Maryland | 77-0404318 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Common Stock, par value $.01 per share | New York Stock Exchange | |
8.70% Series H Cumulative Redeemable Preferred Stock, | New York Stock Exchange | |
par value $.01 per share | ||
(Title of each class) | (Name of each exchange on which registered) |
PAGE | ||||||
PART I
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ITEM 1. |
BUSINESS
|
1 | ||||
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ITEM 1a. |
RISK FACTORS
|
8 | ||||
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ITEM 1b. |
UNRESOLVED STAFF COMMENTS
|
15 | ||||
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ITEM 2. |
COMMUNITIES
|
16 | ||||
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ITEM 3. |
LEGAL PROCEEDINGS
|
43 | ||||
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ITEM 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
43 | ||||
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PART II
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ITEM 5. |
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
44 | ||||
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ITEM 6. |
SELECTED FINANCIAL DATA
|
46 | ||||
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ITEM 7. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
49 | ||||
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ITEM 7a. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
|
66 | ||||
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ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
68 | ||||
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ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
68 | ||||
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ITEM 9a. |
CONTROLS AND PROCEDURES
|
68 | ||||
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ITEM 9b. |
OTHER INFORMATION
|
68 | ||||
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PART III
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ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
69 | ||||
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ITEM 11. |
EXECUTIVE COMPENSATION
|
69 | ||||
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ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
69 | ||||
|
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ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
70 | ||||
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ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
70 | ||||
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PART IV
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ITEM 15. |
EXHIBITS, FINANCIAL STATEMENT SCHEDULE
|
71 | ||||
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SIGNATURES | 76 |
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18
19
20
21
22
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40
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43
ITEM 1.
BUSINESS
151 operating apartment communities containing 43,533 apartment homes in ten states
and the District of Columbia, of which six communities containing 2,381 apartment homes
were under reconstruction;
17 communities under construction that are expected to contain an aggregate of 5,153
apartment homes when completed; and
rights to develop an additional 54 communities that, if developed in the manner
expected, will contain an estimated 14,185 apartment homes.
Boston, Massachusetts;
Chicago, Illinois;
Long Island, New York;
Los Angeles, California;
New York, New York;
Newport Beach, California;
San Jose, California;
Seattle, Washington;
Shelton, Connecticut; and
Woodbridge, New Jersey.
strong focus on resident satisfaction;
staggering lease terms such that lease expirations are better matched to traffic patterns;
balancing high occupancy with premium pricing, and increasing rents as market
conditions permit; and
managing community occupancy for optimal rental revenue levels.
we use purchase order controls, acquiring goods and services
from pre-approved vendors;
we purchase supplies in bulk where possible;
we bid third-party contracts on a volume basis;
we strive to retain residents through high levels of service in order to eliminate
the cost of preparing an apartment home for a new resident and to reduce marketing and
vacant apartment utility costs;
we perform turnover work in-house or hire third parties, generally depending upon
the least costly alternative;
we undertake preventive maintenance regularly to maximize resident satisfaction and
property and equipment life; and
we aggressively pursue real estate tax appeals.
we may be unable to obtain, or experience delays in obtaining, necessary zoning,
occupancy, or other required governmental or third party permits and authorizations, which
could result in increased costs or the delay or abandonment of opportunities;
we may abandon opportunities that we have already begun to explore for a number of
reasons, including changes in local market conditions or increases in construction or
financing costs, and, as a result, we may fail to recover expenses already incurred in
exploring those opportunities;
we may incur costs that exceed our original estimates due to increased material, labor
or other costs;
occupancy rates and rents at a community may fail to meet our expectations for a number
of reasons, including changes in market and economic conditions beyond our control and the
development by competitors of competing communities;
we may be unable to complete construction and lease up of a community on schedule,
resulting in increased construction and financing costs and a decrease in expected rental
revenues;
we may be unable to obtain financing with favorable terms, or at all, for the proposed
development of a community, which may cause us to delay or abandon an opportunity;
we may incur liabilities to third parties during the development process, for example,
in connection with managing existing improvements on the site prior to tenant terminations
and demolition (such as commercial space) or in connection with providing services to
third parties, such as the construction of shared infrastructure or other improvements;
and
we may incur liability if our communities are not constructed and operated in
compliance with the accessibility provisions of the Americans with Disabilities Acts, the
Fair Housing Act or other federal, state or local requirements. Noncompliance could
result in imposition of fines, an award of damages to private litigants, and a requirement
that we undertake structural modifications to remedy the noncompliance. We are currently
engaged in a lawsuit alleging noncompliance with these statutes. See Legal Proceedings.
land and/or property acquisition costs;
construction or reconstruction costs;
costs of environmental remediation;
real estate taxes;
capitalized interest;
loan fees;
permits;
professional fees;
allocated development or redevelopment overhead; and
other regulatory fees.
plant closings, industry slowdowns and other factors that adversely affect the local economy;
an oversupply of, or a reduced demand for, apartment homes;
a decline in household formation or employment or lack of employment growth;
the inability or unwillingness of residents to pay rent increases; and
rent control or rent stabilization laws, or other laws regulating housing, that could
prevent us from raising rents to offset increases in operating costs.
an acquired property may fail to perform as we expected in analyzing our investment; and
our estimate of the costs of repositioning or redeveloping an acquired property may prove inaccurate.
investors in the Fund may fail to make their capital contributions when due and, as a
result, the Fund may be unable to execute its investment objectives;
our subsidiary that is the general partner of the Fund is generally liable, under
partnership law, for the debts and obligations of the Fund, subject to certain exculpation
and indemnification rights pursuant to the terms of the partnership agreement of the Fund;
investors in the Fund holding a majority of the partnership interests may remove us as
the general partner without cause, subject to our right to receive an additional nine
months of management fees after such removal and our right to acquire one of the
properties then held by the Fund;
while we have broad discretion to manage the Fund and make investment decisions on
behalf of the Fund, the investors or an advisory committee comprised of representatives of
the investors must approve certain matters, and as a result we may be unable to cause the
Fund to make certain investments or implement certain decisions that we consider
beneficial;
we can develop communities but are generally prohibited from making acquisitions of
apartment communities outside of the Fund until the earlier of March 16, 2008 or until 80%
of the Funds committed capital is invested, subject to certain exceptions; and
we may be liable if either the Fund, or the REIT through which a number of investors
have invested in the Fund and which we manage, fails to comply with various tax or other
regulatory matters.
the environmental assessments described above have identified all potential
environmental liabilities;
no prior owner created any material environmental condition not known to us or the
consultants who prepared the assessments;
no environmental liabilities have developed since the environmental assessments were
prepared;
the condition of land or operations in the vicinity of our communities, such as the
presence of underground storage tanks, will not affect the environmental condition of our
communities;
future uses or conditions, including, without limitation, changes in applicable
environmental laws and regulations, will not result in the imposition of environmental
liability; and
no environmental liabilities will arise at communities that we have sold for which we
may have liability.
Established Communities (also known as Same Store Communities)
are
consolidated communities where a comparison of operating results from
the prior year to the current year is meaningful, as these communities
were owned and had stabilized occupancy and operating expenses as of the
beginning of the prior year. For the year ended December 31, 2006, the
Established Communities are communities that are consolidated for
financial reporting purposes, had stabilized occupancy and operating
expenses as of January 1, 2005, are not conducting or planning to
conduct substantial redevelopment activities and are not held for sale
or planned for disposition within the current year. A community is
considered to have stabilized occupancy at the earlier of (i) attainment
of 95% physical occupancy or (ii) the one-year anniversary of completion
of development or redevelopment.
Other Stabilized Communities
includes all other completed communities
that we own or have a direct or indirect ownership interest in, and that
have stabilized occupancy, as defined above. Other Stabilized
Communities do not include communities that are conducting or planning
to conduct substantial redevelopment activities within the current year.
Lease-Up Communities
are communities where construction has been
complete for less than one year and where physical occupancy has not
reached 95%.
Redevelopment Communities
are communities where substantial
redevelopment is in progress or is planned to begin during the current
year. For communities that we wholly own, redevelopment is considered
substantial when capital invested during the reconstruction effort is
expected to exceed the lesser of $5,000,000 or 10% of the communitys
acquisition cost. The definition of substantial redevelopment may
differ for communities owned through a joint venture arrangement.
Number of
Number of
communities
apartment homes
35
8,674
17
5,413
3
887
10
2,500
29
8,450
11
3,430
105
29,354
19
6,088
5
1,397
2
460
1
211
3
603
7
2,128
37
10,887
2
519
6
2,381
150
43,141
17
5,153
54
14,185
vaulted ceilings;
lofts;
fireplaces;
patios/decks; and
modern appliances.
swimming pools;
fitness centers;
tennis courts; and
business centers.
Number of
Number of apartment
Percentage of total
communities at
homes at
apartment homes at
1-1-06
1-31-07
1-1-06
1-31-07
1-1-06
1-31-07
55
56
15,671
15,732
37.8
%
36.1
%
18
18
4,514
4,490
10.9
%
10.3
%
16
14
4,375
3,812
10.6
%
8.8
%
3
6
915
1,621
2.2
%
3.7
%
3
3
1,182
1,182
2.9
%
2.7
%
5
6
1,752
2,042
4.2
%
4.7
%
10
9
2,933
2,585
7.1
%
5.9
%
21
24
6,859
7,622
16.6
%
17.5
%
6
9
1,224
1,987
3.0
%
4.6
%
15
15
5,635
5,635
13.6
%
12.9
%
6
7
1,696
1,952
4.1
%
4.5
%
6
7
1,696
1,952
4.1
%
4.5
%
12
12
3,111
3,111
7.5
%
7.2
%
12
12
3,111
3,111
7.5
%
7.2
%
32
33
9,203
9,366
22.2
%
21.5
%
7
7
2,089
2,089
5.0
%
4.8
%
9
11
2,015
2,489
4.9
%
5.7
%
16
15
5,099
4,788
12.3
%
11.0
%
16
19
4,872
5,750
11.8
%
13.2
%
7
9
2,448
3,006
5.9
%
6.9
%
6
7
1,366
1,686
3.3
%
3.9
%
3
3
1,058
1,058
2.6
%
2.4
%
142
151
41,412
43,533
100.0
%
100.0
%
a full fee simple, or absolute, ownership interest in 113 operating communities, six of
which are on land subject to land leases expiring in November 2028, July 2029, December
2034, January 2062, April 2095, and March 2142;
a general partnership interest in two partnerships that each own a fee simple interest
in an operating community;
a general partnership interest and an indirect limited partnership interest in the Fund,
which owns a fee simple interest in 14 operating communities;
a general partnership interest in five partnerships structured as DownREITs, as
described more fully below, that own an aggregate of 16 communities;
a membership interest in five limited liability companies that each hold a fee simple
interest in an operating community, three of which are on land subject to land leases
expiring in December 2026, November 2089, and
December 2103; and
a residual profits interest (with no ownership interest) in a limited liability company
to which an operating community was transferred upon completion of construction in the
second quarter of 2006.
(Dollars in thousands, except per apartment home data)
Average economic
Average
Approx.
Year of
Average
Physical
occupancy
rental rate
Financial
Number of
rentable area
completion/
Size
occupancy at
$ per
$ per
reporting cost
City and state
homes
(Sq. Ft.)
Acres
acquisition
(Sq. Ft.)
12/31/06
2006
2005
Apt (4)
Sq. Ft.
(5)
Bedford, MA
139
159,704
38.0
2006
1,149
95.7
%
85.4
%(3)
17.1
%
$
1,705
$
1.27
(3)
24,716
Providence, RI
225
222,834
1.2
1991/1997
990
88.0
%
93.8
%
95.6
%
2,247
2.13
28,744
Danvers & Peabody, MA
387
410,454
20.0
2004
1,271
95.3
%
95.5
%
85.6
%
1,349
1.21
54,781
Quincy, MA
171
175,649
8.3
1998
1,027
95.3
%
96.3
%
95.7
%
1,596
1.50
15,657
Westborough, MA
280
299,828
62.0
2003
1,099
95.7
%
95.4
%
97.0
%
1,515
1.35
37,202
Lexington, MA
198
230,277
16.1
1994
1,163
98.0
%
95.9
%
97.1
%
1,775
1.46
16,034
Newton, MA
294
339,484
7.0
2003
1,177
95.2
%
95.2
%
96.0
%
2,220
1.83
56,664
Boston, MA
780
732,237
1.0
1968/1998
939
97.4
%
97.5
%
96.8
%
2,767
2.87
156,653
Saugus, MA
326
381,825
82.6
2004
1,106
96.0
%
95.7
%
94.6
%
1,587
1.30
54,285
Plymouth, MA
101
151,712
6.0
2004
1,954
96.0
%
93.4
%
83.9
%
1,814
1.13
19,943
Peabody, MA
154
198,478
11.1
2000
1,289
98.1
%
97.3
%
96.6
%
1,605
1.21
21,817
Weymouth, MA
304
329,822
57.6
2002
1,023
95.4
%
95.3
%
94.3
%
1,432
1.26
36,367
Wilmington, MA
204
229,752
22.5
1999
1,023
98.5
%
95.1
%
93.5
%
1,515
1.28
21,257
Wilmington, MA
120
133,376
27.0
2002
1,033
97.5
%
93.7
%
93.8
%
1,432
1.21
16,844
Marlborough, MA
156
176,497
23.0
2002
1,219
95.5
%
96.4
%
97.2
%
1,495
1.27
21,150
Quincy, MA
245
224,418
8.0
1986/1996
916
97.6
%
95.5
%
95.2
%
1,221
1.27
17,345
Westborough, MA
120
147,472
8.0
1996
1,229
95.8
%
95.9
%
96.7
%
1,432
1.12
11,332
Peabody, MA
286
250,322
18.0
2004
875
96.2
%
97.8
%
96.3
%
1,090
1.22
23,727
Stamford, CT
306
314,600
3.0
2002
1,040
97.4
%
97.9
%
97.6
%
2,088
1.99
70,393
Danbury, CT
234
235,320
36.0
2005
1,006
94.0
%
94.5
%
40.8
%(3)
1,619
1.52
35,454
Darien, CT
189
242,533
32.0
2004
1,282
95.8
%
93.7
%
97.7
%
2,500
1.82
41,519
Trumbull, CT
340
379,282
37.0
1997
1,116
95.0
%
98.1
%
96.3
%
1,554
1.37
37,105
Stamford, CT
238
229,644
4.1
1991
965
93.7
%
97.2
%
98.0
%
1,878
1.89
32,143
North Haven, CT
128
139,972
10.6
2000
1,094
96.1
%
97.4
%
95.9
%
1,511
1.35
13,987
Milford, CT
246
216,746
22.0
2004
886
95.9
%
98.1
%
93.9
%
1,363
1.52
31,441
New Canaan, CT
104
131,782
9.1
2002
1,251
92.3
%
95.7
%
96.4
%
2,910
2.20
24,364
Stamford, CT
323
323,587
12.1
2003
1,002
98.8
%
97.6
%
96.5
%
2,334
2.27
62,886
Orange, CT
168
163,238
9.6
2005
972
95.2
%
97.9
%
64.1
%(3)
1,436
1.45
22,096
Wilton, CT
102
158,259
12.0
1996
1,552
95.1
%
92.7
%
93.9
%
2,845
1.70
17,194
Danbury, CT
268
300,044
17.1
1999
1,070
97.4
%
98.1
%
94.9
%
1,621
1.42
26,310
Hamden, CT
764
766,604
38.4
1992/1994
996
89.9
%
91.7
%(2)
93.2
%
1,242
1.14
(2)
65,461
Glen Cove, NY
256
261,425
4.0
2004
1,050
96.9
%
95.5
%
95.8
%
2,289
2.14
67,902
Smithtown, NY
312
377,240
20.6
1997
1,209
96.8
%
97.1
%
97.4
%
2,014
1.62
33,715
Melville, NY
494
596,942
35.4
1997/2000
1,208
96.4
%
96.3
%
96.8
%
2,394
1.91
59,822
Coram, NY
298
362,124
32.0
2005
1,485
95.3
%
95.9
%
71.6
%(3)
1,816
1.43
46,537
Coram, NY
152
185,954
42.0
2006
1,223
98.7
%
71.0
%(3)
N/A
2,310
1.34
(3)
23,866
Long Beach, NY
109
124,611
1.3
1990/1995
1,143
98.2
%
97.7
%
97.7
%
3,339
2.85
21,278
(Dollars in thousands, except per apartment home data)
Average economic
Average
Approx.
