or
circumstance existing or arising from the beginning of time through the date this Agreement is executed by all parties. Your waiver and release herein is intended to bar any form of Claim against any or all of the AIR Parties seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages or any other form of monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys fees and any other costs) against any or all of the AIR Parties, for any alleged action, inaction or circumstance existing or arising through the date this Agreement is executed by all parties. The foregoing waiver and release constitutes a FULL AND FINAL RELEASE OF ALL CLAIMS, and shall apply to all known and unknown claims or damages existing as of the date this Agreement is
executed by all parties.
a. | Without limiting the foregoing general waiver and release, on behalf of the Employee Parties, You specifically waive and release any and all of the AIR Parties from any Claim arising from or related to Your employment relationship with the Company or the termination thereof, including, without limitation: |
(i) | Claims under any local, state, federal or foreign discrimination, fair employment practices or other employment related statute, regulation or executive order (as they may have been amended through the Effective Date) prohibiting discrimination or harassment based upon any protected status including, without limitation, race, religion, citizenship, national origin, age, gender, genetic carrier status, marital status, disability, veteran status or sexual orientation. Without limitation, specifically included in this paragraph are any Claims arising under the federal Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Civil Rights Acts of 1866 and 1871, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the Immigration Reform and Control Act, the Americans With Disabilities Act and any similar local, state, federal or foreign statute or law. |
(ii) | Claims under any other local, state, federal or foreign employment related statute, regulation or executive order (as they may have been amended through the Effective Date) relating to wages, hours or any other terms and conditions of employment. Without limitation, specifically included in this paragraph are any Claims arising under the Fair Labor Standards Act, the Family and Medical Leave Act of 1993, the National Labor Relations Act, the Employee Retirement Income Security Act of 1974, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and any similar local, state, federal or foreign statute or law. |
(iii) | Claims under any local, state, federal or foreign common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation, deceit, fraud or negligence. |
(iv) | Any other Claim arising under local, state, or federal law. |
b. | Notwithstanding the foregoing, this Section 6 does not release the Company from any obligation expressly set forth in this Agreement. You acknowledge and agree that, but for providing this waiver and release, You would not be receiving the Separation Pay being provided to You under the terms of this Agreement. |
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c. | You explicitly acknowledge that if You are over forty (40) years of age, You have specific rights under the Age Discrimination in Employment Act (ADEA), which prohibits discrimination on the basis of age, and the releases set forth in this Section 6 are intended to release any right that You may have to file a claim against any or all of the AIR Parties alleging discrimination on the basis of age. It is the Companys desire and intent to make certain that You fully understand the provisions and effects of this Agreement. To that end, You have been encouraged and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Agreement. Consistent with the provisions of the Older Worker Benefits Protection Act (OWBPA), the Company is providing You with forty-five (45) days in which to consider and accept the terms of this Agreement by signing below and returning it to Patricia Nelson, Vice President of Human Resources in Denver, Colorado. In addition, You may rescind Your assent to this Agreement within seven (7) days after You sign it. To do so, You must deliver a notice of rescission to Patricia Nelson, Vice President of Human Resources. To be effective, such rescission must be hand delivered or postmarked within the seven (7) day period and sent by certified mail, return receipt requested, to Patricia Nelson, Vice President of Human Resources, 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237. By executing this Agreement, You are acknowledging that You have been afforded sufficient time to understand the terms and effects of this Agreement, that Your agreements and obligations hereunder are made voluntarily, knowingly and without duress, and that neither any of the AIR Parties nor their agents or representatives have made any representations inconsistent with the provisions of this Agreement. |
Nothing in this Agreement is intended to, or shall, interfere with Your rights under federal, state, or local civil rights or employment discrimination laws to file or otherwise institute a charge of discrimination, to participate in a proceeding with any appropriate federal, state, or local government agency enforcing discrimination laws, or to cooperate with any such agency in its investigation, none of which shall constitute a breach of this Agreement. You shall not, however, be entitled to any relief, recovery, or monies in connection with any such action or investigation brought against the Company, regardless of who filed or initiated any such complaint, charge, or proceeding.
7. | Agreement to Cooperate |
As further consideration for this Agreement, You agree to cooperate fully with the Company in connection with any litigation, investigation or prosecution for which the Company, in its sole subjective discretion, determines that Your cooperation is necessary. This cooperation obligation includes, without limitation, meeting and cooperating with the Companys attorneys and other personnel upon reasonable notice and for reasonable durations of time; reviewing documents; sitting for depositions and other testimony on the Companys behalf; and any other reasonable request from the Company.
8. | Miscellaneous. |
For the purposes hereof, the term Claims shall mean any and all claims, demands, debts, liens, agreements, promises causes of action, liability, damages, costs, and expenses of any kind and nature whatsoever, whether arising under state, federal or local law, administrative rule or regulation, common law, contract, tort, or in equity, known or unknown, whether accrued, contingent, inchoate or otherwise, suspected or unsuspected, raised affirmatively or by way of defense or offset, including, without limitation any consequences flowing, resulting, or which might result therefrom.
For the purposes hereof, the term AIR Parties shall mean the Company and any and all of its subsidiaries, affiliates, divisions, acquiring and/or ownership entities, parent, associated or allied companies, corporations, firms, partnerships, management companies, and/or organizations, purchasers of assets or stock, investors, joint ventures, and any related entities (including, without limitation, any management company and its subsidiaries and affiliates), and the shareholders (past and present), successors, predecessors, counsel, assigns, board members, insurers, officers, partners, directors, joint venturers, managers, members, fiduciaries, trustees, agents, representatives, counsel or employees thereof jointly and severally, in both their personal and corporate capacities. The AIR Parties are hereby made third party beneficiaries of this Agreement.
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This Agreement contains the entire agreement and understanding by and between You and Company with respect to matters set forth herein. No change, amendment or modification herein hereto shall be valid or binding unless the same is in writing and signed by the party intended to be bound. No waiver of any provision or any particular breach or default of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any provision or any particular breach or default of this Agreement at any time shall be deemed a waiver of any other provision or prior or subsequent breach or default of this Agreement at such time or be deemed a valid waiver of such provision at any other time. No failure or delay in exercising any right under this Agreement shall operate as a waiver thereof or of any other right, and the failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of any original violation. No single or partial exercise by any party of any right, power or remedy will preclude any other or future exercise thereof or of any other remedy. A determination that any provision of this Agreement is prohibited by law or unenforceable shall not affect the validity or enforceability of any other provision of this Agreement.
Any controversy, dispute, or Claim of any nature arising out of, in connection with, or in relation to the interpretation, performance or breach of this Agreement, including any Claim based on contract, tort or statute, shall be resolved at the written request of any party to this Agreement by binding arbitration. The arbitration shall be administered in accordance with the then current National Rules for the Resolution of Employment Disputes of the American Arbitration Association. Any matter to be settled by arbitration shall be submitted to the American Arbitration Association in Denver, Colorado. The parties shall attempt to designate one arbitrator from the American Arbitration Association. If they are unable to do so, then the American Arbitration Association shall designate an arbitrator. The arbitration shall be final and binding, and enforceable in any court of competent jurisdiction. Notwithstanding anything herein to the contrary, this arbitration provision shall not prevent either You or the Company from seeking and obtaining equitable relief on a temporary or permanent basis, including, without limitation, a temporary restraining order, a preliminary or permanent injunction or similar equitable relief from a court of competent jurisdiction by instituting a legal action or other court proceeding in order to protect or enforce the rights of either under this Agreement or to prevent irreparable harm and injury, including, without limitation, enforcement of the provisions of Section 4 of this Agreement. The courts jurisdiction over any such equitable matter, however, shall be expressly limited only to the temporary, preliminary, or permanent equitable relief sought, and otherwise all Claims between You and the Company shall be determined through final and binding arbitration as described above.
This Agreement shall be governed by, and interpreted in accordance with, the laws of the state of Colorado without reference to its conflict of laws rules. This Agreement may be executed by facsimile and in any number of counterparts; all such counterparts shall be deemed to constitute one and the same instrument, and each counterpart (whether an original, a facsimile or other copy) shall be deemed an original hereof. This Agreement shall not be valid unless accepted in writing, by You, as evidenced by Your signature below, and returned on or before , 2020.
If the foregoing correctly sets forth our understanding, please sign, date and return the enclosed copy of this Agreement to Company. This Agreement may be executed in counterpart.
CONFIRMED, CONSENTED AND AGREED TO BY YOU: | ||||||
Date: | ||||||
By: | Date: |
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Exhibit 10.9
APARTMENT INCOME REIT CORP.
2007 STOCK AWARD AND INCENTIVE PLAN
Apartment Income REIT Corp., a Maryland corporation, has adopted the Apartment Income REIT Corp. 2007 Stock Award and Incentive Plan (the Plan), adopted on December 14, 2020, for the benefit of eligible employees, consultants, advisors and directors of the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries (each as defined below).
ARTICLE 1
PURPOSE OF PLAN; DEFINITIONS
1.1 Purpose. The purpose of the Plan is to reinforce the long-term commitment to the Companys success of those officers (including officers who are directors of the Company), employees, independent directors, consultants and advisors of the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries who are or will be responsible for such success; to facilitate the ownership of the Companys stock by such individuals, thereby reinforcing the identity of their interests with those of the Companys stockholders; and to assist the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries in attracting and retaining officers and employees, directors and consultants and advisors with experience and ability.
1.2 Definitions. For purposes of the Plan, the following terms shall be defined as set forth below:
(a) Administrator means the Board, or if the Board does not administer the Plan, the Committee in accordance with Article 2.
(b) Board means the Board of Directors of the Company.
(c) Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(d) Committee means the Compensation and Human Resources Committee of the Board. If at any time the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Committee.
(e) Company means Apartment Income REIT Corp., a Maryland corporation (or any successor corporation).
(f) Company Employee means any officer or employee (as defined in accordance with Section 3401(c) of the Code) of the Company, or of any corporation that is then a Company Subsidiary.
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(g) Company Subsidiaries means any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Except with respect to Incentive Stock Options, Company Subsidiary shall also mean any partnership in which the Company and/or any Company Subsidiary owns more than fifty percent (50%) of the capital or profits interests; provided, however, that Company Subsidiary shall not include the Partnership or any Partnership Subsidiary.
(h) Deferred Stock means an award made pursuant to Article 7 below of the right to receive Stock at the end of a specified deferral period.
(i) Effective Date shall mean the date provided pursuant to Article 12.
(j) Eligible Persons means any person eligible to participate in the Plan pursuant to Article 4.1 including Independent Directors.
(k) Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
(l) Fair Market Value means, as of any given date, with respect to any awards granted hereunder (i) if the Shares are admitted to trading on a national securities exchange, fair market value of the Shares on any date shall be the closing sale price reported for the Shares on such exchange on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, (ii) if the Shares are admitted to quotation on the National Association of Securities Dealers Automated Quotation (Nasdaq) System or other comparable quotation system and have been designated as a National Market System (NMS) security, fair market value of the Shares on any date shall be the closing sale price reported for the Shares on such system on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, or (iii) if the Shares are admitted to quotation on the Nasdaq System but have not been designated as an NMS security, fair market value of the Shares on any date shall be the average of the highest bid and lowest asked prices of the Shares on such system on such date or, if no bid and ask prices were reported on such date, on the last date preceding such date on which both bid and ask prices were reported.