Year of
Average
Physical
occupancy
rental rate
Financial
Number of
rentable area
completion/
Size
occupancy at
$ per
$ per
reporting cost
City and state
homes
(Sq. Ft.)
Acres
acquisition
(Sq. Ft.)
12/31/06
2006
2005
Apt (4)
Sq. Ft.
(5)
Edgewater, NJ
408
428,611
7.6
2002
1,051
96.3
%
95.8
%
96.3
%
2,269
2.07
75,214
Florham Park, NJ
270
330,410
41.9
2001
1,224
95.6
%
97.6
%
96.4
%
2,467
1.97
41,816
Jersey City, NJ
504
575,334
11.0
1997
1,142
98.8
%
97.7
%
97.5
%
2,677
2.29
92,872
Freehold, NJ
296
317,331
40.3
2002
1,072
98.0
%
96.3
%
95.6
%
1,679
1.51
34,748
Lawrenceville, NJ
426
443,168
9.0
1994
1,010
95.8
%
94.6
%
95.5
%
1,401
1.27
60,045
Lawrenceville, NJ
206
257,938
27.1
1996
1,287
97.1
%
95.8
%
96.0
%
1,594
1.22
16,358
Lawrenceville, NJ
312
341,320
70.5
2003
1,095
96.5
%
96.2
%
87.6
%
1,722
1.51
52,144
West Windsor, NJ
512
486,069
64.4
1988
949
96.1
%
96.4
%
95.3
%
1,368
1.39
30,138
New York, NY
206
162,000
1.1
2006
786
59.7
%
32.2
%(3)
N/A
3,418
1.40
(3)
89,577
Nanuet, NY
504
608,842
62.5
1998
1,208
95.2
%
97.0
%
97.8
%
2,035
1.63
55,112
Elmsford, NY
105
113,538
16.9
1995
1,081
94.3
%
96.5
%
96.3
%
2,148
1.92
13,243
New Rochelle, NY
412
372,860
2.4
2001
905
96.4
%
96.2
%
96.2
%
2,237
2.38
117,098
Long Island City, NY
372
332,947
1.0
2002
895
97.0
%
96.7
%
96.7
%
2,956
3.19
94,561
Wappingers Falls, NY
288
327,547
41.0
1993
1,137
92.0
%
95.0
%
92.7
%
1,320
1.10
19,267
Mamaroneck, NY
227
199,842
4.0
2000
880
98.2
%
98.9
%
96.4
%
2,044
2.29
47,514
Bronxville, NY
110
119,410
1.5
1999
1,085
96.4
%
97.0
%
96.4
%
3,438
3.07
31,356
Columbia, MD
384
386,344
23.8
1987/1996
1,005
95.1
%
97.0
%
94.7
%
1,207
1.16
22,771
Columbia, MD
336
337,683
20.2
1987/1996
1,005
94.9
%
95.1
%(2)
91.1
%(2)
1,293
1.22
(2)
29,353
Columbia, MD
176
179,880
10.0
1986
1,022
91.0
%
96.6
%
95.9
%
1,200
1.13
9,355
Annapolis, MD
158
117,033
13.8
1984/1995
741
97.5
%
97.8
%
97.2
%
1,177
1.55
10,188
Columbia, MD
215
212,420
12.7
1986/2006
988
95.3
%
93.8
%
N/A
248
0.24
36,358
Fairfax, VA
420
355,228
24.3
1989/1996
846
86.4
%
94.6
%(2)
95.2
%
1,225
1.37
(2)
33,201
Arlington, VA
842
901,120
20.1
2001
1,070
97.1
%
96.5
%
94.7
%
1,770
1.60
112,609
Arlington, VA
344
294,954
4.1
1990
857
95.9
%
97.8
%
97.2
%
1,602
1.83
38,110
Alexandria, VA
460
467,292
16.0
1998
1,016
95.2
%
97.3
%
95.3
%
1,725
1.65
43,533
Rockville, MD
368
368,374
24.0
1991/1995
1,001
94.8
%
97.0
%
95.3
%
1,369
1.33
32,298
Washington, DC
308
297,875
2.7
1982
967
98.7
%
96.6
%
94.3
%
2,050
2.05
44,388
Washington, DC
203
184,230
0.5
2003
903
97.5
%
95.7
%
95.6
%
2,235
2.36
48,873
North Bethesda, MD
497
477,459
10.0
2004
963
96.8
%
97.3
%
95.7
%
1,627
1.65
82,157
Fairfax, VA
141
148,282
9.3
1988/1997
1,052
100.0
%
96.9
%
96.8
%
1,387
1.28
11,680
North Bethesda, MD
386
388,232
10.2
2003
1,006
97.2
%
96.6
%
94.9
%
1,659
1.59
46,260
North Potomac, MD
520
573,717
47.9
2004
1,103
96.5
%
97.7
%
94.7
%
1,595
1.41
69,747
McLean, VA
558
613,426
19.1
1996
1,099
96.1
%
96.0
%
96.2
%
1,770
1.55
57,601
Gaithersburg, MD
288
292,282
9.2
1998
1,050
92.7
%
97.0
%
95.7
%
1,350
1.29
22,778
Germantown, MD
300
290,544
26.7
1985
968
95.7
%
97.2
%
95.8
%
1,147
1.15
9,395
(Dollars in thousands, except per apartment home data)
Average economic
Average
Approx.
Year of
Average
Physical
occupancy
rental rate
Financial
Number of
rentable area
completion/
Size
occupancy at
$ per
$ per
reporting cost
City and state
homes
(Sq. Ft.)
Acres
acquisition
(Sq. Ft.)
12/31/06
2006
2005
Apt (4)
Sq. Ft.
(5)
Arlington Heights, IL
409
346,416
2.8
1987/2000
848
91.9
%
92.9
%(2)
95.0
%
1,374
1.51
(2)
55,857
Wheaton, IL
295
350,606
19.2
1997
1,188
95.9
%
95.3
%
95.6
%
1,346
1.08
38,972
Bloomingdale, IL
192
237,084
12.7
1997
1,235
95.3
%
95.9
%
95.1
%
1,322
1.03
22,164
Westmont, IL
400
388,500
17.4
1967
971
94.5
%
95.0
%
96.2
%
881
0.86
31,272
Redmond, WA
264
288,250
22.2
1998
1,092
95.8
%
96.3
%
94.6
%
1,174
1.04
34,857
Bellevue, WA
202
167,069
1.7
2001
827
98.0
%
96.5
%
95.8
%
1,361
1.59
30,862
Seattle, WA
100
82,418
0.7
2001
824
96.0
%
96.4
%
95.5
%
1,610
1.88
18,444
Lynwood, WA
424
453,602
27.0
2001
1,070
96.0
%
96.8
%
96.6
%
1,034
0.94
45,646
Everett, WA
391
422,482
19.0
2000
1,081
96.4
%
96.5
%
94.9
%
962
0.86
39,879
Redmond, WA
124
126,951
2.0
2000
1,024
94.4
%
96.4
%
95.4
%
1,371
1.29
19,245
Redmond, WA
222
211,450
8.4
1991/1997
952
94.6
%
96.7
%
96.4
%
1,116
1.13
26,409
Bothell, WA
206
243,958
11.2
2000
1,184
97.1
%
96.1
%
95.0
%
1,132
0.92
24,806
Everett, WA
234
259,080
23.0
2000
1,107
96.2
%
96.7
%
95.7
%
955
0.83
23,095
Issaquah, WA
333
424,803
11.6
2001
1,276
93.7
%
95.4
%
94.0
%
1,286
0.96
52,844
Union City, CA
208
150,320
8.5
1973/1996
723
98.1
%
96.7
%
96.9
%
1,106
1.48
22,581
Fremont, CA
235
191,935
13.5
1985/1994
817
100.0
%
97.7
%
96.9
%
1,336
1.60
36,212
Dublin, CA
204
179,004
13.0
1989/1997
877
96.6
%
97.2
%
96.2
%
1,400
1.55
27,866
Fremont, CA
308
316,052
14.3
1994
1,026
95.8
%
96.9
%
96.3
%
1,583
1.49
56,612
Pleasanton, CA
456
366,062
14.7
1988/1994
803
97.4
%
96.8
%
95.9
%
1,304
1.57
62,350
Hayward, CA
544
452,043
11.1
1985/1986
831
95.6
%
95.6
%
94.9
%
1,154
1.33
61,686
Daly City, CA
195
141,411
7.0
1972/1997
725
97.4
%
96.8
%
96.0
%
1,404
1.87
26,546
San Francisco, CA
154
123,047
3.0
1972/1994
799
98.1
%
97.4
%
95.9
%
1,649
2.01
25,327
San Francisco, CA
250
243,089
1.4
2003
977
92.8
%
95.2
%
95.5
%
3,057
2.99
92,812
San Francisco, CA
185
108,745
1.4
1990/1995
588
97.3
%
96.4
%
96.3
%
1,672
2.74
28,071
Foster City, CA
288
222,364
11.0
1973/1994
772
97.9
%
97.1
%
97.0
%
1,377
1.73
43,588
Pacifica, CA
220
186,800
21.9
1971/1995
849
96.8
%
96.7
%
96.1
%
1,495
1.70
32,165
San Francisco, CA
243
171,800
16.0
1961/1996
707
95.9
%
96.7
%
97.4
%
1,714
2.34
28,778
San Francisco, CA
227
243,090
1.0
1999
1,071
97.8
%
96.8
%
96.2
%
2,843
2.57
67,006
San Rafael, CA
254
221,635
21.9
1973/1996
873
98.4
%
96.3
%
95.8
%
1,324
1.46
33,063
(Dollars in thousands, except per apartment home data)
Average economic
Average
Approx.
Year of
Average
Physical
occupancy
rental rate
Financial
Number of
rentable area
completion/
Size
occupancy at
$ per
$ per
reporting cost
City and state
homes
(Sq. Ft.)
Acres
acquisition
(Sq. Ft.)
12/31/06
2006
2005
Apt (4)
Sq. Ft.
(5)
San Jose, CA
324
323,496
7.5
1995
998
97.8
%
96.7
%
96.2
%
1,484
1.44
62,060
San Jose, CA
218
218,177
3.8
2002
1,001
95.9
%
97.0
%
97.1
%
1,868
1.81
52,570
Mountain View, CA
294
215,680
13.0
1962/1997
734
98.0
%
97.7
%
96.5
%
1,257
1.67
43,423
San Jose, CA
396
334,956
12.0
1988/1987
844
97.5
%
96.9
%
96.0
%
1,247
1.43
60,670
Sunnyvale, CA
192
203,990
8.0
1991/1996
1,062
99.5
%
98.0
%
97.4
%
1,655
1.53
38,218
Campbell, CA
252
197,000
8.5
1968/1997
782
99.6
%
97.4
%
97.0
%
1,251
1.56
32,141
San Jose, CA
226
210,050
4.0
1990/1996
929
97.3
%
97.6
%
96.7
%
1,487
1.56
45,009
Campbell, CA
348
326,796
10.8
1995
939
98.3
%
96.9
%
96.2
%
1,528
1.58
60,114
Mountain View, CA
248
211,552
10.5
1986
853
96.4
%
95.9
%
95.1
%
1,567
1.76
51,609
San Jose, CA
305
299,762
8.9
1999
983
97.0
%
96.9
%
95.2
%
1,850
1.82
56,506
San Jose, CA
456
448,488
16.6
1997/1999
984
98.0
%
96.4
%
95.7
%
1,480
1.45
79,364
Sunnyvale, CA
710
653,929
13.6
1997
921
95.2
%
96.5
%
95.8
%
1,732
1.81
122,123
Mountain View, CA
211
218,392
1.9
2002
1,035
97.6
%
96.5
%
96.7
%
2,422
2.26
65,752
San Jose, CA
360
322,992
14.0
1985/1996
897
99.4
%
97.8
%
96.8
%
1,347
1.47
48,790
San Jose, CA
248
209,000
11.5
1984/1988
843
99.2
%
97.4
%
96.7
%
1,249
1.44
35,017
Burbank, CA
748
530,084
14.1
1961/1997
709
96.7
%
95.7
%
95.9
%
1,370
1.85
76,461
Woodland Hills, CA
227
191,114
7.0
1979/1998
842
96.0
%
96.8
%
97.5
%
1,614
1.86
26,943
Camarillo, CA
249
233,267
10.0
2006
937
99.2
%
54.4
%(3)
N/A
3,196
1.85
(3)
47,174
Burbank, CA
223
241,714
5.1
2003
1,084
96.0
%
95.4
%
95.7
%
2,237
1.97
40,248
Woodland Hills, CA
663
594,396
18.2
1989/1997
897
97.0
%
95.5
%
96.0
%
1,491
1.59
72,073
Burbank, CA
400
360,587
6.9
1988/2002
901
98.0
%
97.4
%
96.9
%
1,759
1.90
71,003
Los Angeles, CA
309
284,636
5.0
2006
921
97.4
%
51.5
%(3)
N/A
3,710
2.07
(3)
65,075
Huntington Beach, CA
304
268,000
9.7
1971/1997
882
96.7
%
96.0
%
96.7
%
1,455
1.58
32,296
Costa Mesa, CA
258
207,672
8.0
1973/1996
805
98.1
%
98.3
%
97.2
%
1,356
1.66
25,490
Mission Viejo, CA
166
124,600
7.8
1984/1996
751
95.8
%
95.5
%
95.4
%
1,233
1.57
14,012
Costa Mesa, CA
145
122,415
6.6
1956/1996
844
100.0
%
98.2
%
97.5
%
1,566
1.82
10,352
Rancho Santa Margarita, CA
301
229,593
20.0
1990/1997
763
97.7
%
96.9
%
96.5
%
1,295
1.64
24,361
San Diego, CA
294
226,140
1.4
1973/1998
769
95.6
%
95.1
%
95.0
%
1,404
1.74
34,556
San Diego, CA
564
402,285
12.9
1969/1997
713
97.3
%
95.7
%
95.1
%
1,378
1.85
66,281
San Diego, CA
200
207,625
4.0
1960/1997
1,038
97.0
%
96.3
%
96.1
%
1,509
1.40
22,421
(Dollars in thousands, except per apartment home data)
(Dollars in thousands, except per apartment home data)
(1)
We own a fee simple interest in the communities listed, excepted as noted below.
(2)
Represents community which was under redevelopment during the year, resulting in lower average economic occupancy and average rental rate per square foot for the year.
(3)
Represents community that completed development or was purchased during the year, which could result in lower average economic occupancy and average rental rate per square foot for the year.
(4)
Represents the average rental revenue per occupied apartment home.
(5)
Costs are presented in accordance with
generally accepted accounting principles. For current Development Communities, cost represents
total costs incurred through December 31, 2006.
Financial reporting costs are excluded
for unconsolidated communities, see Note 6, Investments in Unconsolidated Entities of our Consolidated Financial Statements in Item 8 of this report.
(6)
We own a 15.2% combined general partnership and indirect limited partner equity interest in this community.
(7)
We own a general partnership interest in a partnership that owns a fee simple interest in this community.
(8)
We own a general partnership interest in a partnership structured as a DownREIT that owns this community.
(9)
We own a membership interest in a limited liability company that holds a fee simple interest in this community.
(10)
This community was transferred to a joint venture entity upon completion of development. We do not hold an equity interest in the entity, but retain a promoted residual interest in the profits of the entity.
We receive a property management fee for this community.
(11)
Community is located on land subject to a land lease.
(12)
Upon completion of this community we admitted a 70% joint
venture partner to the LLC. However, due to an operating guarantee provided to the joint venture partner, this community is consolidated for financial reporting purposes.
(13)
In December 2006, we completed the purchase of our partners interest in Avalon Run, and this community is now a wholly-owned
community. See Note 6, Investments in Unconsolidated Entities of our Consolidated Financial Statements in Item 8 of this report.