(m) Incentive Stock Option means any Stock Option intended to be designated as an incentive stock option within the meaning of Section 422 of the Code.
(n) Independent Director means a member of the Board who is not a Company Employee or a Partnership Employee.
(o) Non-Qualified Stock Option means any Stock Option that is not an Incentive Stock Option, including any Stock Option that provides (as of the time such option is granted) that it will not be treated as an Incentive Stock Option.
(p) Participant means any Eligible Person, or any consultant or advisor to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary selected by the Administrator, pursuant to the Administrators authority in Article 2 below, to receive
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grants of Stock Options, Stock Appreciation Rights, Restricted Stock awards, Deferred Stock awards, Performance Shares or any combination of the foregoing.
(q) Partnership means AIMCO Properties, L.P., a Delaware limited partnership.
(r) Partnership Employee means any officer or employee (as defined in accordance with Section 3401(c) of the Code) of the Partnership, or any entity that is then a Partnership Subsidiary.
(s) Partnership Subsidiary means any partnership or limited liability company in any unbroken chain of partnerships or limited liability companies beginning with the Partnership if each of the partnerships or limited liability companies other than the last partnership or limited liability company in the unbroken chain then owns more than fifty percent (50%) of the capital or profits interests in one of the other partnerships or limited liability companies. Partnership Subsidiary shall also mean any corporation in which the Partnership and/or any Partnership Subsidiary owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock.
(t) Performance Share means an award of shares of Stock pursuant to Article 7 that is subject to restrictions based upon the attainment of specified performance objectives.
(u) Restricted Stock means an award granted pursuant to Article 7 of shares of Stock subject to certain restrictions.
(v) Stock means the Class A Common Stock of the Company, par value $.01 per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any warrants, options or other rights to purchase Class A Common Stock. Debt securities of the Company convertible into Class A Common Stock shall be deemed equity securities of the Company.
(w) Stock Appreciation Right means the right pursuant to an award granted under Article 6 to receive an amount equal to the difference between (A) the Fair Market Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the shares of Stock covered by such right or such portion thereof, and (B) the aggregate exercise price of such right or such portion thereof.
(x) Stock Option means any option to purchase shares of Stock granted pursuant to Article 5.
(y) Stock Ownership Limit means the restrictions on ownership and transfer of Stock provided in Section 3.4 of the Companys Charter.
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ARTICLE 2
ADMINISTRATION
2.1 Administrator. The Plan shall be administered by the Board or by a Committee which shall be appointed by the Board and which shall serve at the pleasure of the Board. To the extent necessary and desirable, the Committee shall be composed entirely of individuals who meet the qualifications referred to in Section 162(m) of the Code, Rule 16b-3 under the Exchange Act and the applicable stock exchanges.
2.2 Duties and Powers of Administrator. The Administrator shall have the power and authority to grant to Eligible Persons, pursuant to the terms of the Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares, Deferred Stock, or any combination of the foregoing. In particular, the Administrator shall have the authority to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder and in its discretion, to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan.
2.3 Delegation of Authority. The Administrator may in his sole and absolute discretion delegate to the Chief Financial Officer of the Company or the Secretary of the Company, or both, any or all of the administrative duties and authority of the Administrator under this Plan, other than the authority to (a) make grants under this Plan to employees who are officers of the Company within the meaning of Rule 16(a)-1(b) of the Exchange Act or whose total compensation is required to be reported to the Companys stockholders under the Exchange Act, (b) determine the price, timing or amount of such grants or (c) determine any other matter required by Rule 16b-3 or Section 162(m) of the Code to be determined in the sole and absolute discretion of the Administrator.
ARTICLE 3
STOCK SUBJECT TO PLAN
3.1 Number and Source of Shares. Subject to Article 3.3, the total number of shares of Stock reserved and available for issuance under the Plan shall be 240,319 shares. Such shares of Stock may consist, in whole or in part, of treasury shares, authorized and unissued shares or shares of Stock reacquired by the Company. If any shares of Stock subject to an award granted hereunder are forfeited, cancelled, exchanged or surrendered or if an award granted hereunder terminates or expires without a distribution of shares of Stock to the Participant, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, such shares shall again be available for awards under the Plan. If shares of Stock are surrendered or withheld as payment of either the exercise price of an award granted hereunder and/or withholding taxes in respect of such an award, such shares of Stock shall not be returned to the Plan and shall not be available for future awards under the Plan. Upon the exercise of any award granted in tandem with any other award, such related award shall be cancelled to the extent of the number of shares of Stock as to which the award is exercised and, notwithstanding the foregoing, such number of
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shares of Stock shall no longer be available for awards under the Plan. Upon the exercise of a Stock Appreciation Right, the number of shares of Stock reserved and available for issuance under the Plan shall be reduced by the full number of shares of Stock with respect to which such award is being exercised.
3.2 Limit on Incentive Stock Option Grants. In no event will more than 240,319 shares of Stock be available for issuance pursuant to the exercise of Incentive Stock Options, subject to adjustment as provided in this Article 3.
3.3 Limit on Awards Granted Pursuant to Article 7. The aggregate number of shares of Stock as to which Restricted Stock, Deferred Stock and Performance Shares may be granted pursuant to the Plan may not, subject to adjustment as provided in this Article 3, exceed 50% of the shares available under the Plan; provided, however, if any such shares of Stock are forfeited, cancelled, exchanged or surrendered or if an award granted pursuant to Article 7 terminates or expires without a distribution of shares of Stock to the Participant, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, such Shares shall not count against the limits set forth in this Article 3.3.
3.4 Limitation on Individual Grants. The aggregate number of shares of Stock as to which Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock and Performance Shares may be granted to any individual during any calendar year may not, subject to adjustment as provided in this Article 3, exceed 100% of the shares available under the Plan.
3.5 Adjustment of Awards. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Stock, a substitution or adjustment shall be made in (a) the kind and aggregate number of shares reserved for issuance under the Plan, (b) the kind, number and option price of shares subject to outstanding Stock Options granted under the Plan, and (c) the kind, number and purchase price of shares issuable pursuant to awards of Restricted Stock, Deferred Stock and Performance Shares to maintain the same estimated fair value of the award before and after the equity restructuring. The form of such adjustment and estimate of fair value shall be determined by the Administrator, in its sole discretion. Such other substitutions or adjustments shall be made respecting awards hereunder as may be determined by the Administrator, in its sole discretion. An adjusted option price shall also be used to determine the amount payable by the Company in connection with Stock Appreciation Rights awarded under the Plan. In connection with any event described in this paragraph, the Administrator may provide, in its discretion, for the cancellation of any outstanding awards and payment in cash or other property in exchange therefor.
ARTICLE 4
ELIGIBILITY
4.1 General Provisions. Subject to Article 3.1 and the Stock Ownership Limit, officers (including officers who are directors of the Company), employees and Independent Directors of, and consultants and advisors to the Company, any Company Subsidiary, the Partnership and any Partnership Subsidiary who are responsible for or contribute to the
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management, growth and/or profitability of the business of the Company, any Company Subsidiary and any Partnership Subsidiary, shall be eligible to be granted awards under the Plan. The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Persons, consultants and advisors to the Company recommended by the senior management of the Company, and the Administrator shall determine, in its sole discretion, the number of shares covered by each award.
ARTICLE 5
STOCK OPTIONS
5.1 Option Awards. Stock Options may be granted alone or in addition to other awards granted under the Plan. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve, and the provisions of Stock Option awards need not be the same with respect to each optionee. Recipients of Stock Options shall enter into an award agreement with the Company, in such form as the Administrator shall determine, which agreement shall set forth, among other things, the exercise price of the option, the term of the option and provisions regarding exercisability of the option granted thereunder.
5.2 Types of Options. The Stock Options granted under the Plan may be of two types: (a) Incentive Stock Options and (b) Non-Qualified Stock Options. The Administrator shall have the authority to grant (x) Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights) to Company Employees and (y) Non-Qualified Stock Options (with or without Stock Appreciation Rights) to Partnership Employees, and persons who are Independent Directors, consultants or advisors to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary. To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. More than one Stock Option may be granted to the same optionee and be outstanding concurrently hereunder.
5.3 Terms and Conditions of Options. Stock Options granted under the Plan shall contain such terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Administrator in its sole discretion at the time of grant, but shall not be less than one hundred percent (100%) of the Fair Market Value of the Stock on such date. If a Company Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company or any Company Subsidiary or any Partnership Subsidiary that is a corporation and an Incentive Stock Option is granted to such employee, the option price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than one hundred and ten percent (110%) of the Fair Market Value of the Stock on the date such Incentive Stock Option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten (10) years after the date
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such Stock Option is granted; provided that if a Company Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary that is a corporation and an Incentive Stock Option is granted to such employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.
5.4 Termination of Employment or Service. If an optionees employment with or service as a director of or consultant or advisor to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary terminates by reason of death, disability or for any other reason, the Stock Option may thereafter be exercised to the extent provided in the applicable award agreement, or as otherwise determined by the Administrator.
5.5 Loans. To the extent permitted by applicable law, the Company may make loans available to Stock Option holders in connection with the exercise of outstanding options granted under the Plan, as the Administrator, in its discretion, may determine. Such loans shall (a) be evidenced by promissory notes entered into by the Stock Option holders in favor of the Company, (b) be subject to the terms and conditions set forth in this Article 5.4 and such other terms and conditions, not inconsistent with the Plan, as the Administrator shall determine; provided that each loan shall comply with all applicable laws, regulations and rules of the Board of Governors of the Federal Reserve System and any other governmental agency having jurisdiction.
5.6 Annual Limit on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of shares of Stock with respect to which Incentive Stock Options granted to an Optionee under this Plan and all other option plans of the Company or its Company Subsidiaries become exercisable for the first time by the Optionee during any calendar year exceeds $100,000, such Stock Options shall be treated as Non-Qualified Stock Options.
5.7 Nontransferability of Stock Options. Pursuant to Section 11.6 of the Plan, no Stock Option shall be transferable by the optionee, and all Stock Options shall be exercisable, during the optionees lifetime, only by the optionee, provided that, the Administrator may, in its sole discretion, provide for the transferability of Stock Options under such terms and conditions as the Administrator shall determine and set forth in the Agreement evidencing such award. Notwithstanding the foregoing, unless permitted by the provisions of Section 422 of the Code, no Stock Option shall be treated as an Incentive Stock Option unless it is at all times subject to the nontransferability provisions of Section 11.6 of the Plan.
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ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1 Grant of Rights. Stock Appreciation Rights may be granted either alone (Free Standing Rights) or in conjunction with all or part of any Stock Option granted under the Plan (Related Rights) either at or after the time of the grant of such Stock Option. Subject to the provisions of Section 409A of the Code, in the case of a Non-Qualified Stock Option, Related Rights may be granted either at or after the time of the grant of such Stock Option. In the case of an Incentive Stock Option, Related Rights may be granted only at the time of the grant of the Incentive Stock Option.
6.2 Termination of Rights. A Related Right or applicable portion thereof granted in conjunction with a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise provided by the Administrator at the time of grant, a Related Right granted with respect to less than the full number of shares covered by a related Stock Option shall only be reduced if and to the extent that the number of shares covered by the exercise or termination of the related Stock Option exceeds the number of shares not covered by the Related Right.
6.3 Exercise of Rights.
(a) Upon the exercise of a Free Standing Right, the Participant shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or any combination of cash and Stock) equal in value to the excess of the Fair Market Value as of the date of exercise over the price per share specified in the Free Standing Right (which price shall be no less than 100% of the Fair Market Value on the date of grant) multiplied by the number of shares of Stock in respect of which the Free Standing Right is being exercised, with the Administrator having the right to determine the form of payment.
(b) A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or any combination of cash and Stock) equal in value to the excess of the Fair Market Value as of the date of exercise over the exercise price specified in the related Stock Option multiplied by the number of shares of Stock in respect of which the Related Right is being exercised, with the Administrator having the right to determine the form of payment. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.
6.4 Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time-to-time by the Administrator; provided, however, that no Stock Appreciation Right shall be exercisable more than ten (10) years after the date such Stock Appreciation Right is granted.
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6.5 Termination of Employment or Service. In the event of the termination of employment or service of a Participant who has been granted one or more Free Standing Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.
ARTICLE 7
RESTRICTED STOCK, DEFERRED STOCK AND
PERFORMANCE SHARES
7.1 General. Restricted Stock, Deferred Stock or Performance Share awards may be issued either alone or in addition to other awards granted under the Plan. To the extent permitted by applicable law, in the discretion of the Administrator, loans may be made to Participants in connection with the purchase of Restricted Stock under substantially the same terms and conditions as provided in Article 5.4 with respect to the exercise of Stock Options.
7.2 Award Agreements. The prospective recipient of a Restricted Stock, Deferred Stock or Performance Share award shall not have any rights with respect to such award, unless and until such recipient has executed an agreement evidencing the award and delivered a fully executed copy thereof to the Company, within such period as the Administrator may specify after the award date).
7.3 Award Certificates. Except as otherwise provided below in this Article 7, (a) each Participant who is awarded Restricted Stock or Performance Shares shall be issued a stock certificate in respect of such shares of Restricted Stock or Performance Shares; and (b) such certificate shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award.
7.4 Deferred Stock Certificates. With respect to Deferred Stock awards, at the expiration of the Restricted Period, stock certificates in respect of such shares of Deferred Stock shall be delivered to the participant, or his legal representative, in a number equal to the number of shares of Stock covered by the Deferred Stock award.
7.5 Restrictions and Conditions. The Restricted Stock, Deferred Stock and Performance Share awards granted pursuant to this Article 7 shall be subject to the following restrictions and conditions as determined by the Committee:
(a) Restrictions on Transfer. Subject to the provisions of the Plan and the Restricted Stock Award Agreement, Deferred Stock Award Agreement, Performance Share Award Agreement or other award agreement, as appropriate, governing such award, during such period as may be set by the Administrator commencing on the grant date (the Restricted Period), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock, Performance Shares or Deferred Stock awarded under the Plan; provided that the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion, including, but not limited to, the attainment of certain performance related goals, the
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Participants termination of employment or service, death or Disability or the occurrence of a Change of Control as defined in the agreement evidencing such award.
(b) Termination of Employment or Service. The rights of holders of Restricted Stock, Deferred Stock and Performance Share awards upon termination of employment or service for any reason during the Restricted Period shall be set forth in the award agreement, as appropriate, governing such awards.
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 Amendment of the Plan. The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under any award theretofore granted without such Participants consent. No such action of the Board, unless taken with the approval of the stockholders of the Company, may increase the maximum number of shares that may be sold or issued under the Plan or alter the class of Employees eligible to participate in the Plan. With respect to any other amendments of the Plan, the Board may in its discretion determine that such amendments shall only become effective upon approval by the stockholders of the Company, if the Board determines that such stockholder approval may be advisable, such as for the purpose of obtaining or retaining any statutory or regulatory benefits under federal or state securities law, federal or state tax law or any other laws or for the purposes of satisfying applicable stock exchange listing requirements.
8.2 Amendment of Awards. The Administrator may amend the terms of any award theretofore granted, prospectively or retroactively, but, no such amendment shall impair the rights of any holder without his or her consent, provided, however, that the Committee may not reduce the exercise price of an outstanding Stock Option or Stock Appreciation Right by amending the terms of such Stock Option or Stock Appreciation Right or by canceling such Stock Option or Stock Appreciation Right in exchange for the grant of a new Stock Option or Stock Appreciation Right without first obtaining approval from the stockholders of the Company. Notwithstanding the previous sentence, the Administrator reserves the right to amend the terms of any award as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code.
ARTICLE 9
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an unfunded plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
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ARTICLE 10
GENERAL PROVISIONS
10.1 Representations. The Administrator may require each person purchasing shares pursuant to a Stock Option to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. The certificates for such shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer.
10.2 Legends. All certificates for shares of Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Securities Exchange Commission, any stock exchange upon which the Stock is then listed, and any applicable Federal or state securities law, and the Administrator may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.
10.3 Other Plans; No Guarantee of Engagement. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any director, employee, consultant or advisor of the Company, any Company Subsidiary or any Partnership or Partnership Subsidiary any right to continued employment with or service as a director to the Company, any Company Subsidiary or any Partnership or Partnership Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary to terminate the employment or service of any of its directors, employees, consultants or advisors at any time.
10.4 Withholding Requirements. Each Participant shall, no later than the date as of which the value of an award first becomes includible in the gross income of the Participant for Federal income tax purposes, pay to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary (as the case may be), or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to the award. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. With the approval of the Administrator, a Participant may satisfy the foregoing requirement by electing to have the Company withhold from delivery of shares of Stock or by delivering already owned unrestricted shares of Common Stock, in each case, having a value equal to the minimum amount of tax required to be withheld. Such shares shall be valued at their Fair Market Value on the date of which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash.
10.5 No Liability. No member of the Board or the Committee, or any director, officer or employee of the Company, and Company Subsidiary, the Partnership or any Partnership Subsidiary shall be liable, responsible or accountable in damages or otherwise for any
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determination made or other action taken or any failure to act by such person so long as such person is not determined to be guilty by a final adjudication of willful misconduct with respect to such determination, action or failure to act.
10.6 Indemnification. No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the Board or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
ARTICLE 11
MISCELLANEOUS
11.1 Compliance With Laws.
(a) The obligation of the Company to sell or deliver Stock with respect to any award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable Federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
(b) Each award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an award or the issuance of Stock, no such award shall be granted, payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.
(c) In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the Securities Act) and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a grantee receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such grantee is acquired for investment only and not with a view to distribution.
11.2 No Rights to Awards; No Stockholder Rights. No Eligible Person shall have any claim to be granted any award under the Plan, and there is no obligation for uniformity of treatment of grantees. Except as provided specifically herein, a grantee or a transferee of an award shall have no rights as a stockholder with respect to any shares covered by the award until the date of the issuance of a stock certificate to him for such shares.
11.3 Ownership and Transfer Restrictions. Shares acquired through the realization of awards granted under the Plan shall be subject to the restrictions on ownership and transfer set
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forth in the Companys Charter. The Committee (or the Board, in the case of Non-Qualified Stock Options granted to Independent Directors), in its sole and absolute discretion, may impose such additional restrictions on the ownership and transferability of the shares issuable pursuant to Plan awards as it deems appropriate. Any such restriction shall be set forth in the respective award agreement and may be referred to on the certificates evidencing such shares. The Committee may require a Participant to give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two (2) years from the date of granting such option to such Participant or (ii) one (1) year after the transfer of such shares to such Participant. The Committee may direct that the certificates evidencing shares acquired by exercise of a Stock Option refer to such requirement to give prompt notice of disposition.
11.4 Restrictions on Ownership. A Stock Option is not exercisable (and an award may not otherwise be realized) if, in the sole and absolute discretion of the Committee, the exercise of such Option or realization of such award would likely result in any of the following:
(a) the Participants ownership of Stock being in violation of the Stock Ownership Limit set forth in the Companys Charter;
(b) income to the Company that could impair the Companys status as a real estate investment trust, within the meaning of Sections 856 through 860 of the Code;
(c) a transfer, at any one time, of more than one-tenth of one percent (0.1%) (measured in value or in number of shares, whichever is more restrictive) of the Companys total Stock from the Company to the Partnership pursuant to Article 5.4(d); or
(d) Notwithstanding any other provision of this Plan, a Participant shall have no rights under this Plan to acquire Stock that would otherwise be prohibited under the Companys Charter.
11.5 Approval of Plan by Stockholders. The Plan remains subject to, and contingent upon approval of the Companys stockholders, which approval must occur within twelve months of the date the Plan is approved by the Board.
11.6 Nontransferability. Awards shall not be transferable by a Participant except by will or the laws of descent and distribution, pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, and shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative. Notwithstanding anything to the contrary herein, no awards granted hereunder shall be transferable for consideration.
11.7 Governing Law. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Maryland without giving effect to the conflict of laws principles thereof.
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ARTICLE 12
EFFECTIVE DATE OF PLAN
The Plan shall become effective (the Effective Date) on December 14, 2020, the date the Companys sole stockholder formally approved the Plan.
ARTICLE 13
TERM OF PLAN
No Stock Option, Stock Appreciation Right, Restricted Stock, Deferred Stock or Performance Share award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but awards theretofore granted may extend beyond that date.
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Exhibit 10.10
APARTMENT INCOME REIT CORP.
2020 EMPLOYEE STOCK PURCHASE PLAN
Section 1. General Purpose of Plan; Definitions.
The name of this plan is the Apartment Income REIT Corp. 2020 Employee Stock Purchase Plan (the Plan). The Plan was adopted by the Board (defined below) on December 14 , 2020, subject to the approval of the stockholders of the Company (defined below), and the Companys sole stockholder approved the Plan on December 14, 2020. The purpose of the Plan is to provide certain employees of the Company, the Partnership, any Company Subsidiary and any Partnership Subsidiary (each as defined below) with the opportunity to purchase common stock of the Company through accumulated payroll deductions. It is the intention of the Company that the Plan will not qualify as an employee stock purchase plan within the meaning of Section 423 of the Code (defined below).
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) Administrator means the Board, or if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 11 below.
(b) Board shall mean the Board of Directors of the Company.
(c) Change in Capitalization shall mean any increase, reduction, change or exchange of Shares for a different number of shares and/or kind of shares or other securities of the Company by reason of a reclassification, recapitalization, merger, consolidation, reorganization, issuance of warrants or rights, stock dividend, stock split or reverse stock split, combination or exchange of Shares, repurchase of Shares, change in corporate structure or otherwise.
(d) Code shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(e) Committee shall mean the Compensation and Human Resources Committee of the Board. If at any time the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Committee.
(f) Common Stock shall mean the Class A Common Stock of the Company, par value $.01 per share.