Washer &
Large
Balcony,
Non-
Homes w/
1 BR
2BR
3BR
dryer
storage or
patio, deck
direct
Direct
pre-wired
Studios /
Parking
hook-ups
Vaulted
walk-in
or
Built-in
access
access
security
1/1.5 BA
1/1.5 BA
2/2.5/3 BA
2/2.5 BA
3BA
efficiencies
Other
Total
spaces
or units
ceilings
Lofts
Fireplaces
closet
sunroom
bookcases
Carports
garages
garages
systems
158
190
60
408
872
All
Some
Some
Some
All
Half
None
No
No
Yes
Some
46
162
62
270
583
All
All
None
Some
Most
Some
None
No
No
Yes
All
197
231
26
2
48
504
460
All
Some
Some
Some
All
Some
None
No
Yes
No
None
40
24
192
40
296
591
All
Some
Some
Half
All
All
None
No
Yes
No
None
144
90
108
84
426
640
All
Some
Some
Some
Some
All
None
Yes
No
No
All
64
106
36
206
401
All
Some
Some
Some
Most
Most
None
Yes
Yes
Yes
All
72
36
148
56
312
500
All
Some
Some
Some
Some
All
None
Yes
Yes
Yes
All
252
48
172
40
512
781
All
Some
None
Half
All
All
None
No
Yes
No
None
98
54
54
206
131
All
None
None
None
Some
Some
None
No
No
Yes
Some
208
48
144
104
504
1,382
All
Half
Half
Some
All
All
Some
Yes
Yes
Yes
All
25
24
56
105
208
All
Some
Some
Some
All
All
None
Yes
No
No
All
142
185
21
21
43
412
648
Most
Some
Some
None
Most
Some
None
No
No
Yes
None
186
114
15
14
43
372
426
All
None
Some
None
Most
Some
None
No
No
Yes
None
112
47
65
64
288
598
All
Some
Some
Some
Most
All
None
Yes
No
No
None
151
76
227
371
All
Some
Some
Some
Some
All
None
No
No
No
No
55
2
43
10
110
170
All
Some
Some
Some
Most
Half
None
No
No
Yes
All
185
78
100
38
401
283
All
Some
None
Most
Some
All
Some
No
No
No
None
97
146
54
22
23
342
522
All
Some
None
Most
Some
All
Some
No
No
No
None
88
14
54
20
176
268
All
Some
None
Most
All
Most
Some
No
No
No
None
83
18
57
158
256
All
None
None
Most
Most
All
None
Yes
No
No
None
63 94
48
10
2
15 353
All
None
None
Most
None
All
None
No
No
No
None
220
104
96
420
720
All
Some
None
Some
All
All
None
Yes
No
No
None
404
24
196
60
158
842
1,411
All
Some
Some
Some
All
All
Some
No
Yes
Yes
All
233
111
344
470
All
None
None
Some
Most
All
Some
No
No
No
None
208
168
84
460
897
All
Most
Some
Some
All
Most
None
No
Yes
Yes
All
156
168
44
368
627
All
Some
Some
Some
Most
All
None
No
Yes
No
None
160
70
32
2
28
16
308
349
All
Some
None
Some
All
All
Some
No
No
Yes
None
113
75
4
11
203
148
All
Some
None
None
Most
Some
None
No
No
Yes
None
265
33
185
13
1
497
746
All
Some
Some
None
Most
Most
None
No
Yes
Yes
All
19
112
4
6
141
299
All
Some
None
Most
All
All
None
No
No
No
None
178
39
133
36
386
680
All
Some
Some
Some
Most
All
None
No
Yes
No
All
190
30
232
68
520
1,062
All
Some
Some
Some
All
Most
Some
Yes
Yes
Yes
None
186
26
346
558
989
All
Some
Some
Most
Most
All
Some
No
Yes
Yes
All
112
32
112
32
66
288
461
All
Some
Some
Some
Most
Most
None
No
Yes
No
All
136
56
80
28
300
477
All
Some
None
Most
All
All
Most
No
No
No
None
Washer &
Large
Balcony,
Non-
Homes w/
1 BR
2BR
3BR
dryer
storage or
patio, deck
direct
Direct
pre-wired
Studios /
Parking
hook-ups
Vaulted
walk-in
or
Built-in
access
access
security
1/1.5 BA
1/1.5 BA
2/2.5/3 BA
2/2.5 BA
3BA
efficiencies
Other
Total
spaces
or units
ceilings
Lofts
Fireplaces
closet
sunroom
bookcases
Carports
garages
garages
systems
232
147
30
409
650
All
None
None
None
Some
Half
None
No
No
No
None
132
134
14
15
295
555
All
None
None
Some
Most
Some
Some
No
No
Yes
None
63
108
21
192
424
All
None
None
Some
Most
Most
Some
No
Yes
Yes
None
200
200
400
594
None
None
None
None
Some
Half
None
Yes
No
No
None
55
40
110
56
3
264
515
All
Some
None
Most
All
All
Half
Yes
Yes
Yes
All
112
67
23
202
300
All
Some
Some
Some
Most
Some
None
No
No
No
Some
64
20
16
100
118
All
None
None
None
Most
Some
None
No
No
No
Yes
88
109
149
78
424
737
All
Some
None
Most
All
All
Some
Yes
Yes
Yes
All
84
119
124
56
8
391
721
All
Half
None
Most
All
All
Some
Yes
Yes
Yes
All
31
26
55
12
117
124
189
All
Some
None
None
All
All
None
No
Yes
Yes
Some
76
44
67
35
222
161
All
Some
None
Most
Most
All
None
Yes
Yes
No
None
28
48
86
28
16
206
415
All
Some
None
Most
Most
All
Some
Yes
No
Yes
All
36
60
78
60
234
463
All
Some
None
Most
All
All
Some
Yes
Yes
No
All
3
42
239
13
28
8
333
780
All
Most
Some
Most
Half
Most
None
Yes
Yes
Yes
All
124
84
208
296
None
None
None
Most
All
All
None
Yes
No
No
None
99
136
235
240
All
None
None
None
All
All
None
Yes
No
No
None
72
8
60
48
16
204
428
Most
Some
None
Most
All
All
None
No
Yes
No
None
88
176
44
308
609
All
Some
None
Some
Half
All
None
Yes
Yes
No
All
238
218
456
941
All
Some
None
Most
Some
All
None
Yes
Yes
Yes
None
208
336
544
927
Some
Some
None
None
All
All
None
Yes
No
No
None
117
33
24
21
195
259
None
None
Some
None
Some
All
None
Yes
No
Yes
None
90
49
15
154
155
None
Some
None
None
All
All
None
No
Yes
No
None
148
95
6
1
250
191
All
None
Some
None
All
Most
Some
No
Yes
No
Some
114
25
46
185
105
None
None
None
None
Some
Some
Most
No
Yes
No
None
125
122
1
40
288
290
None
None
None
None
Most
All
Some
Yes
No
No
None
58
106
56
220
301
None
None
None
Some
Some
All
None
Yes
Yes
No
None
183
20
20
20
243
244
None
None
None
None
None
Some
None
No
No
Yes
None
103
120
3
226
212
All
None
None
Some
Half
Most
None
No
No
No
None
158
68
24
4
254
404
Some
Some
None
Some
None
All
None
Yes
No
Yes
None
Washer &
Large
Balcony,
Non-
Homes w/
1 BR
2BR
3BR
dryer
storage or
patio, deck
direct
Direct
pre-wired
Studios /
Parking
hook-ups
Vaulted
walk-in
or
Built-in
access
access
security
1/1.5 BA
1/1.5 BA
2/2.5/3 BA
2/2.5 BA
3BA
efficiencies
Other
Total
spaces
or units
ceilings
Lofts
Fireplaces
closet
sunroom
bookcases
Carports
garages
garages
systems
90
210
24
324
549
All
Some
None
None
Most
All
None
Yes
No
No
None
118
94
6
218
314
All
Some
Some
None
All
Some
None
No
No
No
Yes
158
128
8
294
441
None
None
None
Some
None
Most
None
Yes
No
No
None
156
240
396
666
All
Some
None
None
ALL
All
None
Yes
Yes
No
None
60
96
36
192
353
All
Some
None
Half
All
All
Some
Yes
Yes
No
None
212
40
252
400
All
None
None
None
None
Half
None
Yes
Yes
No
None
100
126
226
356
Most
None
None
Most
All
All
None
No
Yes
No
None
157
179
12
348
454
All
Some
None
None
All
All
None
Yes
No
No
All
108
88
52
248
672
All
Some
None
None
Some
All
None
Yes
No
No
None
113
164
28
305
534
All
Some
Some
Some
Most
All
None
Some
Yes
No
None
168
264
24
456
684
All
Some
None
Some
ALL
All
Most
Yes
Yes
No
None
338
336
18
15
3
710
2,000
All
Some
Some
Some
All
All
Some
Yes
Yes
No
None
88
117
6
211
307
All
Some
None
None
Most
All
None
No
No
Yes
None
108
252
360
692
All
None
None
All
None
All
None
Yes
Yes
No
None
102
146
248
439
All
Some
None
None
None
All
None
Yes
No
No
None
296
169
50
12
221
748
893
Most
Some
None
Some
Some
Some
None
Yes
Yes
No
None
88
54
65
20
227
427
All
Some
None
Some
Some
All
None
Yes
Yes
No
None
125
124
249
482
All
None
None
None
All
All
None
No
Yes
Yes
None
75
121
27
223
519
All
None
Some
Some
All
All
None
No
No
No
All
222
441
663
1,356
Some
Some
Some
None
Most
All
None
No
No
No
None
153
196
51
400
736
Some
Some
Some
All
Some
All
None
No
No
No
None
190
119
309
623
All
None
Some
None
All
All
None
No
Yes
No
None
144
56
104
304
492
All
None
None
None
All
All
None
Yes
Yes
No
None
124
86
48
258
428
Some
Half
None
None
Half
All
None
Yes
Yes
No
None
94
28
44
166
232
None
None
None
None
None
All
None
Yes
Yes
No
None
44
54
35
12
145
249
Most
Some
None
Some
Most
Most
Some
Yes
Yes
No
None
160
141
301
521
All
None
None
None
None
All
None
Yes
Yes
No
None
113
84
97
294
298
None
None
None
None
None
All
None
No
No
No
None
270
9
165
120
564
755
None
None
None
None
Some
All
None
No
No
No
None
18
98
1
83
200
387
Most
None
None
Most
Most
Most
Most
No
Yes
No
None
Washer &
Large
Balcony,
Non-
Homes w/
1 BR
2BR
3BR
dryer
storage or
patio, deck
direct
Direct
pre-wired
Studios /
Parking
hook-ups
Vaulted
walk-in
or
Built-in
access
access
security
1/1.5 BA
1/1.5 BA
2/2.5/3 BA
2/2.5 BA
3BA
efficiencies
Other
Total
spaces
or units
ceilings
Lofts
Fireplaces
closet
sunroom
bookcases
Carports
garages
garages
systems
106
90
196
327
All
Some
Some
None
Some
All
None
No
Yes
No
None
87
8
16
111
190
All
None
None
None
All
Some
None
No
No
No
None
109
254
24
387
823
All
Some
Some
Some
All
Some
None
No
Yes
No
None
118
45
157
8
328
569
Most
Some
Some
None
All
Most
None
No
No
No
None
192
188
380
732
All
Some
Some
Some
Most
Some
None
No
Yes
No
None
62
18
10
90
50
All
None
None
None
Most
Some
None
No
No
No
None
125
70
15
210
370
All
Some
Some
None
Most
Most
None
No
Yes
No
None
36
28
85
50
5
204
427
All
None
Some
None
All
All
None
No
No
No
All
148
235
50
433
856
All
Some
Some
Some
Some
Some
None
No
Yes
Yes
None
61
56
14
131
357
All
Some
None
None
Some
Some
None
No
Yes
No
None
174
5
88
23
78
368
485
All
None
None
None
Some
Some
None
No
Yes
Yes
None
208
162
128
90
588
489
All
None
None
None
Some
None
None
No
All
None
None
381
146
1
74
602
361
Some
None
None
None
Some
Some
None
No
Yes
No
None
92
12
123
24
251
529
All
None
Some
None
All
All
None
No
Yes
Yes
None
158
288
446
892
All
None
Some
Some
All
Some
None
No
Yes
No
None
53
62
8
123
350
All
None
None
None
All
Most
None
No
Yes
No
None
Community
Building
Buildings w/
entrance
entrance
Under-
Aerobicse
Indoor /
security
controlled
controlled
ground
dance
Picnic
Walking /
Sauna /
Tennis
Fitness
Sand
outdoor
Clubhouse /
Business
systems
access
access
parking
studio
Car wash
area
jogging trail
Pool
whirlpool
court
Racquetball
center
volleyball
basketball
clubroom
center
Tot lot
Concierge
All
Yes
Yes
Yes
No
No
No
No
Yes
No
No
No
Yes
No
No
Yes
Yes
No
Yes
None
No
No
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
No
Yes
Yes
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
None
No
No
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
Yes
Yes
No
None
Yes
No
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
No
No
Yes
No
All
No
No
No
No
No
Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
Yes
No
Yes
No
Yes
No
No
No
No
No
Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
Yes
No
Yes
No
None
No
Some
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
No
No
Yes
No
Yes
No
All
Yes
Yes
Yes
No
No
No
No
No
No
No
No
Yes
No
No
Yes
No
No
Yes
Some
No
No
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
No
None
No
No
No
No
No
Yes
No
Yes
No
No
No
No
No
No
Yes
No
Yes
No
No
Yes
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
Yes
All
Yes
Yes
No
No
No
Yes
No
No
No
No
No
Yes
No
No
Yes
Yes
No
Yes
Some
No
No
No
No
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
Yes
No
Yes
No
No
Yes
Yes
No
No
No
Yes
No
Yes
No
No
Yes
Yes
No
No
Yes
No
Yes
Yes
All
Yes
Yes
Yes
No
No
No
No
No
No
No
No
Yes
No
No
Yes
Yes
No
Yes
None
No
No
No
No
Yes
Yes
No
Yes
No
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
None
No
No
No
No
Yes
Yes
No
Yes
No
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
None
No
No
No
No
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
Yes
No
No
No
None
No
No
No
No
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
Yes
No
No
No
None
Yes
No
No
No
Yes
No
No
No
No
No
No
No
No
No
No
No
No
No
None
No
No
No
No
Yes
Yes
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
No
Yes
No
None
No
Yes
No
No
Yes
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
Yes
Yes
No
All
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
No
Yes
No
Yes
No
No
Yes
No
No
Yes
All
Yes
Yes
No
No
Yes
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
No
Yes
None
No
No
No
No
Yes
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
No
None
Yes
Yes
Yes
No
No
No
No
Yes
No
No
No
Yes
No
No
No
No
No
Yes
All
Yes
Yes
Yes
No
No
No
No
No
No
No
No
Yes
No
No
Yes
Yes
No
Yes
None
No
Yes
Yes
No
Yes
Yes
No
Yes
No
No
No
Yes
No
No
Yes
Yes
No
Yes
None
No
No
No
No
Yes
No
Yes
Yes
No
No
No
No
No
No
Yes
Yes
No
No
None
No
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
Yes
Yes
Yes
None
No
Yes
No
No
Yes
Yes
Yes
Yes
No
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
None
Yes
No
No
No
Yes
Yes
Yes
Yes
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
None
No
No
No
No
Yes
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
Yes
No
None
No
Yes
No
No
Yes
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
No
Yes
No
Community
Building
Buildings w/
entrance
entrance
Under-
Aerobicse
Indoor /
security
controlled
controlled
ground
dance
Picnic
Walking /
Sauna /
Tennis
Fitness
Sand
outdoor
Clubhouse /
Business
systems
access
access
parking
studio
Car wash
area
jogging trail
Pool
whirlpool
court
Racquetball
center
volleyball
basketball
clubroom
center
Tot lot
Concierge
All
Yes
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
None
No
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
All
No
No
No
No
Yes
Yes
Yes
Yes
No
No
No
No
No
No
Yes
No
No
No
None
Yes
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
No
None
Yes
No
No
No
No
No
No
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
No
Yes
No
Yes
Yes
No
No
No
No
No
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
No
No
Yes
No
No
No
No
No
No
No
No
No
No
No
No
All
No
No
No
No
No
Yes
No
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
No
None
No
No
No
No
No
No
No
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
No
All
Yes
Yes
Yes
No
No
No
No
No
No
No
No
Yes
No
No
Yes
Yes
No
No
None
No
No
No
No
No
No
Yes
Yes
Yes
No
No
Yes
No
No
Yes
No
Yes
No
None
No
No
No
No
No
No
No
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
No
None
No
No
No
No
No
Yes
Yes
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
No
None
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
No
No
Yes
No
No
Yes
Yes
Yes
Yes
None
Yes
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
No
No
Yes
No
None
Yes
No
No
No
Yes
Yes
No
Yes
Yes
No
No
Yes
No
No
No
No
No
No
None
No
No
No
No
Yes