(g) Company shall mean Apartment Income REIT Corp., a Maryland corporation (or any successor corporation).
(h) Company Subsidiary means any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Company Subsidiary shall also mean any partnership in which the Company and/or any Company Subsidiary owns more than fifty percent (50%)
of the capital or profits interests; provided, however, that Company Subsidiary shall not include the Partnership or any Partnership Subsidiary.
(i) Compensation shall mean the fixed salary or wage paid by the Company, the Partnership, or any Company Subsidiary or Partnership Subsidiary to an Employee as reported by the Company, the Partnership, or any Company Subsidiary or Partnership Subsidiary to the United States government for Federal income tax purposes, including any payments for overtime and any pre-tax contributions by the Employee under sections 125 or 401(k) of the Code. Compensation shall not include the value of or income attributable to any bonuses, any fringe benefits provided by the Company, the Partnership, or any Company Subsidiary or Partnership Subsidiary, any contributions made by the Company, the Partnership, or any Company Subsidiary or Partnership Subsidiary to any plan or to Social Security on behalf of the Participant, or any amounts of deferred compensation credited to the Participant in a qualified retirement plan (other than a 401(k) plan) or otherwise. The Company shall determine whether a particular item is included in Compensation.
(j) Corporate Transaction shall mean a sale of all or substantially all of the Companys assets, or a merger, consolidation or other capital reorganization of the Company with or into another corporation, or any other transaction or series of related transactions in which the Companys stockholders immediately prior thereto own less than 50% of the voting stock of the Company (or its successor or parent) immediately thereafter.
(k) Employee shall mean any person that is at least 18 years of age and has 30 days or more of continuous service with the Company, the Partnership, or any Company Subsidiary or Partnership Subsidiary prior to enrollment in the Plan pursuant to Section 4 hereof, but shall not include (i) any officer of the Company or any member of the Board who is subject to Section 16 of the Securities Exchange Act of 1934 or (ii) any person covered by a collective bargaining agreement, unless the collective bargaining agreement so requires.
(l) Fair Market Value as of a particular date shall mean the fair market value of the Shares as determined by the Administrator in its sole discretion; provided, however, that (i) if the Shares are admitted to trading on a national securities exchange, fair market value of the Shares on any date shall be the closing sale price reported for the Shares on such exchange on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, (ii) if the Shares are admitted to quotation on the National Association of Securities Dealers Automated Quotation (Nasdaq) System or other comparable quotation system and have been designated as a National Market System (NMS) security, fair market value of the Shares on any date shall be the closing sale price reported for the Shares on such system on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, or (iii) if the Shares are admitted to quotation on the Nasdaq System but have not been designated as an NMS security, fair market value of the Shares on any date shall be the average of the highest bid and lowest asked prices of the Shares on such
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system on such date or, if no bid and ask prices were reported on such date, on the last date preceding such date on which both bid and ask prices were reported.
(m) Offering Period shall mean a period as described in Section 3 hereof.
(n) Participant shall mean an Employee who elects to participate in the Plan pursuant to Section 4 hereof.
(o) Partnership means AIMCO Properties, L.P., a Delaware limited partnership.
(p) Partnership Subsidiary means any partnership or limited liability company in any unbroken chain of partnerships or limited liability companies beginning with the Partnership if each of the partnerships or limited liability companies other than the last partnership or limited liability company in the unbroken chain then owns more than fifty percent (50%) of the capital or profits interests in one of the other partnerships or limited liability companies. Partnership Subsidiary shall also mean any corporation in which the Partnership and/or any Partnership Subsidiary owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock.
(q) Purchase Date shall mean the last Trading Day of each Offering Period.
(r) Purchase Price shall mean an amount equal to 95% of the Fair Market Value of Share on the Purchase Date.
(s) Share shall mean a share of Common Stock.
(t) Trading Day shall mean a day on which national stock exchanges and the Nasdaq System are open for trading.
Section 2. Eligibility.
Each Employee that has elected to participate in the Plan pursuant to Section 4 hereof shall be granted an option to purchase Common Stock for the applicable Offering Period.
Section 3. Offering Periods.
The Plan shall be implemented by a series of consecutive three-month Offering Periods, with a new Offering Period commencing on the first Trading Day on or after January 1 (beginning in the year 2021), April 1 (beginning in the year 2021), July 1 (beginning in the year 2021) and October 1 (beginning in the year 2021) of each year, or at such other time or times as may be determined by the Administrator, and ending on the last Trading Day on or before the following March 31, June 30, September 30 and December 31, respectively, or at such other time or times as may be determined by the Administrator. The Plan shall continue until terminated in accordance with Section 17 hereof. Subject to Section 17 hereof, the Administrator shall have the power to change the duration and/or the frequency of Offering Periods with respect to future
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offerings and shall use its best efforts to notify Employees of any such change at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected.
Section 4. Enrollment; Participation.
(a) The Company shall commence an offering by granting each Employee, who has elected to participate in such Offering Period pursuant to Section 4(b), an option to purchase shares of Common Stock on the Purchase Date of such Offering Period up to a number of Shares determined by dividing each Employees payroll deductions accumulated prior to such Purchase Date and retained in the Participants account as of such Purchase Date by the applicable Purchase Price; provided that in no event shall a Participant be permitted to purchase during each fiscal year of the Company more than Shares (subject to any adjustment pursuant to Section 16 hereof), provided, further, that such purchase shall be subject to the limitations set forth in Section 10 hereof. Exercise of the option shall occur as provided in Section 6 hereof, unless the Participant has withdrawn pursuant to Section 8 hereof. The option with respect to an Offering Period shall expire on the Purchase Date with respect to such Offering Period or the withdrawal date if earlier.
(b) An Employee may elect to become a Participant in the Plan at any time during an Offering Period by completing and filing an enrollment form authorizing the Company to make payroll deductions (as set forth in Section 5 hereof). Unless a Participant, by giving written notice (or such other notice as may from time to time be prescribed by the Administrator), elects not to participate with respect to any subsequent Offering Period, the Participant shall be deemed to have accepted each new offer and to have authorized payroll deductions in respect thereof during each subsequent Offering Period.
Section 5. Payroll Deductions.
(a) An Employee may, in accordance with rules and procedures adopted by the Administrator, authorize payroll deductions in amounts that are not less than one percent (1%) and not more than fifteen percent (15%) of such Employees Compensation on each payday occurring during an Offering Period. Payroll deductions shall commence on the first full pay period following receipt of the enrollment form, and shall end on the last payroll paid prior to the Purchase Date of the Offering Period to which the enrollment form is applicable, unless sooner terminated by the Participants withdrawal from the Plan or Participants termination of employment with the Company, the Partnership, or any Company Subsidiary or Partnership Subsidiary as provided in Section 8 hereof. Once enrolled in an Offering Period, a Participant may not change his or her rate of payroll deductions at any time during such Offering Period, except by means of a withdrawal from the Plan as provided in Section 8 hereof.
(b) All payroll deductions made by a Participant shall be credited to such Participants account under the Plan and shall be withheld in whole percentages or whole dollar amounts only. A Participant may not make any additional payments into such account.
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Section 6. Purchase of Shares.
Unless a Participant withdraws from the Plan as provided in Section 8 hereof, such Participants election to purchase Shares shall be exercised automatically on each Purchase Date, and the maximum number of whole Shares subject to option shall be purchased for each Participant at the applicable Purchase Price with the accumulated payroll deductions in each Participants account as of the Purchase Date. No fractional Shares may be purchased hereunder. Any payroll deductions accumulated in a Participants account following the purchase of Shares on any Purchase Date shall be retained in the Participants account for the subsequent Offering Period, subject to earlier withdrawal by the Participant as provided in Section 8 hereof. During a Participants lifetime, a Participants option to purchase Shares hereunder is exercisable only by the Participant.
Section 7. Delivery of Shares; Withdrawal or Sale of Shares.
As promptly as reasonably practicable after each Purchase Date, the Company shall either arrange the delivery of the whole Shares purchased on such date by each Participant to the Participants brokerage account or arrange the delivery to the Participant of a share certificate representing such Shares.
Section 8. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all, but not less than all, of the payroll deductions credited to such Participants account (that have not been used to purchase Shares) under the Plan by giving written notice to the Company (or such other administrator the Company may designate) and such withdrawal will be effective the first full pay period following receipt of the withdrawal notice. Withdrawal of payroll deductions shall be deemed to be a withdrawal from the Plan. All of the payroll deductions credited to such Participants account (that have not been used to purchase Shares) shall be paid to such Participant promptly after receipt of such Participants notice of withdrawal, and such Participants eligibility to participate in the Plan for the Offering Period in which the withdrawal occurs shall be automatically terminated. No further payroll deductions for the purchase of Shares shall be made for such Participant during such Offering Period. If a Participant withdraws from an Offering Period, payroll deductions for such Participant shall not resume at the beginning of the succeeding Offering Period unless the Participant timely delivers to the Company a new enrollment form in accordance with the provisions of Section 4 hereof. A Participants withdrawal from an Offering Period shall not have any effect upon a Participants eligibility to participate in any similar plan that may hereafter be adopted by the Company or in succeeding Offering Periods which commence after termination of the Offering Period from which the Participant withdraws. If a Participant withdraws from an Offering Period, the Participant may not re-enroll in the Plan for the same Offering Period.
(b) Upon termination of a Participants employment during the Offering Period for any reason, including Participants voluntary termination, retirement or death, all the payroll deductions credited to such Participants account (that have not been used to purchase Shares) shall be returned to such Participant or, in the case of such
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Participants death, to the person or persons entitled thereto under Section 12 hereof, and such Participants option shall be automatically terminated. Such termination shall be deemed a withdrawal from the Plan.
Section 9. Interest.
No interest shall accrue on or be payable by the Company with respect to the payroll deductions of a Participant in the Plan.
Section 10. Stock Subject to Plan.
(a) Subject to adjustment upon Changes in Capitalization of the Company as provided in Section 16 hereof, the maximum aggregate number of Shares which shall be reserved for sale under the Plan for all Offering Periods that commence during each fiscal year of the Company occurring during the term of the Plan shall be 75,000 Shares. Such Shares shall be available as of the first day of the first Offering Period that commences in each such fiscal year. The Shares may consist, in whole or in part, of authorized and unissued Shares or treasury Shares. If the total number of Shares which would otherwise be subject to options granted pursuant to Section 2(a) hereof on a Purchase Date exceeds the number of Shares then available under the Plan, the Administrator shall make a pro rata allocation of the Shares remaining available for option exercise in as uniform a manner as shall be practicable and as it shall determine to be equitable. In such event, the Administrator shall give written notice to each Participant of such reduction of the number of option Shares affected thereby.
(b) No Participant shall have rights as a stockholder with respect to any option granted hereunder until the date on which such Shares shall be deemed to have been purchased by the Participant in accordance with Section 6 hereof.
(c) Shares purchased on behalf of a Participant under the Plan shall be registered in the name of the Participant or, if requested in writing by the Participant, in the names of the Participant and the Participants spouse.
Section 11. Administration.
The Plan shall be administered by the Board or a Committee. The Board or the Committee shall have full power and authority, subject to the provisions of the Plan, to promulgate such rules and regulations as it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise the administration of the Plan, and to take all action in connection therewith or in relation thereto as it deems necessary or advisable. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made at a meeting duly held. The Company shall pay all expenses incurred in the administration of the Plan. No member of the Board or Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan, and all members of the Board or Committee shall be fully indemnified by the Company with respect to any such action, determination or interpretation.
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All decisions, determinations and interpretations of the Board or Committee shall be final and binding on all persons, including the Company, the Partnership, any Company Subsidiary, any Partnership Subsidiary, the Employee (or any person claiming any rights under the Plan through any Employee) and any stockholder of the Company.
The Administrator may in his sole and absolute discretion delegate to the Chief Financial Officer of the Company or the Secretary of the Company, or both, any or all of the administrative duties and authority of the Administrator under this Plan, other than the authority to (a) amend the Plan in a manner that would require stockholder approval of such amendment or (b) the terminate the Plan.
Section 12. Designation of Beneficiary.
(a) A Participant may file, on forms supplied by and delivered to the Company (or such other administrator the Company may designate), a written designation of a beneficiary who is to receive Shares and/or cash, if any, remaining in such Participants account under the Plan in the event of the Participants death.
(b) Such designation of beneficiary may be changed by the Participant at any time by written notice. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participants death, the Company shall deliver the balance of the Shares and/or cash credited to Participants account to the executor or administrator of the estate of the Participant or, if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
Section 13. Transferability.
Neither payroll deductions credited to a Participants account nor any rights with regard to the exercise of an option or any rights to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by the laws of descent and distribution or as provided in Section 12 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect.
Section 14. Use of Funds.
All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.
Section 15. Reports.
Individual accounts shall be maintained by the Company for each Participant in the Plan. Statements of account shall be given to each Participant at least annually which statements shall
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set forth the amounts of payroll deductions, the Purchase Price, the number of Shares purchased and the remaining cash balance, if any.
Section 16. Effect of Certain Changes.
In the event of a Change in Capitalization or the distribution of an extraordinary dividend, the Administrator shall conclusively determine the appropriate equitable adjustments, if any, to be made under the Plan, including without limitation adjustments to the number of Shares which have been authorized for issuance under the Plan, but have not yet been placed under option, as well as the Purchase Price of each option under the Plan which has not yet been exercised.
In the event of a dissolution or liquidation of the Company, any Offering Period then in progress will terminate immediately prior to the consummation of such action, unless otherwise provided by the Board. In the event of a Corporate Transaction, each option outstanding under the Plan shall be assumed or an equivalent option shall be substituted by the successor corporation or a parent or subsidiary of such successor corporation. In the event that the successor corporation refuses to assume or substitute for outstanding options, the Offering Period then in progress shall be shortened and a new Purchase Date shall be set (the New Purchase Date), as of which date any Offering Period then in progress will terminate. The New Purchase Date shall be on or before the date of consummation of the transaction and the Company shall notify each Participant in writing that the Purchase Date for his or her option has been changed to the New Purchase Date and that his or her option will be exercised automatically on the New Purchase Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in Section 8. For purposes of this Section 16, an option granted under the Plan shall be deemed to be assumed, without limitation, if, at the time of issuance of the stock or other consideration upon a Corporate Transaction, each holder of an option under the Plan would be entitled to receive upon exercise of the option the same number and kind of shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to the transaction, the holder of the number of Shares of Common Stock covered by the option at such time (after giving effect to any adjustments in the number of Shares covered by the option as provided for in this Section 16); provided however that if the consideration received in the transaction is not solely common stock of the successor corporation or its parent, the Board may, with the consent of the successor corporation, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in fair market value to the per Share consideration received by holders of Common Stock in the transaction.
Section 17. Amendment or Termination.
The Board may at any time terminate or amend the Plan. Except as provided in Section 16 hereof, no such termination may adversely affect options previously granted and no amendment may make any change in any option theretofore granted which adversely affects the rights of any Participant. To the extent necessary to comply with any applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such a manner and to such a degree as required.
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Section 18. Notices.
All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when they are received in a timely manner in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
Section 19. Regulations and Other Approvals; Governing Law.
(a) This Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Maryland without giving effect to the choice of law principles thereof, except to the extent that such law is preempted by federal law.
(b) The obligation of the Company to sell or deliver Shares with respect to options granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator.
Section 20. Withholding of Taxes.
Each Participant shall pay to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary (as the case may be), or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to the option to purchase Common Stock granted under the Plan. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. With the approval of the Administrator, a Participant may satisfy the foregoing requirement by electing to have the Company withhold from delivery of shares of Stock or by delivering already owned unrestricted shares of Common Stock, in each case, having a value equal to the minimum amount of tax required to be withheld. Such shares shall be valued at their Fair Market Value on the date of which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash.
Section 21. Effective Date.
The Plan shall become effective (the Effective Date) on December 14, 2020, the date the Companys sole stockholder formally approved the Plan.
Section 22. Term of Plan.
No option shall be granted pursuant to the Plan and no Offering Period shall commence on or after the tenth anniversary of the Effective Date, but options theretofore granted may extend beyond that date.
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Section 23. Ownership and Transfer Restrictions.
(a) Shares acquired through the exercise of options granted under the Plan shall be subject to the restrictions on ownership and transfer set forth in the Companys Charter. The Committee, in its sole and absolute discretion, may impose such additional restrictions on the ownership and transferability of the Shares issuable pursuant to Plan as it deems appropriate. Any such restriction may be referred to on the certificates evidencing such Shares.
(b) Shares issuable upon exercise of options granted under the Plan may not be purchased if, in the sole and absolute discretion of the Committee, the exercise of such option would likely result in any of the following:
(i) the Participants ownership of Common Stock being in violation of the Stock Ownership Limit set forth in the Companys Charter;
(ii) income to the Company that could impair the Companys status as a real estate investment trust, within the meaning of Sections 856 through 860 of the Code;
(iii) a transfer, at any one time, of more than one-tenth of one percent (0.1%) (measured in value or in number of shares, whichever is more restrictive) of the Companys total Stock from the Company to the Partnership pursuant to Article 5.4(d) of the Companys Charter; or
(iv) Notwithstanding any other provision of this Plan, a Participant shall have no rights under this Plan to acquire Shares that would otherwise be prohibited under the Companys Charter.
Section 24. Other Plans; No Guarantee of Engagement.
Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any Employee of the Company, the Partnership, any Company Subsidiary or any Partnership Subsidiary any right to continued employment with the Company, the Partnership, any Company Subsidiary or any Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company, the Partnership, any Company Subsidiary, or any Partnership Subsidiary to terminate the employment of any of its employees at any time.
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Exhibit 10.11
APARTMENT INCOME REIT CORP.
2020 STOCK AWARD AND INCENTIVE PLAN
Apartment Income REIT Corp., a Maryland corporation, has adopted the Apartment Income REIT Corp. 2020 Stock Award and Incentive Plan (the Plan) for the benefit of eligible employees, consultants, advisors and directors of the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries (each as defined below).
ARTICLE 1
Purpose of Plan; Definitions
1.1 Purpose. The purpose of the Plan is to reinforce the long-term commitment to the Companys success of those officers (including officers who are directors of the Company), employees, independent directors, consultants and advisors of the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries who are or will be responsible for such success; to facilitate the ownership of the Companys stock by such individuals, thereby reinforcing the identity of their interests with those of the Companys stockholders; and to assist the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries in attracting and retaining officers and employees, directors and consultants and advisors with experience and ability.
1.2 Definitions. For purposes of the Plan, the following terms shall be defined as set forth below:
(a) Administrator means the Board, or if the Board does not administer the Plan, the Committee in accordance with Article 2.
(b) Applicable Accounting Standards shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Companys fmancial statements under United States federal securities laws from time to time.
(c) Award means any of the following granted under the Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Performance Shares, Other Incentive Awards, Cash-Based Awards or LTIP Unit, and any combination of the foregoing.
(d) Board means the Board of Directors of the Company.
(e) Cash-Based Award means an Award granted pursuant to Article 8.
(f) Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(g) Committee means the Compensation and Human Resources Committee of the Board. If at any time the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Committee.
(h) Company means Apartment Income REIT Corp., a Maryland corporation (or any successor corporation).
(i) Company Employee means any officer or employee (as defined in accordance with Section 3401(c) of the Code) of the Company, or of any corporation that is then a Company Subsidiary.
(j) Company Subsidiaries means any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Except with respect to Incentive Stock Options, Company Subsidiary shall also mean any partnership in which the Company and/or any Company Subsidiary owns more than fifty percent (50%) of the capital or profits interests; provided, however, that Company Subsidiary shall not include the Partnership or any Partnership Subsidiary.
(k) Deferred Stock means an award made pursuant to Article 7 below of the right to receive Stock at the end of a specified deferral period.
(l) Effective Date shall mean the date provided pursuant to Article 14.
(m) Eligible Persons means any person eligible to participate in the Plan pursuant to Section 4.1 including Independent Directors.
(n) Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
(o) Fair Market Value means, as of any given date, with respect to any awards granted hereunder (i) if the shares of Stock are admitted to trading on a national securities exchange, fair market value of the shares of Stock on any date shall be the closing sale price reported for the shares of Stock on such exchange on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, (ii) if the shares of Stock are admitted to quotation on the National Association of Securities Dealers Automated Quotation (Nasdaq) System or other comparable quotation system and have been designated as a National Market System (NMS) security, fair market value of the shares of Stock on any date shall be the closing sale price reported for the shares of Stock on such system on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, or (iii) if the shares of Stock are admitted to quotation on the Nasdaq System but have not been designated as an NMS security, fair market value of the shares of Stock on any date shall be the average of the highest bid and lowest asked prices of the shares of Stock on such system on such date or, if no bid and ask prices were reported on such date, on the last date preceding such date on which both bid and ask prices were reported.
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(p) Incentive Stock Option means any Stock Option intended to be designated as an incentive stock option within the meaning of Section 422 of the Code.
(q) Independent Director means a member of the Board who is not a Company Employee or a Partnership Employee.
(r) LTIP Unit means an LTIP Unit of the Partnership (as defined in the Partnership Agreement) that is granted under Section 7.1 hereof and is intended to constitute a profits interest within the meaning of the Code.
(s) Non-Qualified Stock Option means any Stock Option that is not an Incentive Stock Option, including any Stock Option that provides (as of the time such option is granted) that it will not be treated as an Incentive Stock Option.
(t) Other Incentive Award shall mean an Award denominated in, linked to or derived from shares of Stock or value metrics related to shares of Stock, granted pursuant to Section 7.4 hereof.
(u) Participant means any Eligible Person, or any consultant or advisor to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary selected by the Administrator, pursuant to the Administrators authority in Article 2 below, to receive grants of Stock Options, Stock Appreciation Rights, Restricted Stock awards, Deferred Stock awards, Performance Shares or any combination of the foregoing.
(v) Partnership means AIMCO Properties, L.P., a Delaware limited partnership.
(w) Partnership Agreement means the Sixth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P. (as amended from time to time).