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
No
Yes
No
No
None
No
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
No
No
No
No
None
No
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
No
Yes
No
Yes
Yes
No
None
Yes
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
No
No
Yes
No
None
No
No
No
No
No
No
No
Yes
Yes
No
No
Yes
No
No
Yes
No
No
No
None
No
Yes
Yes
No
No
No
No
Yes
Yes
No
No
Yes
No
No
Yes
No
No
No
All
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
Yes
No
No
Yes
No
No
Yes
None
Yes
Yes
Yes
No
No
Yes
No
No
No
No
No
Yes
No
No
No
No
No
No
Some
No
No
No
No
Yes
No
Yes
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
No
None
No
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
No
No
No
No
All
Yes
Yes
Yes
No
Yes
Yes
No
No
No
No
No
No
No
No
No
No
No
No
None
Yes
Yes
Yes
No
No
No
No
No
Yes
No
No
Yes
No
No
Yes
Yes
No
Yes
None
No
No
Yes
No
No
No
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes
No
No
Community
Building
Buildings w/
entrance
entrance
Under-
Aerobicse
Indoor /
security
controlled
controlled
ground
dance
Picnic
Walking /
Sauna /
Tennis
Fitness
Sand
outdoor
Clubhouse /
Business
systems
access
access
parking
studio
Car wash
area
jogging trail
Pool
whirlpool
court
Racquetball
center
volleyball
basketball
clubroom
center
Tot lot
Concierge
None
Yes
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
No
No
No
No
All
Yes
Yes
Yes
Yes
No
No
No
Yes
Yes
No
No
Yes
No
No
Yes
Yes
No
No
Some
No
No
No
No
Yes
Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
Yes
Yes
No
No
None
No
No
Yes
No
Yes
Yes
No
Yes
No
No
No
Yes
No
No
No
No
No
No
None
No
No
Yes
No
No
Yes
No
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
No
Yes
No
No
No
No
Yes
Yes
No
Yes
Yes
No
No
Yes
No
Yes
Yes
No
No
No
None
No
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
No
Yes
No
No
None
Yes
No
Yes
No
No
No
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes
Yes
No
None
No
No
Yes
No
Yes
Yes
No
Yes
Yes
No
No
Yes
No
No
No
Yes
Yes
No
None
Yes
Yes
Yes
No
No
No
No
Yes
Yes
No
No
Yes
No
No
No
No
No
No
None
Yes
No
No
No
No
No
No
Yes
Yes
No
No
Yes
No
No
No
No
No
No
Some
Yes
Yes
Yes
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
All
Yes
Yes
Yes
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
Yes
No
No
Yes
None
Yes
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
No
No
No
No
None
Yes
No
No
No
Yes
No
No
Yes
No
No
No
Yes
No
No
No
No
Yes
No
None
No
Yes
No
No
No
No
No
Yes
No
No
No
Yes
No
No
No
No
No
Yes
None
Yes
No
No
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
None
Yes
No
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
Yes
No
None
Yes
No
Yes
No
No
No
No
Yes
Yes
No
No
Yes
No
No
No
No
No
No
None
Yes
No
Yes
No
No
No
No
Yes
Yes
No
No
Yes
No
No
No
Yes
No
No
All
Yes
Yes
Yes
No
No
No
No
Yes
Yes
No
No
No
No
No
Yes
Yes
Yes
No
All
Yes
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
Yes
No
No
None
Yes
No
No
No
No
No
No
Yes
Yes
No
No
Yes
No
No
No
Yes
Yes
No
None
Yes
No
No
No
Yes
No
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
No
None
Yes
No
No
No
No
No
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes
No
No
None
No
No
No
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
No
Yes
No
No
None
No
No
No
No
No
Yes
Yes
Yes
Yes
No
No
Yes
No
No
Yes
No
Yes
No
All
Yes
Yes
No
No
No
No
No
Yes
Yes
Yes
No
Yes
No
No
Yes
Yes
No
No
None
Yes
No
Yes
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
No
None
No
No
No
No
No
Yes
No
Yes
Yes
No
No
Yes
No
No
No
No
Yes
No
Community
Building
Buildings w/
entrance
entrance
Under-
Aerobicse
Indoor /
security
controlled
controlled
ground
dance
Picnic
Walking /
Sauna /
Tennis
Fitness
Sand
outdoor
Clubhouse /
Business
systems
access
access
parking
studio
Car wash
area
jogging trail
Pool
whirlpool
court
Racquetball
center
volleyball
basketball
clubroom
center
Tot lot
Concierge
None
No
No
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
No
No
Yes
No
Yes
No
All
No
Yes
Yes
No
No
Yes
No
Yes
No
No
Yes
Yes
No
No
Yes
No
No
Yes
Some
No
Some
Some
Yes
No
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
Yes
All
No
Yes
No
Yes
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
All
Yes
Some
Some
No
No
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
No
All
Yes
Yes
Yes
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Yes
All
Yes
Yes
No
No
No
Yes
No
Yes
Yes
No
No
Yes
No
No
Yes
No
No
No
None
No
Yes
Yes
No
No
No
No
Yes
No
No
No
Yes
No
No
Yes
No
Yes
Yes
Some
No
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
All
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
No
No
Yes
No
No
Yes
No
No
No
All
Yes
Yes
Yes
No
No
Yes
No
No
No
No
No
Yes
No
No
Yes
No
No
No
All
All
All
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
No
Yes
None
No
Yes
No
Yes
No
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
No
Yes
None
No
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
No
Some
No
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
No
All
Yes
Yes
Yes
No
No
Yes
No
No
No
No
No
Yes
No
No
Yes
No
No
No
Total
Number of
capitalized
apartment
cost (1)
Construction
Initial
Estimated
Estimated
homes
($ millions)
start
occupancy (2)
completion
stabilization (3)
1.
123
$
46.6
Q1 2005
Q1 2007
Q2 2007
Q4 2007
2.
204
60.6
Q2 2005
Q3 2006
Q1 2007
Q3 2007
3.
196
30.5
Q3 2005
Q2 2006
Q1 2007
Q3 2007
4.
328
78.8
Q3 2005
Q4 2006
Q4 2007
Q2 2008
5.
251
36.1
Q3 2005
Q2 2006
Q2 2007
Q4 2007
6.
602
175.6
Q3 2005
Q3 2007
Q3 2008
Q1 2009
7.
111
42.4
Q4 2005
Q2 2007
Q3 2007
Q1 2008
8.
433
84.8
Q4 2005
Q1 2007
Q2 2008
Q4 2008
9.
446
81.3
Q4 2005
Q3 2006
Q1 2008
Q3 2008
10.
588
184.2
Q1 2006
Q3 2007
Q3 2008
Q1 2009
11.
368
84.3
Q1 2006
Q4 2007
Q3 2008
Q1 2009
12.
305
85.8
Q2 2006
Q3 2007
Q2 2008
Q4 2008
13.
387
86.2
Q2 2006
Q2 2007
Q3 2008
Q1 2009
14.
90
61.9
Q3 2006
Q4 2007
Q1 2008
Q2 2008
15.
131
61.5
Q3 2006
Q3 2008
Q4 2008
Q1 2009
16.
210
53.9
Q4 2006
Q1 2008
Q2 2008
Q4 2008
17.
380
68.8
Q4 2006
Q1 2008
Q4 2008
Q2 2009
5,153
$
1,323.3
(1)
Total capitalized cost includes all capitalized costs projected to be or actually incurred to
develop the respective Development Community, determined in accordance with GAAP, including
land acquisition costs, construction costs, real estate taxes, capitalized interest and loan
fees, permits, professional fees, allocated development overhead and other regulatory fees.
Total capitalized cost for communities identified as having joint venture ownership, either
during construction or upon construction completion, represents the total projected joint
venture contribution amount.
(2)
Future initial occupancy dates are estimates. There can be no assurance that we will pursue
to completion any or all of these proposed developments.
(3)
Stabilized operations is defined as the earlier of (i) attainment of 95% or greater physical
occupancy or (ii) the one-year anniversary of completion of development.
(4)
The remediation of our Avalon Lyndhurst development site, as discussed in Note 8,
Commitment and Contingencies of the Consolidated Financial Statements included as Item 8
of this report, is substantially complete. The net cost associated with this remediation
effort after considering insurance proceeds received to date, including costs associated
with construction delays, is expected to total approximately $7.5 million. We are pursuing
the recovery of these additional costs through insurance as well as from the third parties
involved, but any additional recoverable amounts are not currently estimable. The total
expected capitalized cost cited above does not reflect the potential impact of these
additional net costs.
(5)
This community is being financed in part by third party, tax-exempt debt.
Total cost
Number of
($ millions)
Estimated
Estimated
apartment
Pre-redevelopment
Total capitalized
Reconstruction
reconstruction
restabilized
homes
cost
cost (1)
start
completion
operations (2)
409
$
50.2
$
57.1
Q1 2006
Q1 2007
Q3 2007
Hamden, CT
764
59.4
71.2
Q1 2006
Q4 2007
Q2 2008
420
31.2
38.3
Q3 2006
Q3 2008
Q1 2009
1,593
$
140.8
$
166.6
Redmond, WA
400
$
49.2
$
56.7
Q2 2006
Q4 2007
Q2 2008
Norwalk, CA
192
38.1
43.5
Q4 2006
Q2 2008
Q4 2008
196
25.2
28.6
Q4 2006
Q1 2008
Q3 2008
788
$
112.5
$
128.8
2,381
$
253.3
$
295.4
(1)
Total capitalized cost includes all capitalized costs projected to be or actually incurred to
develop the respective Redevelopment Community, including land acquisition costs, construction
costs, real estate taxes, capitalized interest and loan fees, permits, professional fees,
allocated development overhead and other regulatory fees, all as determined in accordance with
GAAP.
(2)
Restabilized operations is defined as the earlier of (i) attainment of 95% or greater
physical occupancy or (ii) the one-year anniversary of completion of redevelopment.
Total
Estimated
capitalized
number
cost
Location
of homes
($ millions) (1)
1.
(2
)
393
$
155
2.
296
125
3.
216
41
4.
(2
)
200
47
5.
(2
)
176
53
6.
(2
)
235
44
7.
350
60
8.
(2
)
100
24
9.
(5
)
438
120
10.
(2
)
115
21
11.
319
83
12.
156
26
13.
628
317
14.
(4
)
416
153
15.
(2
)
284
45
16.
170
23
17.
(2
)
200
38
18.
(2
)
146
24
19.
(3
)
216
36
20.
81
17
21.
302
49
22.
171
34
23.
340
75
24.
210
45
25.
152
40
26.
(3
)
156
48
27.
265
42
28.
254
41
29.
285
67
30.
200
52
31.
205
53
32.
297
85
33.
680
261
34.
376
55
35.
173
38
36.
444
112
37.
(2
)
280
76
38.
(2
)
146
23
39.
210
47
40.
(2
)
150
42
41.
300
55
42.
308
62
43.
128
31
44.
180
57
45.
160
58
46.
(5
)
283
73
47.
(5
)
439
101
48.
400
88
49.
160
38
50.
(5
)
320
56
51.
(2
)
343
57
52.
233
57
53.
(5
)
240
46
54.
260
65
14,185
$
3,581
(1)
Total capitalized cost includes all capitalized costs incurred to date (if any) and projected
to be incurred to develop the respective community, determined in accordance with GAAP,
including land acquisition costs, construction costs, real estate taxes, capitalized interest
and loan fees, permits, professional fees, allocated development overhead and other regulatory
fees.
(2)
We own the land parcel, but construction has not yet begun.
(3)
This Development Right is subject to a joint venture ownership structure.
(4)
This Development Right is subject to a joint venture arrangement. In connection with the
pursuit of this Development Right, $125 million in bond financing was issued and immediately
invested in a guaranteed investment contract (GIC) administered by a trustee as described in
the Notes to the Consolidated Financial Statements set forth in Item 8 of this report.
(5)
Represents improved land encumbered with debt. The improved
land consists of occupied office buildings and industrial space. Net
operating income from incidental operations from the current
improvements are recorded as a reduction in the cost basis as
described in the Notes to the Consolidated Financial Statements set
forth in Item 8 of this report.
apply sufficient market and management presence to enhance revenue growth;
reduce operating expenses; and
leverage management talent.
Estimated
Total
number
capitalized
Gross
of apartment
cost (1)
Date
Construction
acres
homes
($ millions)
acquired
start (2)
1.
62.0
200
$
38
January 2006
2008
2.
3.3
210
54
January 2006
2006
3.
4.5
280
76
May 2006
2008
4.
22.5
387
86
June 2006
2006
5.
39.0
200
47
June 2006
2007
6.
12.9
235
44
June 2006
2007
7.
5.0
150
42
August 2006
2008
8.
50.3
380
69
December 2006
2006
9.
3.2
393
155
December 2006
2007
202.7
2,435
$
611
(1)
Total capitalized cost includes all capitalized costs incurred to date (if any) and projected
to be incurred to develop the respective community, determined in accordance with GAAP,
including land acquisition costs, construction costs, real estate taxes, capitalized interest
and loan fees, permits, professional fees, allocated development overhead and other regulatory
fees.
(2)
Future construction start dates are estimates. There can be no assurance that we will pursue
to completion any or all of these proposed developments.
(3)
Excludes portion of land acquired that is not planned for development
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
2006
2005
Sales Price
Dividends
Sales Price
Dividends
High
Low
declared
High
Low
declared
$
110.45
$
88.95
$
0.78
$
75.59
$
65.18
$
0.71
$
112.00
$
100.50
$
0.78
$
81.80
$
64.99
$
0.71
$
125.21
$
110.27
$
0.78
$
88.23
$
78.37
$
0.71
$
134.60
$
119.31
$
0.78
$
92.99
$
78.82
$
0.71
(c)
(d)
Total Number of
Maximum Dollar Amount
(a)
(b)
Shares Purchased
that May Yet be Purchased
Total Number of
Average Price Paid
as Part of Publicly
Under the Plans or
Shares Purchased
per Share
Announced Plans
Programs
Period
(1)
(1)
or Programs (2)
(in thousands) (2)
549
$
121.78
$
100,000
757
$
131.77
$
100,000
254
$
127.91
$
100,000
(1)
Includes shares surrendered to the Company in connection with employee stock option
exercises or vesting of restricted stock as payment of exercise price or as payment of
taxes.
(2)
As disclosed for the first time in our Form 10-K for the year ended December 31,
2005, our Board of Directors has adopted a Stock Repurchase Program under which we may
acquire, from time to time, shares of common stock in the open market with an aggregate
purchase price of up to $100,000,000. In 2006 and 2005, no purchases were made (a) under this program, or (b) outside of this program. In determining whether to repurchase shares, we consider a variety of
factors, including our liquidity needs, the then current market price of our shares and
the effect of the share repurchases on our per share earnings and FFO. There is no scheduled
expiration date to this program.