(x) Partnership Employee means any officer or employee (as defined in accordance with Section 3401(c) of the Code) of the Partnership, or any entity that is then a Partnership Subsidiary.
(y) Partnership Subsidiary means any partnership or limited liability company in any unbroken chain of partnerships or limited liability companies beginning with the Partnership if each of the partnerships or limited liability companies other than the last partnership or limited liability company in the unbroken chain then owns more than fifty percent (50%) of the capital or profits interests in one of the other partnerships or limited liability companies. Partnership Subsidiary shall also mean any corporation in which the Partnership and/or any Partnership Subsidiary owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock.
(z) Performance-Based Compensation shall mean any compensation that is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code.
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(aa) Performance Criteria shall mean the criteria (and adjustments) that the Administrator selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:
The Performance Criteria that shall be used to establish Performance Goals are limited to the following: (i) net earnings (either before or after one or more of the following: (A) interest, (B) taxes, (C) depreciation, (D) amortization and (E) non-cash equity-based compensation expense); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings or profit; (vi) cash flow (including, but not limited to, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on shareholders equity; (x) total shareholder return; (xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs; (xiv) funds from operations; (xv) expenses; (xvi) working capital; (xvii) earnings per share; (xviii) adjusted earnings per share; (xix) price per share; (xx) regulatory body approval for commercialization of a product; (xxi) implementation or completion of critical projects; (xxii) market share; (xxiii) economic value; (xxiv) debt levels or reduction; (xxv) customer retention; (xxvi) sales-related goals; (xxvii) comparisons with other stock market indices; (xxviii) operating efficiency; (xxix) customer satisfaction and/or growth; (xxx) team member satisfaction; (xxxi) research and development achievements; (xxxii) financing and other capital raising transactions; (xxxiii) recruiting and maintaining personnel; (xxxiv) year-end cash, (xxxv) inventory, (xxxvi) inventory turns, (xxxvii) net inventory turns, (xxxviii) balance sheet measures, (xxxix) portfolio quality. (xl) adjusted funds from operations, WO customer traffic, (xlii) accounts payable to inventory ratio, (xliii) team member retention; (xlv) capital expenditures; (xlvi) average occupancy; (xlvii) year-end occupancy; (xlviii) property operating expense savings; or (xlix) leasing goals, any of which may be measured either in absolute terms for the Company or any operating unit of the Company or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.
The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include, but are not limited to, one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal or sale of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are
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outside the scope of the Companys core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions. For all Awards intended to qualify as Performance-Based Compensation, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.
To the extent permitted under Section 162(m) of the Code (including, without limitation, compliance with any requirements for shareholder approval), the Committee may designate additional Performance Criteria on which Performance Goals may be based, and may adjust, modify, or amend Performance Criteria.
(bb) Performance Goals shall mean, with respect to a Performance Period, one or more goals established in writing by the Committee for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of an affiliate, a subsidiary, a division or business unit, or one or more individuals. In addition, such performance goals may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other corporations. The achievement of each Performance Goal shall be determined in accordance with Applicable Accounting Standards, to the extent applicable.
(cc) Performance Period shall mean one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participants right to, and the payment of, a Performance Award.
(dd) Performance Share means an award of shares of Stock pursuant to Article 7 that is subject to restrictions based upon the attainment of specified performance objectives determined by the Committee.
(ee) Restricted Stock means an award granted pursuant to Article 7 of shares of Stock subject to certain restrictions.
(ff) Stock means the Class A Common Stock of the Company, par value $.01 per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any warrants, options or other rights to purchase Class A Common Stock. Debt securities of the Company convertible into Class A Common Stock shall be deemed equity securities of the Company.
(gg) Stock Appreciation Right means the right pursuant to an award granted under Article 6 to receive an amount equal to the difference between (A) the Fair Market
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Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the shares of Stock covered by such right or such portion thereof, and (B) the aggregate exercise price of such right or such portion thereof.
(hh) Stock Option means any option to purchase shares of Stock granted pursuant to Article 5.
(ii) Stock Ownership Limit means the restrictions on ownership and transfer of Stock provided in Section 3.4 of the Companys Charter.
ARTICLE 2
Administration
2.1 Administrator. The Plan shall be administered by the Board or by a Committee which shall be appointed by the Board and which shall serve at the pleasure of the Board. To the extent necessary and desirable, the Committee shall be composed entirely of individuals who meet the qualifications referred to in Section 162(m) of the Code, Rule 16b-3 under the Exchange Act and the applicable stock exchanges.
2.2 Duties and Powers of Administrator. The Administrator shall have the power and authority to grant to Eligible Persons, pursuant to the terms of the Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Performance Shares, Other Incentive Awards, LTIP Units, Cash-Based Awards and any combination of the foregoing. In particular, the Administrator shall have the authority to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder and in its discretion, to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent it deems necessary or desirable; and to otherwise supervise the administration of the Plan. All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants.
2.3 Delegation of Authority. The Administrator may in his sole and absolute discretion delegate to the Chief Financial Officer of the Company or the Secretary of the Company, or both, any or all of the administrative duties and authority of the Administrator under this Plan, other than the authority to (a) make grants under this Plan to employees who are officers of the Company within the meaning of Rule 16(a)-1(b) of the Exchange Act or whose total compensation is required to be reported to the Companys stockholders under the Exchange Act, (b) determine the price, timing or amount of such grants or (c) determine any other matter required by Rule 16b-3 or Section 162(m) of the Code to be determined in the sole and absolute discretion of the Administrator. Any such delegation by the Administrator shall include a limitation as to the amount of Stock underlying awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not
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invalidate any prior actions of the Administrators delegate or delegates that were consistent with the terms of the Plan.
ARTICLE 3
Stock Subject to Plan
3.1 Number and Source of Shares. The total number of shares of Stock reserved and available for issuance under the Plan shall be 3,000,000 shares. Such shares of Stock may consist, in whole or in part, of treasury shares, authorized and unissued shares or shares of Stock reacquired by the Company. If any shares of Stock subject to an award granted hereunder are forfeited, cancelled, exchanged or surrendered or if an award granted hereunder terminates or expires without a distribution of shares of Stock to the Participant, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, such shares shall again be available for awards under the Plan. If shares of Stock are surrendered or withheld as payment of either the exercise price of an award granted hereunder and/or withholding taxes in respect of such an award, such shares of Stock shall not be returned to the Plan and shall not be available for future awards under the Plan. Upon the exercise of any award granted in tandem with any other award, such related award shall be cancelled to the extent of the number of shares of Stock as to which the award is exercised and, notwithstanding the foregoing, such number of shares of Stock shall no longer be available for awards under the Plan. Upon the exercise of a Stock Appreciation Right, the number of shares of Stock reserved and available for issuance under the Plan shall be reduced by the full number of shares of Stock with respect to which such award is being exercised. Each LTIP Unit issued pursuant to an Award shall be treated as a share of Stock for purposes of calculating the aggregate number of shares of Stock available for issuance under the Plan as set forth in this Section 3.1 and for purposes of calculating the award limits set forth in Sections 3.3 and 3.4 hereof.
3.2 Limit on Incentive Stock Option Grants. In no event will more than 1.5 Million (1,5000,000) shares of Stock be available for issuance pursuant to the exercise of Incentive Stock Options, subject to adjustment as provided in this Article 3.
3.3 Limitation on Individual Grants. Notwithstanding any provision in the Plan to the contrary, to the extent required to comply with Section 162(m):
(a) the aggregate number of shares of Stock subject to Stock Options and Stock Appreciation Rights awarded to any one Participant during any calendar year may not exceed 1,000,000 shares of Stock;
(b) the aggregate number of shares of Stock subject to Awards other than Stock Options and Stock Appreciation Rights (excluding Awards referenced in Section 3.3(c) below) awarded to any one Participant during any calendar year may not exceed 1,000,000 shares of Stock, respectively; and
(c) the aggregate amount of compensation to be paid to any one Participant in respect to all Awards that are intended to constitute Performance-Based Compensation denominated in cash in any calendar year is $ .
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3.4 Limitation on Director Grants. Notwithstanding anything herein to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable fmancial accounting rules) of any Award granted to any Independent Director of the Company during any single calendar year, taken together with any cash fees paid to such person during such calendar year shall not exceed $750,000.
3.5 Adjustment of Awards. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Stock, a substitution or adjustment shall be made in (a) the kind and aggregate number of shares reserved for issuance under the Plan, (b) the kind, number and option price of shares subject to outstanding Stock Options granted under the Plan, (c) the kind, number and purchase price of shares issuable pursuant to awards of Restricted Stock, Deferred Stock and Performance Shares and (d) the kind and number of LTIP Units pursuant to awards of LTIP Units to maintain the same estimated fair value of the award before and after the equity restructuring. The form of such adjustment and estimate of fair value shall be determined by the Administrator, in its sole discretion. Such other substitutions or adjustments shall be made respecting awards hereunder as may be determined by the Administrator, in its sole discretion. An adjusted option price shall also be used to determine the amount payable by the Company in connection with Stock Appreciation Rights awarded under the Plan. In connection with any event described in this paragraph, the Administrator may provide, in its discretion, for the cancellation of any outstanding awards and payment in cash or other property in exchange therefor; provided, that if the exercise price of any outstanding award is equal to or greater than the Fair Market Value of the Stock, cash or other property covered by such award, the Administrator may cancel such award without the payment of any consideration to the Participant.
ARTICLE 4
Eligibility
4.1 General Provisions. Subject to Section 3.1 and the Stock Ownership Limit, officers (including officers who are directors of the Company), employees and Independent Directors of, and consultants and advisors to the Company, any Company Subsidiary, the Partnership and any Partnership Subsidiary who are responsible for or contribute to the management, growth and/or profitability of the business of the Company, any Company Subsidiary and any Partnership Subsidiary, shall be eligible to be granted awards under the Plan. The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Persons, consultants and advisors to the Company recommended by the senior management of the Company, and the Administrator shall determine, in its sole discretion, the number of shares covered by each award.
ARTICLE 5
Stock Options
5.1 Option Awards. Stock Options may be granted alone or in addition to other awards granted under the Plan. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve, and the provisions of Stock Option awards need
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not be the same with respect to each optionee. Recipients of Stock Options shall enter into an award agreement with the Company, in such form as the Administrator shall determine, which agreement shall set forth, among other things, the exercise price of the option, the term of the option and provisions regarding exercisability of the option granted thereunder.
5.2 Types of Options. The Stock Options granted under the Plan may be of two types: (a) Incentive Stock Options and (b) Non-Qualified Stock Options. The Administrator shall have the authority to grant (x) Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights) to Company Employees and (y) Non-Qualified Stock Options (with or without Stock Appreciation Rights) to Partnership Employees, and persons who are Independent Directors, consultants or advisors to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary. To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. More than one Stock Option may be granted to the same optionee and be outstanding concurrently hereunder.