For the year ended
12-31-06
12-31-05
12-31-04
12-31-03
12-31-02
$
731,041
$
666,376
$
613,240
$
556,582
$
531,595
6,259
4,304
604
931
2,145
737,300
670,680
613,844
557,513
533,740
210,895
191,558
181,351
164,253
147,965
68,257
65,487
59,458
53,257
47,580
111,046
127,099
131,103
130,178
114,282
162,896
158,822
151,991
138,725
121,995
24,767
25,761
18,074
14,830
13,449
6,800
577,861
568,727
541,977
501,243
452,071
7,455
7,198
1,100
25,535
55
(1,178
)
(1,688
)
(857
)
(573
)
(1,481
)
(150
)
(950
)
(865
)
13,519
4,479
1,138
1,234
179,840
112,149
72,777
80,401
80,002
1,148
14,942
21,134
31,368
44,723
97,411
195,287
121,287
159,756
48,893
98,559
210,229
142,421
191,124
93,616
278,399
322,378
215,198
271,525
173,618
4,547
278,399
322,378
219,745
271,525
173,618
(8,700
)
(8,700
)
(8,700
)
(10,744
)
(17,896
)
$
269,699
$
313,678
$
211,045
$
260,781
$
155,722
$
2.31
$
1.42
$
0.96
$
1.01
$
0.90
$
1.33
$
2.88
$
1.99
$
2.79
$
1.36
$
3.64
$
4.30
$
2.95
$
3.80
$
2.26
74,125,795
72,952,492
71,564,202
68,559,657
68,772,139
$
2.27
$
1.40
$
0.96
$
1.00
$
0.89
$
1.30
$
2.81
$
1.96
$
2.73
$
1.34
$
3.57
$
4.21
$
2.92
$
3.73
$
2.23
75,586,898
74,759,318
73,354,956
70,203,467
70,674,211
$
3.12
$
2.84
$
2.80
$
2.80
$
2.80
For the year ended
12-31-06
12-31-05
12-31-04
12-31-03
12-31-02
$
278,399
$
322,378
$
219,745
$
271,525
$
173,618
162,896
158,822
151,991
138,725
121,995
3,241
10,676
14,380
22,482
111,046
127,099
131,103
130,178
114,282
525
2,399
3,122
$
552,341
$
611,540
$
514,040
$
557,207
$
435,499
$
330,819
$
281,773
$
246,247
$
230,566
$
251,410
150
143
138
131
137
43,141
41,412
40,142
38,504
40,179
$
6,578,615
$
5,903,168
$
5,697,144
$
5,431,757
$
5,369,453
$
5,813,186
$
5,165,060
$
5,081,249
$
4,909,582
$
4,950,835
$
2,825,586
$
2,334,017
$
2,451,354
$
2,337,817
$
2,471,163
$
351,943
$
306,248
$
275,617
$
239,677
$
307,810
$
(511,371
)
$
(19,761
)
$
(251,683
)
$
33,935
$
(435,796
)
$
162,280
$
(282,293
)
$
(29,471
)
$
(279,465
)
$
68,008
(1)
EBITDA is defined as net income before interest income and expense, income taxes,
depreciation and amortization from both continuing and discontinued operations. Under this
definition, EBITDA includes gains on sale of assets and gain on sale of partnership interests.
Management generally considers EBITDA to be an appropriate supplemental measure to net income
of our operating performance because it helps investors to understand our ability to incur and
service debt and to make capital expenditures. EBITDA should not be considered as an
alternative to net income (as determined in accordance with generally accepted accounting
principles, or GAAP), as an indicator of our operating performance, or to cash flows from
operating activities (as determined in accordance with GAAP) as a measure of liquidity. Our
calculation of EBITDA may not be comparable to EBITDA as calculated by other companies.
(2)
We generally consider Funds from Operations, or FFO, as defined below, to be an appropriate
supplemental measure of our operating and financial performance because, by excluding gains or
losses related to dispositions of previously depreciated property and excluding real estate
depreciation, which can vary among owners of identical assets in similar condition based on
historical cost accounting and useful life estimates, FFO can help one compare the operating
performance of a real estate company between periods or as compared to different companies.
We believe that in order to understand our operating results, FFO should be examined with net
income as presented in the Consolidated Statements of Operations and Other Comprehensive
Income included elsewhere in this report.
(3)
Current Communities consist of all communities other than those which are still under
construction and have not received a certificate of occupancy.
gains or losses on sales of previously depreciated operating communities;
extraordinary gains or losses (as defined by GAAP);
cumulative effect of change in accounting principle;
depreciation of real estate assets; and
adjustments for unconsolidated partnerships and joint ventures.
For the year ended
12-31-06
12-31-05
12-31-04
12-31-03
12-31-02
$
278,399
$
322,378
$
219,745
$
271,525
$
173,618
(8,700
)
(8,700
)
(8,700
)
(10,744
)
(17,896
)
164,749
162,019
157,988
128,278
142,980
391
1,363
3,048
1,263
1,601
(6,609
)
(4,547
)
(97,411
)
(195,287
)
(121,287
)
(159,756
)
(48,893
)
$
330,819
$
281,773
$
246,247
$
230,566
$
251,410
75,586,898
74,759,318
73,354,956
70,203,467
70,674,211
$
4.38
$
3.77
$
3.36
$
3.28
$
3.55
2006
2005
$ Change
% Change
2005
2004
$ Change
% Change
$
731,041
$
666,376
$
64,665
9.7
%
$
666,376
$
613,240
$
53,136
8.7
%
6,259
4,304
1,955
45.4
%
4,304
604
3,700
612.6
%
737,300
670,680
66,620
9.9
%
670,680
613,844
56,836
9.3
%
169,685
155,481
14,204
9.1
%
155,481
148,705
6,776
4.6
%
68,257
65,487
2,770
4.2
%
65,487
59,458
6,029
10.1
%
237,942
220,968
16,974
7.7
%
220,968
208,163
12,805
6.2
%
34,177
31,243
2,934
9.4
%
31,243
27,956
3,287
11.8
%
7,033
4,834
2,199
45.5
%
4,834
4,690
144
3.1
%
111,046
127,099
(16,053
)
(12.6
%)
127,099
131,103
(4,004
)
(3.1
%)
162,896
158,822
4,074
2.6
%
158,822
151,991
6,831
4.5
%
24,767
25,761
(994
)
(3.9
%)
25,761
18,074
7,687
42.5
%
339,919
347,759
(7,840
)
(2.3
%)
347,759
333,814
13,945
4.2
%
7,455
7,198
257
3.6
%
7,198
1,100
6,098
n/a
n/a
(1,178
)
1,178
(100.0
%)
(573
)
(1,481
)
908
(61.3
%)
(1,481
)
(150
)
(1,331
)
n/a
13,519
4,479
9,040
201.8
%
4,479
1,138
3,341
293.6
%
179,840
112,149
67,691
60.4
%
112,149
72,777
39,372
54.1
%
1,148
14,942
(13,794
)
(92.3
%)
14,942
21,134
(6,192
)
(29.3
%)
97,411
195,287
(97,876
)
(50.1
%)
195,287
121,287
74,000
61.0
%
98,559
210,229
(111,670
)
(53.1
%)
210,229
142,421
67,808
47.6
%
278,399
322,378
(43,979
)
(13.6
%)
322,378
215,198
107,180
49.8
%
n/a
4,547
(4,547
)
n/a
278,399
322,378
(43,979
)
(13.6
%)
322,378
219,745
102,633
46.7
%
(8,700
)
(8,700
)
(8,700
)
(8,700
)
$
269,699
$
313,678
$
(43,979
)
(14.0
%)
$
313,678
$
211,045
$
102,633
48.6
%
For the year ended
12-31-06
12-31-05
12-31-04
$
278,399
$
322,378
$
219,745
28,809
26,675
26,612
7,033
4,834
4,690
111,046
127,099
131,103
24,767
25,761
18,074
(7,455
)
(7,198
)
(1,100
)
1,178
573
1,481
150
162,896
158,822
151,991
(4,547
)
(110,930
)
(199,766
)
(122,425
)
(1,148
)
(14,942
)
(21,134
)
$
493,990
$
445,144
$
404,337
2006
2005
Increase
Increase
$
32,216
$
13,052
5,497
3,786
11,133
23,969
$
48,846
$
40,807
For the year ended
12-31-06
12-31-05
$
559,771
$
523,900
11,082
20,010
(5,796
)
(17,399
)
$
565,057
$
526,511
6.8
%
n/a
7.3
%
n/a
normal recurring operating expenses;
debt service and maturity payments;
preferred stock dividends and DownREIT partnership unit distributions;
the minimum dividend payments on our common stock required to maintain our REIT
qualification under the Internal Revenue Code of 1986;
development and redevelopment activity in which we are currently engaged; and
capital calls for the Fund, as required.
We began the development of eight new communities. These eight communities, if
developed as expected, will contain a total of 2,459 apartment homes, and the total
capitalized cost, including land acquisition costs, is projected to be approximately
$686,600,000. We completed the development of six communities containing a total of 1,368
apartment homes for a total capitalized cost, including land acquisition cost, of
$375,200,000.
We began the redevelopment of three consolidated communities, which contain an aggregate
of 1,593 apartment homes and, if redeveloped as expected, will be completed for a total
redevelopment capitalized cost of $25,800,000, excluding costs incurred prior to
redevelopment. We completed the redevelopment of one consolidated community containing 336
apartment homes for a total capitalized cost of $6,000,000, excluding costs incurred prior
to redevelopment.
We acquired nine parcels of land in connection with Development Rights, for an aggregate
purchase price of $91,574,000
.
We had capital expenditures relating to current communities real estate assets of
$21,289,000 and non-real estate capital expenditures of $957,000.
was used to provide letters of credit and $611,912,000 was available for borrowing under the
unsecured credit facility.
We repaid $150,000,000 in previously issued unsecured notes in July 2006, along with
any unpaid interest, pursuant to their scheduled maturity. No prepayment penalty was
incurred;
We issued a total of $500,000,000 of unsecured notes in September 2006 under our
existing shelf registration statement. The offering consisted of two separate tranches
of $250,000,000 with an annual effective interest rate of 5.586% and 5.820%, maturing
in 2012 and 2016, respectively;
We issued $34,000,000 of variable rate mortgage debt for one community in April
2006, maturing in April 2011;
We issued $93,800,000 of variable rate, tax-exempt debt for one community in
December 2006, maturing in November 2037;
We issued $48,500,000 of variable rate, tax-exempt debt for one community in
December 2006, maturing in November 2039; and
We issued $45,000,000 of variable rate, tax-exempt debt for one community in
December 2006, maturing in July 2040.
All-In
Principal
interest
maturity
Balance outstanding
Scheduled maturities
Community
rate (1)
date
12-31-05
12-31-06
2007
2008
2009
2010
2011
Thereafter
6.30
%
Mar-2012
$
16,586
$
15,990
$
634
$
676
$
719
$
766
$
816
$
12,379
4.90
%
Jul-2024
9,780
9,780
9,780
7.55
%
Aug-2024
16,465
15,980
515
555
595
635
680
13,000
6.55
%
Feb-2025
12,834
12,467
367
415
441
469
498
10,277
5.80
%
Jun-2025
18,494
18,116
(2)
18,116
6.48
%
Jun-2025
33,614
32,776
(2)
32,776
6.48
%
Jun-2025
15,247
14,867
(2)
14,867
6.95
%
Jun-2026
12,239
11,957
302
324
347
371
398
10,215
6.85
%
Jun-2026
6,044
5,903
153
162
173
185
198
5,032
7.55
%
May-2027
10,705
10,483
237
256
275
295
316
9,104
7.73
%
Dec-2036
8,259
8,179
92
91
98
105
112
7,681
7.45
%
Jul-2041
17,324
17,205
129
137
147
157
168
16,467
7.48
%
Apr-2043
17,145
17,036
117
125
133
142
152
16,367
194,736
190,739
2,546
2,741
2,928
3,125
3,338
176,061
5.68
%
Oct-2010
32,100
31,495
651
701
755
29,388
4.27
%
Jul-2014
33,100
33,100
(4)
33,100
4.27
%
Feb-2017
18,300
18,300
(4)
18,300
4.27
%
Nov-2017
16,800
16,800
(4)
16,800
4.27
%
Nov-2017
9,600
9,600
(4)
9,600
4.82
%
Jun-2025
7,635
7,635
(4)
7,635
3.65
%
Jun-2025
2,306
2,684
(2)
2,684
3.65
%
Jun-2025
5,186
6,024
(2)
6,024
3.65
%
Jun-2025
2,353
2,733
(2)
2,733
4.16
%
Nov-2037
93,800
(5)
521
576
636
703
91,364
4.23
%
Nov-2039
48,500
(5)
270
298
47,932
4.96
%
Jul-2040
45,000
(5)
45,000
4.91
%
Jun-2026
11,500
11,500
11,500
138,880
327,171
651
1,222
1,331
30,294
1,001
292,672
6.93
%
Jul-2006
150,000
5.18
%
Aug-2007
150,000
150,000
150,000
7.13
%
Dec-2007
110,000
110,000
110,000
6.63
%
Jan-2008
50,000
50,000
50,000
8.38
%
Jul-2008
150,000
146,000
146,000
7.63
%
Aug-2009
150,000
150,000
150,000
7.66
%
Dec-2010
200,000
200,000
200,000
6.79
%
Sep-2011
300,000
300,000
300,000
6.31
%
Sep-2011
50,000
50,000
50,000
6.26
%
Nov-2012
250,000
250,000
250,000
5.11
%
Mar-2013
100,000
100,000
100,000
5.52
%
Apr-2014
150,000
150,000
150,000
5.88
%
Jan-2012
250,000
250,000
5.72
%
Sep-2016
250,000
250,000
6.99
%
Oct-2008
4,589
4,513
81
4,432
8.08
%
Apr-2009
4,504
4,402
109
118
4,175
7.25
%
Oct-2011
8,379
8,200
193
207
222
239
7,339
5.55
%
Jul-2028
6,681
6,535
156
162
173
183
193
5,668
7.65
%
Jul-2033
20,136
19,883
272
290
311
333
357
18,320
1,854,289
2,199,533
260,811
201,209
154,881
200,755
357,889
1,023,988
6.75
%
May-2009
19,290
18,635
(4)
811
688
17,136
6.75
%
May-2009
21,935
21,245
(4)
926
784
19,535
6.69
%
Dec-2009
38,905
37,650
(4)
1,546
1,397
34,707
6.66
%
Mar-2011
33,535
(4)
1,230
1,045
1,106
1,169
28,985
80,130
111,065
4,513
3,914
72,484
1,169
28,985
$
2,268,035
$
2,828,508
$
268,521
$
209,086
$
231,624
$
235,343
$
391,213
$
1,492,721
(1)
Includes credit enhancement fees, facility fees, trustees fees and other fees.
(2)
Financed by variable rate, tax-exempt debt, but the interest rate on a portion of this debt
is effectively fixed at December 31, 2006 and December 31, 2005 through a swap agreement. The
portion of the debt fixed through a swap agreement decreases (and therefore the variable
portion of the debt increases) monthly as payments are made to a principal reserve fund.
(3)
Variable rates are given as of December 31, 2006.
(4)
Financed by variable rate debt, but interest rate is capped through an interest rate
protection agreement.
(5)
Represents full amount of the debt as of December 31, 2006. Actual amounts drawn on the debt
as of December 31, 2006 are $79,849 for Bowery Place I and $0 for both Bowery Place II and
Avalon Acton.
(6)
Balances outstanding represent total amounts due at maturity, and are not net of $2,922 and
$818 of debt discount as of December 31, 2006 and December 31, 2005, respectively, as
reflected in unsecured notes on our Consolidated Balance Sheets included elsewhere in this
report.
cash currently on hand invested in highly liquid overnight
money market funds and repurchase agreements;
the remaining capacity under our current $650,000,000 unsecured credit facility;
the net proceeds from sales of existing communities;
retained operating cash;
the issuance of debt or equity securities (including proceeds from the recent stock
offering); and/or
private equity funding.
CVP I, LLC
CVP I, LLC has outstanding
tax-exempt, variable rate bonds maturing in
November 2036 in the amount of $117,000,000, which have permanent credit enhancement. We
have agreed to guarantee, under limited circumstances, the repayment to the credit enhancer
of any advances it may make in fulfillment of CVP I, LLCs repayment obligations under the
bonds. We have also guaranteed to the credit enhancer that CVP I, LLC will obtain a final
certificate of occupancy for the project (Chrystie Place in New York City) overall once
tenant improvements related to a retail tenant are complete, which is expected in 2007.
Our 80% partner in this venture has agreed that it will reimburse us its pro rata share of
any amounts paid relative to these guaranteed obligations. The estimated
fair value of, and our obligation under these guarantees, both at
inception and as of December 31, 2006 were not significant. As a
result we have not recorded any obligation associated with these
guarantees at December 31, 2006.
MVP I, LLC
MVP I, LLC has a construction loan in the amount of $94,400,000 (of which
$76,739,000 is outstanding as of December 31, 2006), which matures in September 2010,
assuming exercise of two one-year renewal options, and is payable by the unconsolidated
real estate entity. In connection with the construction management services that we
provided to MVP I, LLC, the entity that owns and developed Avalon at Mission Bay North II
in San Francisco, we have provided a construction completion guarantee to the lender in
order to fulfill their standard financing requirements related to the construction
financing. Construction was completed in 2006, and our obligations under this guarantee
will terminate once all of the lenders standard completion requirements have been
satisfied, which we currently expect to occur in 2007. The estimated
fair value of and our obligation under this guarantee, both at
inception and as of December 31, 2006 was not significant and
therefore no liability has been recorded
related to this construction completion guarantee as of December 31, 2006.
The Fund
The Fund has 12 mortgage loans with amounts outstanding in the aggregate of
$259,645,000. These mortgage loans have varying maturity dates (or dates after which the
loans can be prepaid), ranging from February 2007 to October 2014. These mortgage loans
are secured by the underlying real estate. In addition, the Fund has a credit facility
with $57,400,000 outstanding as of December 31, 2006, which matures in January 2008. The
mortgage loans and the credit facility are payable by the Fund with operating cash flow
from the underlying real estate, and the credit facility is secured by capital commitments.
We have not guaranteed the debt of the Fund, nor do we have any obligation to fund this
debt should the Fund be unable to do so.
In addition, as part of the formation of the Fund, we have provided to one of the limited
partners a guarantee. The guarantee provides that if, upon final liquidation of the Fund,
the total amount of all distributions to that partner during the life of the Fund (whether
from operating cash flow or property sales) does not equal a minimum of the total capital
contributions made by that partner, then we will pay the partner an amount equal to the
shortfall, but in no event more than 10% of the total capital contributions made by the
partner (maximum of approximately $3,400,000 as of December 31, 2006). As of December 31,
2006, the fair value of the real estate assets owned by the Fund is considered adequate to
cover such potential payment to that partner under a liquidation
scenario. The estimated fair value of, and our obligation under this
guarantee, both at inception and as of December 31, 2006 was not
significant and therefore we have not recorded any obligation for this
guarantee as of December 31, 2006.
PHVP I, LLC
In connection with the pursuit of a Development Right in Pleasant Hill,
California, $125,000,000 in bond financing was issued by the Contra Costa County
Redevelopment Agency (the Agency) in connection with the possible future construction of
a multifamily rental community by PHVP I, LLC. The bond proceeds were immediately invested
in their entirety in a guaranteed investment contract (GIC) administered by a trustee.
This Development Right is planned as a mixed-use development, with residential, for-sale,
retail and office components. The bond proceeds will remain in the GIC until at least June
1, 2007, but no later than December 5, 2007, at which time a loan will be made to PHVP I,
LLC to fund construction of the multifamily portion of the development, or the bonds will
be redeemed by the Agency. Although we do not have any equity or economic interest in PHVP
I, LLC at this time, we do have an option to make a capital contribution to PHVP I, LLC in
exchange for a 99% general partner interest in the entity. Should we decide not to
exercise this option, the bonds will be redeemed, and a loan will not be made to PHVP I,
LLC. The bonds are payable from the proceeds of the GIC and are non-recourse to both PHVP
I, LLC and to us. There is no loan payable outstanding by PHVP I, LLC as of December 31,
2006.
In addition, as part of providing construction management services to PHVP I, LLC for the
construction of a public garage, we have provided a construction completion guarantee to the
related lender in order to fulfill their standard financing requirements related to the
garage construction financing. Our obligations under this guarantee will terminate
following construction completion of the garage once all of the lenders standard completion
requirements have been satisfied, which we currently expect to occur in 2008. In the third
quarter of 2006, significant modifications were requested by the local transit authority to
change the garage structure design. We do not believe that the requested design changes
impact the construction schedule. However, it is expected that these changes will increase
the original budget by an amount up to $5,000,000. We believe that substantially all
potential additional amounts are reimbursable from unrelated third parties. At this time we
do not believe that it is probable that we will incur any additional
costs. The estimated fair value of, and our obligation under this
guarantee, both at inception and as of December 31, 2006 was not
significant and therefore we have not recorded any obligation for this
guarantee as of December 31, 2006.
Avalon Del Rey Apartments, LLC
In the fourth quarter of 2006, we admitted a 70%
venture partner to the LLC for an investment of $49,000,000, including the assumption of
debt. In conjunction with this investment, we provided an operating guarantee to
the joint venture partner. This guarantee provides that if the initial year return earned
by the joint venture partner is less than a threshold return of 7% on its initial equity
investment, we will pay the joint venture partner an amount equal to the shortfall, up
to the 7% threshold return required. As of December 31, 2006, the cash flows and expected
return on investment of the community are expected to meet and exceed the initial year
threshold return required by our joint venture partner. Therefore we have not recorded any
liability associated with this guarantee as of December 31, 2006.
Payments due by period
Less than 1
More than 5
Total
Year
1-3 Years
3-5 Years
Years
$
2,828,508
$
268,521
$
440,710
$
626,556
$
1,492,721
1,868,720
8,045
16,411
16,156
1,828,108
$
4,697,228
$
276,566
$
457,121
$
642,712
$
3,320,829
(1)
No balance outstanding under our variable rate unsecured credit facility as of December 31,
2006. Amounts exclude interest payable as of December 31, 2006.
(2)
Includes land leases expiring between July 2029 and March 2142. Amounts do not include any
adjustment for purchase options available under the land leases.
our potential development, redevelopment, acquisition or disposition of communities;
the timing and cost of completion of apartment communities under construction,
reconstruction, development or redevelopment;
the timing of lease-up, occupancy and stabilization of apartment communities;
the pursuit of land on which we are considering future development;
the anticipated operating performance of our communities;
cost, yield and earnings estimates;
our declaration or payment of distributions;
our joint venture and discretionary fund activities;
our policies regarding investments, indebtedness, acquisitions, dispositions,
financings and other matters;
our qualification as a REIT under the Internal Revenue Code;
the real estate markets in Northern and Southern California and markets in
selected states in the Mid-Atlantic, Northeast, Midwest and Pacific Northwest
regions of the United States and in general;
the availability of debt and equity financing;
interest rates;
general economic conditions; and
trends affecting our financial condition or results of operations.
we may fail to secure development opportunities due to an inability to reach
agreements with third parties to obtain land at attractive prices or to obtain
desired zoning and other local approvals;
we may abandon or defer development opportunities for a number of reasons,
including changes in local market conditions which make development less desirable,
increases in costs of development and increases in the cost of capital, resulting
in losses;
construction costs of a community may exceed our original estimates;
we may not complete construction and lease-up of communities under development
or redevelopment on schedule, resulting in increased interest costs and
construction costs and a decrease in our expected rental revenues;
occupancy rates and market rents may be adversely affected by competition and
local economic and market conditions which are beyond our control;
financing may not be available on favorable terms or at all, and our cash flows
from operations and access to cost effective capital may be insufficient for the
development of our pipeline which could limit our pursuit of opportunities;
our cash flows may be insufficient to meet required payments of principal and
interest, and we may be unable to refinance existing indebtedness or the terms of
such refinancing may not be as favorable as the terms of existing indebtedness;
we may be unsuccessful in our management of the Fund and the Fund REIT; and
we may be unsuccessful in managing changes in our portfolio composition.
we agree to pay to a counterparty the interest that would have been incurred on a
fixed principal amount at a fixed interest rate (generally, the interest rate on a
particular treasury bond on the date the agreement is entered into, plus a fixed
increment); and
the counterparty agrees to pay to us the interest that would have been incurred on
the same principal amount at an assumed floating interest rate tied to a particular
market index.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9a.
CONTROLS AND PROCEDURES
(a)
Evaluation of Disclosure Controls and Procedures
. As required by Rule 13a-15 under the
Securities Exchange Act of 1934, as of the end of the period covered by this report, the
Company carried out an evaluation under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Companys disclosure controls
and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Companys disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms. We continue to
review and document our disclosure controls and procedures, including our internal control
over financial reporting, and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that our systems evolve with our business.
(b)
Managements Report on Internal Control Over Financial Reporting
. Our management is
responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting as of December 31, 2006 based on the framework in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Based on that evaluation, our management concluded that our
internal control over financial reporting was effective as of December 31, 2006.
Managements assessment of the effectiveness of our internal control over financial
reporting as of December 31, 2006 has been audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report which is included elsewhere
herein.
(c)
Changes in Internal Control Over Financial Reporting
. There was no change in our internal
control over financial reporting that occurred during the fourth quarter of the
period covered by this Annual Report on Form 10-K that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9b.
OTHER INFORMATION
69
70
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11.
EXECUTIVE COMPENSATION
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
(a)
(b)
(c)
Number of securities
remaining available for future
Number of securities to be
Weighted-average
issuance under equity
issued upon exercise of
exercise price of
compensation plans
outstanding options,
outstanding options,
(excluding securities
Plan category
warrants and rights
warrants and rights
reflected in column (a))
2,603,738
(2)(3)
$
69.65
(3)(4)
1,791,861
(5)
n/a
789,312
2,603,738
$
69.65
(3)(4)
2,581,173
(1)
Consists of the 1994 Plan.
(2)
Includes 116,499 deferred units granted under the 1994 Plan, which, subject to vesting
requirements, will convert in the future to common stock on a one-for-one basis, but does not
include 274,986 shares of restricted stock that are outstanding and that are already reflected
in the Companys outstanding shares.
(3)
Does not include outstanding options to acquire 4,240 shares, at a weighted-average
exercise price of $36.83 per share, that were assumed, in connection with the 1998 merger of
Avalon Properties, Inc. with and into the Company, under the Avalon Properties, Inc. 1995
Equity Incentive Plan and the Avalon Properties, Inc. 1993 Stock Option and Incentive Plan.
(4)
Excludes deferred units granted under the 1994 Plan, which, subject to vesting
requirements, will convert in the future to common stock on a one-for-one basis.
(5)
The 1994 Plan incorporates an evergreen formula pursuant to which the aggregate number
of shares reserved for issuance under the 1994 Plan will increase annually. On each January
1, the aggregate number of shares reserved for issuance under the 1994 Plan will increase by a
number of shares equal to a percentage (ranging from 0.48% to 1.00%) of all outstanding shares
of common stock and operating partnership units at the end of the year. The exact percentage used is determined based on the
percentage of all awards made under the 1994 Plan during the calendar year that were in the
form of stock options with an exercise price equal to the fair market value of a share of
common stock on the date of the grant. In accordance with this procedure, on January 1, 2007,
the maximum number of shares remaining available for future issuance under the 1994 Plan was increased by 748,133 to 2,539,994.
(6)
Consists of the ESPP.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
71
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULE
F-1
F-3
F-4
F-5
F-6
F-8
F-35
72
73
74
75
Articles of Amendment and Restatement of Articles of Incorporation of the Company, dated as of June 4, 1998.
(Refiled herewith.)
Articles of Amendment, dated as of October 2, 1998. (Refiled herewith.)
Articles Supplementary, dated as of October 13, 1998, relating to the 8.70% Series H Cumulative Redeemable
Preferred Stock. (Refiled herewith.)
Amended and Restated Bylaws of the Company, as adopted by the Board of Directors on February 13, 2003.
(Incorporated by reference to Exhibit 3(ii) to Form 10-K of the Company filed March 11, 2003.)
Second Supplemental Indenture of Avalon Properties dated as of December 16, 1997. (Incorporated by reference
to Exhibit 4.3 to Form 10-K of the Company filed March 11, 2003.)
Indenture for Senior Debt Securities, dated as of January 16, 1998, between the Company and State Street Bank
and Trust Company, as Trustee. (Incorporated by reference to Exhibit 4.1 to Form S-3ASR of the Company filed
January 8, 2007.)
First Supplemental Indenture, dated as of January 20, 1998, between the Company and State Street Bank and
Trust Company as Trustee. (Incorporated by reference to Exhibit 4.2 to Form S-3ASR of the Company filed
January 8, 2007.)
Second Supplemental Indenture, dated as of July 7, 1998, between the Company and State Street Bank and Trust
Company as Trustee. (Incorporated by reference to Exhibit 4.3 to Form S-3ASR of the Company filed January 8,
2007.)
Amended and Restated Third Supplemental Indenture, dated as of July 10, 2000 between the Company and State
Street Bank and Trust Company as Trustee. (Incorporated by reference to Exhibit 4.4 to Form S-3ASR of the
Company filed January 8, 2007.)
Fourth Supplemental Indenture, dated as of September 18, 2006, between the Company and U.S. Bank National
Association as Trustee. (Incorporated by reference to Exhibit 4.5 to Form S-3ASR of the Company filed January
8, 2007.)
Dividend Reinvestment and Stock Purchase Plan of the Company filed September 14, 1999. (Incorporated by
reference to Form S-3 of the Company, File No. 333-87063.)
Amendment to the Companys Dividend Reinvestment and Stock Purchase Plan filed on December 17, 1999.
(Incorporated by reference to the Prospectus Supplement filed pursuant to Rule 424(b)(2) of the Securities Act
of 1933 on December 17, 1999.)
Amendment to the Companys Dividend Reinvestment and Stock Purchase Plan filed on March 26, 2004.
(Incorporated by reference to the Prospectus Supplement filed pursuant to Rule 424(b)(3) of the Securities Act
of 1933 on March 26, 2004.)
Amended and Restated Distribution Agreement, dated August 6, 2003, among AvalonBay Communities, Inc. (the
Company) and the Agents, including Administrative Procedures, relating
to the MTNs. (Incorporated by reference to Exhibit 10.1 to Form 10-K of the Company filed March 5, 2004.)
Amended and Restated Limited Partnership Agreement of AvalonBay Value Added Fund, L.P., dated as of March 16,
2005. (Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company filed May 6, 2005.)
Endorsement Split Dollar Agreements and Amendments thereto with Messrs. Blair, Naughton, Fuller, Sargeant,
Horey and Meyer (Incorporated by reference to Exhibit 10.2 to Form 10-Q of the Company filed May 6, 2005.)
Employment Agreement, dated as of July 1, 2003, between the Company and Thomas J. Sargeant. (Incorporated by
reference to Exhibit 10.1 to Amendment No. 3 to the Companys Registration Statement on Form S-3 (333-103755),
filed July 7, 2003.)
First Amendment to Employment Agreement between the Company and Thomas J. Sargeant, dated as of March 31,
2005. (Incorporated by reference to Exhibit 10.5 to Form 10-Q of the Company filed May 6, 2005.)
Employment Agreement, dated as of January 10, 2003, between the Company and Bryce Blair. (Incorporated by
reference to Exhibit 10.5 to Form 10-K of the Company filed March 11, 2003.)
First Amendment to Employment Agreement between the Company and Bryce Blair, dated as of March 31, 2005.
(Incorporated by reference to Exhibit 10.3 to Form 10-Q of the Company filed May 6, 2005.)
Employment Agreement, dated as of February 26, 2001, between the Company and Timothy J. Naughton. (Refiled
herewith.)
First Amendment to Employment Agreement between the Company and Timothy J. Naughton, dated as of March 31,
2005. (Incorporated by reference to Exhibit 10.4 to Form 10-Q of the Company filed May 6, 2005.)
Employment Agreement, dated as of September 10, 2001, between the Company and Leo S. Horey. (Refiled herewith.)
First Amendment to Employment Agreement between the Company and Leo S. Horey, dated as of March 31, 2005.
(Incorporated by reference to Exhibit 10.6 to Form 10-Q of the Company filed May 6, 2005).
Employment Agreement, dated as of December 31, 2001, between the Company and Samuel B. Fuller. (Incorporated
by reference to Exhibit 10.9 to Form 10-K of the Company filed March 26, 2002.)
First Amendment to Employment Agreement between the Company and Samuel B. Fuller, dated as of March 31, 2005.
(Incorporated by reference to Exhibit 10.7 to Form 10-Q of the Company filed May 6, 2005).
Separation Agreement between the Company and Samuel B. Fuller, dated as of April 6, 2005. (Incorporated by
reference to Exhibit 10.9 to Form 10-Q of the Company filed May 6, 2005.)
Retirement Agreement, dated as of March 24, 2000, between the Company and Gilbert M. Meyer. (Refiled herewith.)