5.3 Terms and Conditions of Options. Stock Options granted under the Plan shall contain such terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Administrator in its sole discretion at the time of grant, but shall not be less than one hundred percent (100%) of the Fair Market Value of the Stock on such date. If a Company Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company or any Company Subsidiary or any Partnership Subsidiary that is a corporation and an Incentive Stock Option is granted to such employee, the option price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than one hundred and ten percent (110%) of the Fair Market Value of the Stock on the date such Incentive Stock Option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten (10) years after the date such Stock Option is granted; provided that if a Company Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary that is a corporation and an Incentive Stock Option is granted to such employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.
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5.4 Termination of Employment or Service. If an optionees employment with or service as a director of or consultant or advisor to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary terminates by reason of death, disability or for any other reason, the Stock Option may thereafter be exercised to the extent provided in the applicable award agreement, or as otherwise determined by the Administrator.
5.5 Loans. To the extent permitted by applicable law, the Company may make loans available to Stock Option holders in connection with the exercise of outstanding options granted under the Plan, as the Administrator, in its discretion, may determine. Such loans shall (a) be evidenced by promissory notes entered into by the Stock Option holders in favor of the Company, (b) be subject to the terms and conditions set forth in this Section 5.5 and such other terms and conditions, not inconsistent with the Plan, as the Administrator shall determine; provided that each loan shall comply with all applicable laws, regulations and rules of the Board of Governors of the Federal Reserve System and any other governmental agency having jurisdiction; and provided further; that no loan may be made to an executive officer or director of the Company or that would otherwise be in violation of any law.
5.6 Annual Limit on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of shares of Stock with respect to which Incentive Stock Options granted to an Optionee under this Plan and all other option plans of the Company or its Company Subsidiaries become exercisable for the first time by the Optionee during any calendar year exceeds $100,000, such Stock Options shall be treated as Non-Qualified Stock Options.
5.7 Nontransferability of Stock Options. Pursuant to Section 13.6 of the Plan, no Stock Option shall be transferable by the optionee, and all Stock Options shall be exercisable, during the optionees lifetime, only by the optionee, provided that, the Administrator may, in its sole discretion but subject to Section 13.6 of the Plan, provide for the transferability of Stock Options under such terms and conditions as the Administrator shall determine and set forth in the Agreement evidencing such award. Notwithstanding the foregoing, unless permitted by the provisions of Section 422 of the Code, no Stock Option shall be treated as an Incentive Stock Option unless it is at all times subject to the nontransferability provisions of Section 13.6 of the Plan.
ARTICLE 6
Stock Appreciation Rights
6.1 Grant of Rights. Stock Appreciation Rights may be granted either alone (Free Standing Rights) or in conjunction with all or part of any Stock Option granted under the Plan (Related Rights) either at or after the time of the grant of such Stock Option. Subject to the provisions of Section 409A of the Code, in the case of a Non-Qualified Stock Option, Related Rights may be granted either at or after the time of the grant of such Stock Option. In the case of an Incentive Stock Option, Related Rights may be granted only at the time of the grant of the Incentive Stock Option.
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6.2 Termination of Rights. A Related Right or applicable portion thereof granted in conjunction with a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise provided by the Administrator at the time of grant, a Related Right granted with respect to less than the full number of shares covered by a related Stock Option shall only be reduced if and to the extent that the number of shares covered by the exercise or termination of the related Stock Option exceeds the number of shares not covered by the Related Right.
6.3 Exercise of Rights.
(a) Upon the exercise of a Free Standing Right, the Participant shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or any combination of cash and Stock) equal in value to the excess of the Fair Market Value as of the date of exercise over the price per share specified in the Free Standing Right (which price shall be no less than 100% of the Fair Market Value on the date of grant) multiplied by the number of shares of Stock in respect of which the Free Standing Right is being exercised, with the Administrator having the right to determine the form of payment.
(b) A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or any combination of cash and Stock) equal in value to the excess of the Fair Market Value as of the date of exercise over the exercise price specified in the related Stock Option multiplied by the number of shares of Stock in respect of which the Related Right is being exercised, with the Administrator having the right to determine the form of payment. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.
6.4 Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time-to-time by the Administrator; provided, however, that no Stock Appreciation Right shall be exercisable more than ten (10) years after the date such Stock Appreciation Right is granted.
6.5 Termination of Employment or Service. In the event of the termination of employment or service of a Participant who has been granted one or more Free Standing Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.
ARTICLE 7
Restricted Stock, Deferred Stock, Performance Shares, LTIP Units and Other Incentive Awards
7.1 General. Restricted Stock, Deferred Stock, Performance Share or LTIP Unit awards may be issued either alone or in addition to other awards granted under the Plan. Without limiting the foregoing, the Administrator is authorized to grant LTIP Units to a Participant in such amounts and subject to such terms and conditions as may be selected by the Administrator;
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provided, however, that LTIP Units may only be issued to a Participant for the performance of services to or for the benefit of the Partnership (a) in the Participants capacity as a partner of the Partnership, (b) in anticipation of the Participant becoming a partner of the Partnership, or (c) as otherwise determined by the Administrator, provided that the LTIP Units are intended to constitute profits interests within the meaning of the Code, including, to the extent applicable, Revenue Procedure 93-27, 1993-2 C.B. 343 and Revenue Procedure 2001-43, 2001-2 C.B. 191. LTIP Units shall be subject to the terms and conditions of the Partnership Agreement and such other restrictions, including restrictions on transferability (including by redemption or conversion), as the Administrator may impose. To the extent permitted by applicable law, in the discretion of the Administrator, loans may be made to Participants in connection with the purchase of Restricted Stock under substantially the same terms and conditions as provided in Section 5.5 with respect to the exercise of Stock Options.
7.2 Award Agreements. The prospective recipient of a Restricted Stock, Deferred Stock, Performance Share or LTIP Unit award shall not have any rights with respect to such award, unless and until such recipient has executed an agreement evidencing the award and delivered a fully executed copy thereof to the Company, within such period as the Administrator may specify after the award date.
7.3 Book Entry. The Company may, in lieu of delivering to any Participant certificates evidencing Shares issued in connection with any Award, record the issuance of Shares in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
7.4 Other Incentive Awards. The Administrator is authorized to grant Other Incentive Awards to a Participant, which Awards may cover shares of Stock or the right to purchase shares of Stock or have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in or based on, shares of Stock, shareholder value or shareholder return, in each case, on a specified date or dates or over any period or periods determined by the Administrator.
7.5 Restrictions and Conditions. The Restricted Stock, Deferred Stock, Performance Share and LTIP Unit awards granted pursuant to this Article 7 shall be subject to the following restrictions and conditions as determined by the Committee:
(a) Restrictions on Transfer. Subject to the provisions of the Plan and the Restricted Stock Award Agreement, Deferred Stock Award Agreement, Performance Share Award Agreement, LTIP Unit award agreement or other award agreement, as appropriate, governing such award, during such period as may be set by the Administrator commencing on the grant date (the Restricted Period), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock, Performance Shares, Deferred Stock or LTIP Units awarded under the Plan; provided that the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion, including, but not limited to, the attainment of certain performance related goals, the Participants termination of employment or service, death or disability or the occurrence of a change in control (each as defined in the agreement evidencing such award).
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(b) Termination of Employment or Service. The rights of holders of Restricted Stock, Deferred Stock, Performance Share and LTIP Unit awards upon termination of employment or service for any reason during the Restricted Period shall be set forth in the award agreement, as appropriate, governing such awards.
ARTICLE 8
Cash-Based Awards
8.1 The Administrator is authorized to grant Cash-Based Awards to a Participant and to determine whether such Cash-Based Awards shall be Performance-Based Compensation per Article 10 of this Plan. The value of Cash-Based Awards may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator.
8.2 Without limiting Section 8.1 hereof, the Administrator may grant Cash-Based Awards to a Participant in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such bonuses paid to a Participant which are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with the provisions of Article 10 hereof.
ARTICLE 9
Amendment and Termination; No Repricing ; Section 409A; Minimum Vesting
9.1 Amendment of the Plan. The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under any award theretofore granted without such Participants consent. No such action of the Board, unless taken with the approval of the stockholders of the Company, may increase the maximum number of shares that may be sold or issued under the Plan or alter the class of Employees eligible to participate in the Plan. With respect to any other amendments of the Plan, the Board may in its discretion determine that such amendments shall only become effective upon approval by the stockholders of the Company, if the Board determines that such stockholder approval may be advisable, such as for the purpose of obtaining or retaining any statutory or regulatory benefits under federal or state securities law, federal or state tax law or any other laws or for the purposes of satisfying applicable stock exchange listing requirements.
9.2 Amendment of Awards; No Repricing. The Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any holder without his or her consent. Notwithstanding the foregoing or any other provision of the Plan, the Administrator may not, without prior approval of the Companys stockholders, seek to effect any repricing of any previously granted, underwater Stock Option or Stock Appreciation Right by: (i) amending or modifying the terms of the Stock Option or Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Stock Option or Stock Appreciation Right and granting either replacement Stock Options or Stock Appreciation Rights
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having a lower exercise price; or other Awards or cash in exchange; or (iii) repurchasing the underwater Stock Options or Stock Appreciation Rights. For purposes of this Section 9.2, a Stock Option or Stock Appreciation Right will be deemed to be underwater at any time when the Fair Market Value of the Stock is less than the exercise price of the Stock Option or Stock Appreciation Right.
9.3 Section 409A. To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, then the Plan and any agreement covering such Award shall be interpreted in accordance with Section 409A of the Code. In the event that, following the Effective Date, the Administrator determines that any Award may be subject to Section 409A of the Code, the Administrator may adopt such amendments to the Plan and any Award agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to avoid the imposition of taxes on the Award under Section 409A of the Code, either through compliance with the requirements of Section 409A of the Code or with an available exemption therefrom.
9.4 Minimum Vesting. No Award shall vest prior to the first anniversary of its date of grant; provided, however, that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the shares of Stock available pursuant to Section 3.1 may be granted under the Plan without regard to such minimum vesting provision.
ARTICLE 10
Provisions Applicable to Awards Intended to Qualify as Performance-Based Compensation
10.1 Purpose. The Committee, in its sole discretion, may determine whether any Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant an Award to an Participant that is intended to qualify as Performance-Based Compensation, then the provisions of this Article 10 shall control over any contrary provision contained in the Plan. The Administrator may in its sole discretion grant Awards to Participants that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 10 and that are not intended to qualify as Performance-Based Compensation. Unless otherwise specified by the Committee at the time of grant, the Performance Criteria with respect to an Award intended to be Performance-Based Compensation payable to a Covered Employee shall be determined on the basis of Applicable Accounting Standards.
10.2 Applicability. The grant of an Award to a Participant for a particular Performance Period shall not require the grant of an Award to such Participant in any subsequent Performance Period and the grant of an Award to any one Participant shall not require the grant of an Award to any other Participant in such period or in any other period.
10.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to comply with the requirements of Section 162(m)(4)(C) of the Code, with respect to any Award which is intended to qualify as Performance-Based Compensation, no later than ninety (90) days following the commencement of any Performance Period or any designated fiscal period or period of service (or such earlier time as may be required under Section 162(m) of the Code), the
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Committee shall, in writing, (a) designate one or more Participants, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Goals, and (d) specify the relationship between the Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned under such Awards, unless otherwise provided in an applicable Program or Award Agreement, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant, including the assessment of individual or corporate performance for the Performance Period.