First Amendment to Retirement Agreement between the Company and Gilbert M. Meyer, dated as of March 31, 2005.
(Incorporated by reference to Exhibit 10.8 to Form 10-Q of the Company filed May 6, 2005).
Avalon Properties, Inc. 1993 Stock Option and Incentive Plan. (Refiled herewith.)
Avalon Properties, Inc. 1995 Equity Incentive Plan. (Refiled herewith.)
Amendment, dated May 6, 1999, to the Avalon Properties Amended and Restated 1995 Equity Incentive Plan.
(Refiled herewith.)
AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended and restated in full on December 8, 2004.
(Incorporated by reference to Exhibit 10.B 1 to Form 8-K of the Company filed December 14, 2004.)
Amendment, dated February 9, 2006, to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended
and restated on December 8, 2004. (Incorporated by reference to Exhibit 10.32 to Form 10-K of the Company
filed March 14, 2006.)
Amendment, dated December 6, 2006, to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended
and restated on December 8, 2004. (Filed herewith.)
1996 Non-Qualified Employee Stock Purchase Plan, dated June 26, 1997, as amended and restated. (Incorporated
by reference to Exhibit 99.1 to Post-effective Amendment No. 1 to Form S-8 of the Company filed June 26, 1997,
File No. 333-16837.)
1996 Non-Qualified Employee Stock Purchase Plan Plan Information Statement dated June 26, 1997.
(Incorporated by reference to Exhibit 99.2 to Form S-8 of the company, File No. 333-16837.)
Form of Indemnity Agreement between the Company and its Directors. (Incorporated by reference to Exhibit 10.1
to Form 10-Q of the Company filed November 9, 2005.)
The Companys Officer Severance Plan adopted on September 9, 1999. (Refiled herewith.)
Form of AvalonBay Communities, Inc. Non-Qualified Stock Option Agreement (1994 Stock Incentive Plan, as
Amended and Restated). (Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q filed on
November 4, 2004.).
Form of AvalonBay Communities, Inc. Incentive Stock Option Agreement (1994 Stock Incentive Plan, as Amended
and Restated). (Incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q filed on November 4,
2004.)
Form of AvalonBay Communities, Inc. Employee Stock Grant and Restricted Stock Agreement. (Incorporated by
reference to Exhibit 10.1 to the Companys Form 10-Q filed on November 4, 2004.)
Form of AvalonBay Communities, Inc. Director Restricted Unit Agreement. (Incorporated by reference to Exhibit
10.1 to the Companys Form 10-Q filed on November 4, 2004.)
Form of AvalonBay Communities, Inc. Director Restricted Stock Agreement. (Incorporated by reference to
Exhibit 10.1 to the Companys Form 10-Q filed on November 4, 2004.)
Amended and Restated Revolving Loan Agreement, dated as of May 24, 2004, among the Company, as Borrower,
JPMorgan Chase Bank and Wachovia Bank, N.A., each as a Bank and Syndication Agent, Bank of America, successor
in interest to Fleet National Bank, as a Bank, Swing Lender and Issuing Bank, Morgan Stanley Bank, Wells Fargo
Bank, N.A., and Deutsche Bank Trust Company Americas, each as a Bank and Documentation Agent, the other banks
signatory thereto, each as a Bank, J.P. Morgan Securities, Inc., as Sole Bookrunner and Lead Arranger, and
Bank of America, successor in interest to Fleet National Bank, as Administrative Agent. (Incorporated by
reference to Exhibit 10.1 to Form 10-Q of the Company filed August 6, 2004.)
Rules and Procedures for Non-Employee Directors Deferred Compensation Program adopted on November 20, 2006. (Filed herewith.)
Compensation Arrangements for
Non-Employee Directors. (Incorporated by reference to the
Companys Form 8-K filed on February 14, 2006.)
Statements re: Computation of Ratios. (Filed herewith.)
Schedule of Subsidiaries of the Company. (Filed herewith.)
Consent of Ernst & Young LLP. (Filed herewith.)
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer). (Filed
herewith.)
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer). (Filed
herewith.)
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief
Financial Officer). (Filed herewith.)
+
Management contract or compensatory plan or arrangement required to be filed or incorporated
by reference as an exhibit to this Form 10-K pursuant to Item 154(c) of Form 10-K.
76
AvalonBay Communities, Inc.
Date: February 28, 2007
By:
/s/
Bryce Blair
Bryce Blair, Chairman of the Board and Chief Executive
Officer
By:
/s/ Bryce Blair
(Principal Executive Officer)
By:
/s/ Thomas J. Sargeant
(Principal Financial and Accounting Officer)
By:
/s/ Bruce A. Choate
By:
/s/ John J. Healy, Jr.
By:
/s/ Gilbert M. Meyer
By:
/s/ Timothy J. Naughton
By:
/s/ Lance R. Primis
By:
/s/ H. Jay Sarles
By:
/s/ Allan D. Schuster
By:
/s/ Amy P. Williams
F-1
AvalonBay Communities, Inc.:
February 26, 2007
F-2
AvalonBay Communities, Inc.:
February 26, 2007
F-3
For the year ended | ||||||||||||
12-31-06 | 12-31-05 | 12-31-04 | ||||||||||
Revenue:
|
||||||||||||
Rental and other income
|
$ | 731,041 | $ | 666,376 | $ | 613,240 | ||||||
Management, development and other fees
|
6,259 | 4,304 | 604 | |||||||||
|
||||||||||||
Total revenue
|
737,300 | 670,680 | 613,844 | |||||||||
|
||||||||||||
|
||||||||||||
Expenses:
|
||||||||||||
Operating expenses, excluding property taxes
|
210,895 | 191,558 | 181,351 | |||||||||
Property taxes
|
68,257 | 65,487 | 59,458 | |||||||||
Interest expense, net
|
111,046 | 127,099 | 131,103 | |||||||||
Depreciation expense
|
162,896 | 158,822 | 151,991 | |||||||||
General and administrative expense
|
24,767 | 25,761 | 18,074 | |||||||||
|
||||||||||||
Total expenses
|
577,861 | 568,727 | 541,977 | |||||||||
|
||||||||||||
|
||||||||||||
Equity in income of unconsolidated entities
|
7,455 | 7,198 | 1,100 | |||||||||
Venture partner interest in profit-sharing
|
| | (1,178 | ) | ||||||||
Minority interest in consolidated partnerships
|
(573 | ) | (1,481 | ) | (150 | ) | ||||||
Gain on sale of land
|
13,519 | 4,479 | 1,138 | |||||||||
|
||||||||||||
|
||||||||||||
Income from continuing operations before
cumulative effect of change in accounting principle
|
179,840 | 112,149 | 72,777 | |||||||||
|
||||||||||||
|
||||||||||||
Discontinued operations:
|
||||||||||||
Income from discontinued operations
|
1,148 | 14,942 | 21,134 | |||||||||
Gain on sale
of communities
|
97,411 | 195,287 | 121,287 | |||||||||
|
||||||||||||
Total discontinued operations
|
98,559 | 210,229 | 142,421 | |||||||||
|
||||||||||||
|
||||||||||||
Income before cumulative effect of
change in accounting principle
|
278,399 | 322,378 | 215,198 | |||||||||
Cumulative effect of change in accounting principle
|
| | 4,547 | |||||||||
|
||||||||||||
|
||||||||||||
Net income
|
278,399 | 322,378 | 219,745 | |||||||||
Dividends attributable to preferred stock
|
(8,700 | ) | (8,700 | ) | (8,700 | ) | ||||||
|
||||||||||||
|
||||||||||||
Net income available to common stockholders
|
$ | 269,699 | $ | 313,678 | $ | 211,045 | ||||||
|
||||||||||||
|
||||||||||||
Other comprehensive income:
|
||||||||||||
Unrealized gain on cash flow hedges
|
891 | 2,626 | 1,116 | |||||||||
|
||||||||||||
Comprehensive income
|
$ | 270,590 | $ | 316,304 | $ | 212,161 | ||||||
|
||||||||||||
|
||||||||||||
Earnings per common share basic:
|
||||||||||||
Income from continuing operations
(net of dividends attributable to preferred stock)
|
$ | 2.31 | $ | 1.42 | $ | 0.96 | ||||||
Discontinued operations
|
1.33 | 2.88 | 1.99 | |||||||||
|
||||||||||||
Net income available to common stockholders
|
$ | 3.64 | $ | 4.30 | $ | 2.95 | ||||||
|
||||||||||||
|
||||||||||||
Earnings per common share diluted:
|
||||||||||||
Income from continuing operations
(net of dividends attributable to preferred stock)
|
$ | 2.27 | $ | 1.40 | $ | 0.96 | ||||||
Discontinued operations
|
1.30 | 2.81 | 1.96 | |||||||||
|
||||||||||||
Net income available to common stockholders
|
$ | 3.57 | $ | 4.21 | $ | 2.92 | ||||||
|
F-4
Accumulated | Accumulated | |||||||||||||||||||||||||||||||
Shares issued | Additional | earnings | other | Total | ||||||||||||||||||||||||||||
Preferred | Common | Preferred | Common | paid-in | less | comprehensive | stockholders | |||||||||||||||||||||||||
stock | stock | stock | stock | capital | dividends | loss | equity | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balance at December 31, 2003
|
4,000,000 | 70,937,526 | $ | 40 | $ | 709 | $ | 2,316,773 | $ | 2,024 | $ | (8,212 | ) | $ | 2,311,334 | |||||||||||||||||
|
||||||||||||||||||||||||||||||||
Net income
|
| | | | | 219,745 | | 219,745 | ||||||||||||||||||||||||
Unrealized gain on cash flow hedges
|
| | | | | | 1,116 | 1,116 | ||||||||||||||||||||||||
Dividends declared to common
and preferred stockholders
|
| | | | | (210,338 | ) | | (210,338 | ) | ||||||||||||||||||||||
Issuance of common stock
|
| 1,644,550 | | 17 | 59,147 | (662 | ) | | 58,502 | |||||||||||||||||||||||
Amortization of deferred compensation
|
| | | | 4,932 | | | 4,932 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balance at December 31, 2004
|
4,000,000 | 72,582,076 | 40 | 726 | 2,380,852 | 10,769 | (7,096 | ) | 2,385,291 | |||||||||||||||||||||||
Net income
|
| | | | | 322,378 | | 322,378 | ||||||||||||||||||||||||
Unrealized gain on cash flow hedges
|
| | | | | | 2,626 | 2,626 | ||||||||||||||||||||||||
Dividends declared to common
and preferred stockholders
|
| | | | | (216,982 | ) | | (216,982 | ) | ||||||||||||||||||||||
Issuance of common stock
|
| 1,080,972 | | 11 | 40,378 | (377 | ) | | 40,012 | |||||||||||||||||||||||
Amortization of deferred compensation
|
| | | | 8,338 | | | 8,338 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balance at December 31, 2005
|
4,000,000 | 73,663,048 | 40 | 737 | 2,429,568 | 115,788 | (4,470 | ) | 2,541,663 | |||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Net income
|
| | | | | 278,399 | | 278,399 | ||||||||||||||||||||||||
Unrealized gain on cash flow hedges
|
| | | | | | 891 | 891 | ||||||||||||||||||||||||
Dividends declared to common
and preferred stockholders
|
| | | | | (241,155 | ) | | (241,155 | ) | ||||||||||||||||||||||
Issuance of common stock
|
| 1,005,324 | | 10 | 38,839 | (1,318 | ) | | 37,531 | |||||||||||||||||||||||
Amortization of deferred compensation
|
| | | | 14,109 | | | 14,109 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balance at December 31, 2006
|
4,000,000 | 74,668,372 | $ | 40 | $ | 747 | $ | 2,482,516 | $ | 151,714 | $ | (3,579 | ) | $ | 2,631,438 | |||||||||||||||||
|
F-5
For the year ended | ||||||||||||
12-31-06 | 12-31-05 | 12-31-04 | ||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 278,399 | $ | 322,378 | $ | 219,745 | ||||||
Adjustments to reconcile net income to cash provided
by operating activities:
|
||||||||||||
Depreciation expense
|
162,896 | 158,822 | 151,991 | |||||||||
Depreciation expense from discontinued operations
|
| 3,241 | 10,676 | |||||||||
Amortization of deferred financing costs and debt premium/discount
|
4,474 | 4,022 | 3,962 | |||||||||
Amortization of deferred compensation
|
10,095 | 4,292 | 2,593 | |||||||||
Income allocated to minority interest in consolidated partnerships
|
573 | 1,481 | 187 | |||||||||
Income allocated to venture partner interest in profit-sharing
|
| | 1,178 | |||||||||
Equity in income of unconsolidated entities, net of eliminations
|
(6,480 | ) | (6,565 | ) | (1,100 | ) | ||||||
Return on investment of unconsolidated entities
|
298 | 330 | 43 | |||||||||
Gain on sale of real estate assets
|
(110,930 | ) | (199,766 | ) | (122,425 | ) | ||||||
Cumulative effect of change in accounting principle
|
| | (4,547 | ) | ||||||||
Increase in cash in operating escrows
|
(844 | ) | (4,344 | ) | (1,451 | ) | ||||||
Decrease (increase) in resident security deposits,
prepaid expenses and other assets
|
(2,197 | ) | 8,547 | (10,589 | ) | |||||||
Increase in accrued expenses, other liabilities
and accrued interest payable
|
15,659 | 13,810 | 25,354 | |||||||||
|
||||||||||||
Net cash provided by operating activities
|
351,943 | 306,248 | 275,617 | |||||||||
|
||||||||||||
|
||||||||||||
Cash flows from investing activities:
|
||||||||||||
Development/redevelopment of real estate assets including
land acquisitions and deferred development costs
|
(735,167 | ) | (382,871 | ) | (355,938 | ) | ||||||
Acquisition of real estate assets, including partner equity interest
|
(74,924 | ) | (57,415 | ) | (128,238 | ) | ||||||
Capital expenditures existing real estate assets
|
(21,289 | ) | (17,570 | ) | (12,984 | ) | ||||||
Capital expenditures non-real estate assets
|
(957 | ) | (1,520 | ) | (860 | ) | ||||||
Proceeds from sale of real estate and technology investments,
including reimbursement for Fund communities, net of selling costs
|
272,223 | 469,292 | 219,649 | |||||||||
Increase (decrease) in payables for construction
|
34,542 | 5,198 | (3,962 | ) | ||||||||
Decrease (increase) in cash in construction escrows
|
19,572 | (21,784 | ) | 201 | ||||||||
Repayment of participating mortgage note, including
interest and prepayment premium
|
| | 34,846 | |||||||||
Increase in investments in unconsolidated real estate entities
|
(5,371 | ) | (13,091 | ) | (4,397 | ) | ||||||
|
||||||||||||
Net cash used in investing activities
|
(511,371 | ) | (19,761 | ) | (251,683 | ) | ||||||
|
||||||||||||
|
||||||||||||
Cash flows from financing activities:
|
||||||||||||
Issuance of common stock
|
26,551 | 36,611 | 54,031 | |||||||||
Dividends paid
|
(234,958 | ) | (215,391 | ) | (209,095 | ) | ||||||
Net borrowings (repayments) under unsecured credit facility
|
(66,800 | ) | (35,200 | ) | 50,900 | |||||||
Issuance of mortgage notes payable and draws on construction loans
|
113,849 | 26,269 | 105,843 | |||||||||
Repayments of mortgage notes payable
|
(6,827 | ) | (41,932 | ) | (40,270 | ) | ||||||
Issuance (repayment) of unsecured notes
|
343,743 | (50,000 | ) | 25,000 | ||||||||
Payment of deferred financing costs
|
(12,698 | ) | (1,292 | ) | (9,318 | ) | ||||||
Redemption of units for cash by minority partners
|
(80 | ) | (50 | ) | (1,691 | ) | ||||||
Distributions to DownREIT partnership unitholders
|
(392 | ) | (1,194 | ) | (1,425 | ) | ||||||
Distributions to joint venture and profit-sharing partners
|
(108 | ) | (114 | ) | (3,446 | ) | ||||||
|
||||||||||||
Net cash provided by (used in) financing activities
|
162,280 | (282,293 | ) | (29,471 | ) | |||||||
|
||||||||||||
|
||||||||||||
Net increase (decrease) in cash and cash equivalents
|
2,852 | 4,194 | (5,537 | ) | ||||||||
|
||||||||||||
Cash and cash equivalents, beginning of year
|
5,715 | 1,521 | 7,058 | |||||||||
|
||||||||||||
|
||||||||||||
Cash and cash equivalents, end of year
|
$ | 8,567 | $ | 5,715 | $ | 1,521 | ||||||
|
||||||||||||
|
||||||||||||
Cash paid during year for interest, net of amount capitalized
|
$ | 102,640 | $ | 121,526 | $ | 124,895 | ||||||
|
F-6
|
| As described in Note 4, Stockholders Equity, 122,172 shares of common stock valued at $12,568 were issued in connection with stock grants, 2,306 shares valued at $256 were issued through the Companys dividend reinvestment plan, 47,411 shares valued at $3,449 were withheld to satisfy employees tax withholding and other liabilities and 5,910 shares valued at $193 were forfeited, for a net value of $9,182. In addition, the Company granted 849,769 options for common stock, net of forfeitures, at a value of $9,946. | ||
|
| 308,345 units of limited partnership, valued at $14,166, were presented for redemption to the DownREIT partnerships that issued such units and were acquired by the Company in exchange for an equal number of shares of the Companys common stock. | ||