10.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable Program or Award Agreement (and only to the extent otherwise permitted by Section 162(m)(4)(C) of the Code), the holder of an Award that is intended to qualify as Performance-Based Compensation must be employed by the Company or a Company Subsidiary throughout the applicable Performance Period. Performance Awards shall be paid, unless otherwise determined by the Committee, no later than 2 1⁄2 months after the tax year in which the Performance Award vests, consistent with the requirements of Section 409A of the Code. Unless otherwise provided in the applicable Performance Goals, Program or Award Agreement, a Participant shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such applicable Performance Period are achieved.
10.5 Additional Limitations. Notwithstanding any other provision of the Plan and except as otherwise determined by the Administrator, any Award which is granted to a Participant and is intended to qualify as Performance-Based Compensation shall be subject to any additional limitations imposed under Section 162(m) of the Code that are requirements for qualification as Performance-Based Compensation, and the Plan, the Program and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements.
ARTICLE 11
Unfunded Status of Plan
The Plan is intended to constitute an unfunded plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
ARTICLE 12
General Provisions
12.1 Representations. The Administrator may require each person purchasing shares pursuant to a Stock Option to represent to and agree with the Company in writing that such person
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is acquiring the shares without a view to distribution thereof. The certificates or book entry for such shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer.
12.2 Legends. All certificates or book entries for shares of Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Securities Exchange Commission, any stock exchange upon which the Stock is then listed, and any applicable Federal or state securities law, and the Administrator may cause a legend or legends to be placed on any such certificates or book entries to make appropriate reference to such restrictions.
12.3 Other Plans; No Guarantee of Engagement. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any director, employee, consultant or advisor of the Company, any Company Subsidiary or any Partnership or Partnership Subsidiary any right to continued employment with or service as a director to the Company, any Company Subsidiary or any Partnership or Partnership Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary to terminate the employment or service of any of its directors, employees, consultants or advisors at any time.
12.4 Withholding Requirements. Each Participant shall, no later than the date as of which the value of an award first becomes includible in the gross income of the Participant for Federal income tax purposes, pay to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary (as the case may be), or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, local or foreign income taxes and payroll taxes of any kind required by law to be withheld (as determined without regard to any potential application of Section 83(c)(3) of the Code). The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. With the approval of the Administrator, a Participant may satisfy the foregoing requirement by paying cash, by electing to have the Company withhold from delivery of shares of Stock or by delivering already owned unrestricted shares of Stock, in each case, having a value not exceeding the applicable amount of tax required to be withheld, or, if applicable, such other withholding amount as mutually agreed upon by the Company and the Participant (provided, in the case of any Participant who is an officer or director of the Company or whose transactions in the Stock are subject to Section 16 of the Exchange Act, such other amount is approved in advance by the Committee). The number of shares of Stock which may be so withheld shall be valued at their Fair Market Value on the date of withholding or, in the sole discretion of the Company (determined in the case of any Participant who is an officer or director of the Company or whose transactions in the Stock are subject to Section 16 of the Exchange Act, solely by the Committee), the date immediately prior to the date that taxes are required to be withheld. Fractional share amounts shall be settled in cash.
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12.5 No Liability. No member of the Board or the Committee, or any director, officer or employee of the Company, and Company Subsidiary, the Partnership or any Partnership Subsidiary shall be liable, responsible or accountable in damages or otherwise for any determination made or other action taken or any failure to act by such person so long as such person is not determined to be guilty by a final adjudication of willful misconduct with respect to such determination, action or failure to act.
12.6 Indemnification. No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the Board or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
ARTICLE 13
Miscellaneous
13.1 Compliance With Laws.
(a) The obligation of the Company to sell or deliver Stock with respect to any award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable Federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
(b) Each award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an award or the issuance of Stock, no such award shall be granted, payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.
(c) In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the Securities Act) and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a grantee receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such grantee is acquired for investment only and not with a view to distribution. The obligation of the Company to make payment of awards in Stock, LTIP Units or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register under the Securities Act, or any state securities act, any of the shares of Stock or LTIP Units issued in connection with the Plan.
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The shares or LTIP Units issued in connection with the Plan may in certain circumstances be exempt from registration under the Securities Act, and the Company may restrict the transfer of such shares or LTIP Units in such manner as it deems advisable to ensure the availability of any such exemption.
13.2 No Rights to Awards; No Stockholder Rights. No Eligible Person shall have any claim to be granted any award under the Plan, and there is no obligation for uniformity of treatment of grantees. Except as provided specifically herein, a grantee or a transferee of an award shall have no rights as a stockholder with respect to any shares covered by the award until the making of a book entry with respect thereto.
13.3 Ownership and Transfer Restrictions. Shares acquired through the realization of awards granted under the Plan shall be subject to the restrictions on ownership and transfer set forth in the Companys Charter. The Committee (or the Board, in the case of Non-Qualified Stock Options granted to Independent Directors), in its sole and absolute discretion, may impose such additional restrictions on the ownership and transferability of the shares issuable pursuant to Plan awards as it deems appropriate. Any such restriction shall be set forth in the respective award agreement and may be referred to on the certificates or book entries evidencing such shares. The Committee may require a Participant to give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two (2) years from the date of granting such option to such Participant or (ii) one (1) year after the transfer of such shares to such Participant. The Committee may direct that the certificates or book entries evidencing shares acquired by exercise of a Stock Option refer to such requirement to give prompt notice of disposition.
13.4 Restrictions on Ownership. A Stock Option is not exercisable (and an award may not otherwise be realized) if, in the sole and absolute discretion of the Committee, the exercise of such Option or realization of such award would likely result in any of the following:
(a) the Participants ownership of Stock being in violation of the Stock Ownership Limit set forth in the Companys Charter;
(b) income to the Company that could impair the Companys status as a real estate investment trust, within the meaning of Sections 856 through 860 of the Code; or
(c) notwithstanding any other provision of this Plan, a Participant shall have no rights under this Plan to acquire Stock that would otherwise be prohibited under the Companys Charter.
13.5 Approval of Plan by Stockholders. The Plan remains subject to, and contingent upon approval of the Companys stockholders, which approval must occur within twelve months of the date the Plan is approved by the Board.
13.6 Nontransferability. Awards shall not be transferable by a Participant except by will or the laws of descent and distribution, pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, and shall be exercisable during the lifetime of a Participant only by such
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Participant or his guardian or legal representative. Notwithstanding anything to the contrary herein, no awards granted hereunder shall be transferable for consideration.
13.7 Governing Law. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Maryland without giving effect to the conflict of laws principles thereof.
ARTICLE 14
Effective Date of Plan
The Plan was originally adopted by the Board on December 14, 2020 and became effective on December 14, 2020, the date the Companys sole stockholder approved the Plan (the date of such approval, the Effective Date).
ARTICLE 15
Term of Plan
No Awards other than Incentive Stock Options shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but awards theretofore granted may extend beyond that date. No Incentive Stock Option may be granted following the tenth anniversary of the date on which the Plan was adopted by the Board, but Incentive Stock Options theretofore granted may extend beyond that date.
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Exhibit 99.1
Apartment Income REIT Corp. Completes Separation from Aimco
Denver, CO December 15, 2020 Apartment Income REIT Corp. (NYSE: AIRC) (AIR) announced today that it has completed its separation from Apartment Investment and Management Company (Aimco) (the Separation), becoming an independent, publicly-traded, self-managed and self-administered real estate investment trust.
The distribution of AIR common stock was completed on December 15, 2020, with each Aimco holder of record receiving one share of AIR Class A common stock for every one share of Aimco Class A common stock held as of the close of business on December 5, 2020 (the Record Date). Stockholders of Aimco will receive cash in lieu of any fractional shares of Class A common stock of AIR.
Beginning today, AIR will trade regular way on the NYSE under the symbol AIRC.
Additionally, in connection with the Separation, AIMCO-GP, Inc., the general partner of AIMCO Properties, L.P. (AIR OP), AIRs operating partnership, effected a pro rata distribution of all of the outstanding limited partnership units of Aimco OP L.P. (Aimco OP) to holders, as of the close of business on the Record Date. As a result, Aimco OP is now Aimcos operating partnership and AIR OP is now AIRs operating partnership.
Terry Considine, AIR Chief Executive Officer and Director, comments, AIR launches today providing investors with a simple and transparent way to invest in the multi-family sector and ownership with public market liquidity of a diversified portfolio of apartment communities, with low financial leverage, limited execution risk, best-in-class operations, and sector low management costs. I would like to thank my fellow AIR directors and teammates for all their hard work in the formation of AIR. I am proud of the work we have done and look forward to serving our stockholders together.
Citigroup Global Markets Inc. is serving as lead financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor. J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC also provided financial advisory services to the company in connection with the transaction.
About AIR
AIR is a real estate investment trust focused on the ownership and management of quality apartment communities located in the largest markets in the United States. AIR is one of the countrys largest owners and operators of apartments, with 98 communities in 12 states and the District of Columbia. AIR common shares are traded on the New York Stock Exchange under the ticker symbol AIRC. For more information about AIR, please visit our website at www.aircommunities.com.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief, or expectations, including, but not limited to, statements regarding AIRs portfolio composition and its capital structure after the Separation, including regarding its expected leverage and costs. We caution investors not to place undue reliance on any such forward-looking statements.
Words such as anticipate(s), expect(s), intend(s), plan(s), believe(s), may, will, would, could, should, seek(s) and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on managements current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained.
Risks and uncertainties that could cause actual results to differ materially from our expectations include, but are not limited to: the effects of the coronavirus pandemic on AIRs business and on the global and U.S. economies generally; real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which AIR operates and competition for residents in such markets; national and local
economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing and effects of acquisitions, dispositions, redevelopments and developments; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIRs ability to maintain current or meet projected occupancy, rental rates and property operating results; AIRs ability to meet budgeted costs and timelines, and, if applicable, achieve budgeted rental rates related to redevelopment and development investments; expectations regarding sales of apartment communities and the use of the proceeds thereof; our ability to successfully operate as a separate company from Aimco, with a more narrowed focus; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by Aimco; activities by stockholder activists, including a proxy contest; AIRs relationship with Aimco and the ability and willingness of Aimco and its subsidiaries to meet and/or perform their obligations under contractual arrangements that have been entered into with AIR and its subsidiaries in connection with the Separation and their obligations to indemnify, defend and hold AIR and its subsidiaries harmless from and against various claims, litigation and liabilities; the ability to achieve some or all the benefits that we expect to achieve from the Separation; and such other risks and uncertainties described from time to time in filings by AIR with the SEC.
Readers should carefully review the documents AIR files from time to time with the SEC. Readers should also carefully review the Risk Factors section of AIRs registration statement relating to the Separation. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.
These forward-looking statements reflect managements judgment as of this date, and AIR assumes no (and disclaims any) obligation to revise or update them to reflect future events or circumstances.
Contact
Conor Wagner
Chief Investment Officer
(303) 691-4498
investors@aircommunities.com
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