|
| The Company issued $187,300 of variable rate tax-exempt debt, of which $107,451 in proceeds were not received, but placed in an escrow until requisitioned for construction funding. | ||
|
| The Company recorded a decrease to other liabilities and a corresponding gain to other comprehensive income of $891 to adjust the Companys Hedged Derivatives (as defined in Note 5, Derivative Instruments and Hedging Activities) to their fair value. | ||
|
| Common and preferred dividends declared but not paid totaled $60,417. | ||
|
||||
During
the year ended December 31, 2005:
|
||||
|
||||
|
| 165,790 shares of common stock were issued in connection with stock grants, 1,295 shares were issued through the Companys dividend reinvestment plan, 8,971 shares were issued to a member of the Board of Directors in fulfillment of a deferred stock award, 50,916 shares were withheld to satisfy employees tax withholding and other liabilities and 9,965 shares were forfeited, for a net value of $9,317. In addition, the Company granted 696,484 options for common stock, net of forfeitures, at a value of $4,521. | ||
|
| 49,263 units of limited partnership, valued at $2,202, were presented for redemption to the DownREIT partnerships that issued such units and were acquired by the Company in exchange for an equal number of shares of the Companys common stock. | ||
|
| The Company deconsolidated mortgage notes payable in the aggregate amount of $24,869 upon admittance of outside investors into the Fund (as defined in Note 6, Investments in Unconsolidated Entities). | ||
|
| The Company assumed fixed rate debt of $4,566 as part of the acquisition of an improved land parcel. | ||
|
| The Company recorded a decrease to other liabilities and a corresponding gain to other comprehensive income of $2,626 to adjust the Companys Hedging Derivatives to their fair value. | ||
|
| Common and preferred dividends declared but not paid totaled $54,476. | ||
|
||||
During
the year ended December 31, 2004:
|
||||
|
||||
|
| 147,517 shares of common stock were issued in connection with stock grants, 78,509 shares were issued in connection with non-cash stock option exercises, 1,545 shares were issued through the Companys dividend reinvestment plan, 75,515 shares were withheld to satisfy employees tax withholding and other liabilities and 3,012 shares were forfeited, for a net value of $6,138. In addition, the Company granted 465,232 options for common stock, net of forfeitures, at a value of $2,081. | ||
|
| 104,160 units of limited partnership, valued at $4,035, were presented for redemption to the DownREIT partnerships that issued such units and were acquired by the Company in exchange for an equal number of shares of the Companys common stock. | ||
|
| The Company sold two communities with mortgage notes payable of $28,335 in the aggregate, that were assumed by the respective buyers as part of the total sales price. | ||
|
| The Company assumed fixed rate debt of $8,155 in connection with the acquisition of a community and $20,141 in connection with the acquisition of three improved land parcels. | ||
|
| The Company recorded a decrease to other liabilities and a corresponding gain to other comprehensive income of $1,116 to adjust the Companys Hedged Derivatives to their fair value. | ||
|
| Common and preferred dividends declared but not paid totaled $52,982. |
F-7
F-8
F-9
F-10
2006 | 2005 | 2004 | ||||||||||
Estimate | Actual | Actual | ||||||||||
|
||||||||||||
Net income available to common stockholders
|
$ | 269,699 | $ | 313,678 | $ | 211,045 | ||||||
Dividends attributable to preferred stock,
not deductible for tax
|
8,700 | 8,700 | 8,700 | |||||||||
GAAP gain on sale of communities less than tax gain
|
7,326 | 9,345 | 8,305 | |||||||||
Depreciation/Amortization timing differences on real estate
|
(24,917 | ) | (14,736 | ) | (3,793 | ) | ||||||
Tax compensation expense in excess of GAAP
|
(20,968 | ) | (18,969 | ) | (19,758 | ) | ||||||
Other adjustments
|
5,135 | (2,254 | ) | (9,835 | ) | |||||||
|
||||||||||||
Taxable net income
|
$ | 244,975 | $ | 295,764 | $ | 194,664 | ||||||
|
2006 | 2005 | 2004 | ||||||||||
Ordinary income
|
48 | % | 9 | % | 39 | % | ||||||
15% capital gain
|
43 | % | 77 | % | 51 | % | ||||||
Unrecaptured §1250 gain
|
9 | % | 14 | % | 10 | % |
F-11
For the year ended | ||||||||||||
12-31-06 | 12-31-05 | 12-31-04 | ||||||||||
Basic and diluted shares outstanding
|
||||||||||||
Weighted average common shares basic
|
74,125,795 | 72,952,492 | 71,564,202 | |||||||||
Weighted average DownREIT units outstanding
|
172,255 | 474,440 | 573,529 | |||||||||
Effect of dilutive securities
|
1,288,848 | 1,332,386 | 1,217,225 | |||||||||
|
||||||||||||
Weighted average common shares diluted
|
75,586,898 | 74,759,318 | 73,354,956 | |||||||||
|
||||||||||||
Calculation of Earnings per Share basic
|
||||||||||||
Net income available to common stockholders
|
$ | 269,699 | $ | 313,678 | $ | 211,045 | ||||||
|
||||||||||||
Weighted average common shares basic
|
74,125,795 | 72,952,492 | 71,564,202 | |||||||||
|
||||||||||||
Earnings per common share basic
|
$ | 3.64 | $ | 4.30 | $ | 2.95 | ||||||
|
||||||||||||
Calculation of Earnings per Share diluted
|
||||||||||||
Net income available to common stockholders
|
$ | 269,699 | $ | 313,678 | $ | 211,045 | ||||||
Add: Minority interest of DownREIT unitholders
|
||||||||||||
in consolidated partnerships, including discontinued operations
|
391 | 1,363 | 3,048 | |||||||||
|
||||||||||||
Adjusted net income available to common stockholders
|
$ | 270,090 | $ | 315,041 | $ | 214,093 | ||||||
|
||||||||||||
Weighted average common shares diluted
|
75,586,898 | 74,759,318 | 73,354,956 | |||||||||
|
||||||||||||
Earnings per common share diluted
|
$ | 3.57 | $ | 4.21 | $ | 2.92 | ||||||
|
F-12
F-13
F-14
12-31-06 | 12-31-05 | |||||||
Fixed rate unsecured notes
(1)
|
$ | 2,153,078 | $ | 1,809,182 | ||||
Fixed rate mortgage notes payable conventional and tax-exempt
|
234,272 | 239,025 | ||||||
Variable rate mortgage notes payable conventional and tax-exempt
|
438,236 | 219,010 | ||||||
|
||||||||
Total notes payable and unsecured notes
|
2,825,586 | 2,267,217 | ||||||
Variable rate unsecured credit facility
|
| 66,800 | ||||||
|
||||||||
Total mortgage notes payable, unsecured notes and unsecured credit facility
|
$ | 2,825,586 | $ | 2,334,017 | ||||
|
(1) | Balances at December 31, 2006 and December 31, 2005 include $2,922 and $818 of debt discount, respectively. |
| The Company issued $34,000 of variable rate mortgage debt maturing in March 2011; | ||
| The Company issued $93,800 of variable rate tax-exempt debt maturing in November 2037; | ||
| The Company issued $48,500 of variable rate tax-exempt debt maturing in November 2039; | ||
| The Company issued $45,000 of variable rate tax-exempt debt maturing in July 2040; | ||
| The Company repaid $150,000 of unsecured notes with an annual interest rate of 6.8%, pursuant to their scheduled maturity; and | ||
| The Company issued a total of $500,000 of unsecured notes a shelf registration statement. The offering consisted of two separate tranches in the aggregate principal amount of $250,000 each, with effective interest rates of 5.586% and 5.820%, maturing in January 2012 and September 2016, respectively. |
F-15
Unsecured | Stated | |||||||||||||||
Secured notes | Secured notes | notes | interest rate of | |||||||||||||
Year | payments | maturities | maturities | unsecured notes | ||||||||||||
2007
|
$ | 8,521 | $ | | $ | 110,000 | 6.875 | % | ||||||||
|
150,000 | 5.000 | % | |||||||||||||
2008
|
8,718 | 4,368 | 50,000 | 6.625 | % | |||||||||||
|
146,000 | 8.250 | % | |||||||||||||
2009
|
7,831 | 73,793 | 150,000 | 7.500 | % | |||||||||||
2010
|
6,354 | 28,989 | 200,000 | 7.500 | % | |||||||||||
2011
|
5,303 | 35,910 | 300,000 | 6.625 | % | |||||||||||
|
50,000 | 6.625 | % | |||||||||||||
2012
|
4,601 | 12,166 | 250,000 | 6.125 | % | |||||||||||
|
250,000 | 5.500 | % | |||||||||||||
2013
|
4,728 | | 100,000 | 4.950 | % | |||||||||||
2014
|
3,748 | 34,450 | 150,000 | 5.375 | % | |||||||||||
2015
|
5,499 | | | | ||||||||||||
2016
|
5,926 | | 250,000 | 5.750 | % | |||||||||||
Thereafter
|
144,364 | 277,239 | | | ||||||||||||
|
||||||||||||||||
|
$ | 205,593 | $ | 466,915 | $ | 2,156,000 | ||||||||||
|
F-16
Shares outstanding | Payable | Annual | Liquidation | Non-redeemable | ||||||||||||
Series | December 31, 2006 | quarterly | rate | preference | prior to | |||||||||||
H
|
4,000,000 | March, June, September, December | 8.70 | % | $ | 25.00 | October 15, 2008 |
(i) | issued 614,692 shares of common stock in connection with stock options exercised; | ||
(ii) | issued 308,345 shares of common stock to acquire an equal number of DownREIT limited partnership units; | ||
(iii) | issued 2,306 shares through the Companys dividend reinvestment plan; | ||
(iv) | issued 122,172 common shares in connection with stock grants; | ||
(v) | issued 10,830 shares of common stock in connection with its employee stock purchase plan; | ||
(vi) | had 5,910 shares of restricted stock forfeited; and | ||
(vii) | withheld 47,111 shares to satisfy employees tax withholding and other liabilities. |
F-17
Interest | Interest | |||||||
Rate Caps | Rate Swaps | |||||||
Notional balance
|
$ | 196,500 | $ | 65,759 | ||||
Weighted average interest rate
(1)
|
5.7 | % | 6.3 | % | ||||
Weighted average capped interest rate
|
7.7 | % | n/a | |||||
Earliest maturity date
|
Mar-07 | Aug-07 | ||||||
Latest maturity date
|
Apr-11 | Jul-10 | ||||||
Estimated liability fair value
|
$ | (78 | ) | $ | (3,084 | ) |
(1) | For interest rate caps, this represents the weighted average interest rate on the debt. |
| Town Run Associates In the fourth quarter of 2006, the Company purchased its partners interest in Avalon Run for $58,500. Town Run Associates was formed as a general partnership in November 1994 to develop, own and operate Avalon Run, a 426 apartment-home community located in Lawrenceville, New Jersey. Avalon Run is currently a wholly-owned community and has since been consolidated for financial reporting purposes. |
F-18
| Avalon Terrace, LLC In December 2006, the Company and its joint venture partner sold Avalon Bedford to an unrelated third party for a sales price of $79,100. The Companys share of the gain calculated in accordance with GAAP was $6,609 and is included in equity income of unconsolidated entities on the accompanying Consolidated Statements of Operations and Other Comprehensive Income. The Company acquired Avalon Bedford, a 368 apartment-home community located in Stamford, Connecticut in December 1998. In May 2000, the Company transferred Avalon Bedford to Avalon Terrace, LLC and subsequently admitted a joint venture partner, while retaining a 25% ownership interest in this limited liability company for an investment of $5,394 and a right to 50% of cash flow distributions after achievement of a threshold return. |
| Town Grove, LLC The limited liability corporation was formed in December 1997 to develop, own and operate Avalon Grove, a 402 apartment-home community located in Stamford, Connecticut. Since formation of this venture, the Company has invested $12,600, and following a preferred return on all contributed equity (which was achieved in 2006), has a 50% ownership and a 50% cash flow and residual economic interest. The Company is responsible for the day-to-day operations of the Avalon Grove community and is the management agent subject to the terms of a management agreement. The development of Avalon Grove was funded through contributions from the Company and the other venture partner, and therefore Avalon Grove is not subject to any outstanding debt as of December 31, 2006. This community is unconsolidated for financial reporting purposes and is accounted for under the equity method. | ||
| Arna Valley View LP In connection with the municipal approval process for the development of a consolidated community, the Company agreed to participate in the formation of a limited partnership in February 1999 to develop, finance, own and operate Arna Valley View, a 101 apartment-home community located in Arlington, Virginia. This community has affordable rents for 100% of apartment homes related to the tax-exempt bond financing and tax credits used to finance construction of the community. A subsidiary of the Company is the general partner of the partnership with a 0.01% ownership interest. The Company is responsible for the day-to-day operations of the community and is the management agent subject to the terms of a management agreement. As of December 31, 2006, Arna Valley View has $5,793 of variable rate, tax-exempt bonds outstanding, which mature in June 2032. In addition, Arna Valley View has $4,834 of 4% fixed rate county bonds outstanding that mature in December 2030. Arna Valley Views debt is neither guaranteed by, nor recoursed to the Company. Due to the Companys limited ownership in this venture and the terms of the management agreement regarding the rights of the limited partners, it is accounted for using the cost method. | ||
| CVP I, LLC In February 2004, the Company entered into a joint venture agreement with an unrelated third-party for the development of Avalon Chrystie Place, a 361 apartment-home community located in New York, New York, for which construction was completed in late 2005. The Company has contributed $6,270 to this joint venture and holds a 20% equity interest (with a right to 50% of distributions after achievement of a threshold return, which was not achieved in 2006). The Company is the managing member of CVP I, LLC, however property management services at the community are performed by an unrelated third party. In connection with the construction management services that the Company provided to CVP I, LLC during the development of Avalon Chrystie Place, the Company provided a construction completion guarantee to the construction loan lender in order to fulfill their standard financing requirements related to the construction financing. Upon completion of the construction of Avalon Chrystie Place in 2006, the Company was released from all obligations associated with this guarantee. | ||
As of December 31, 2006, CVP I, LLC has tax-exempt variable rate bonds in the amount of $117,000 outstanding, which have a permanent credit enhancement and mature in February 2036. The Company has guaranteed, under limited circumstance, the repayment to the credit enhancer of any advance in fulfillment of CVP I, LLCs repayment obligations under the bonds. The Company has also guaranteed the credit enhancer that CVP I, LLC will obtain a final certificate of occupancy for the project overall once tenant improvements related to a retail tenant are complete, which is expected in 2007. |
F-19
The Companys 80% partner in this venture has agreed that it will reimburse us its pro rata share of any amounts paid relative to these guaranteed obligations. The Company does not currently expect to incur any liability under either of these guarantees. The estimated fair value of, and the Companys obligation under these guarantees, both at inception and as of December 31, 2006 were not significant. As a result, the Company has not recorded any obligation associated with these guarantees at December 31, 2006. This community is unconsolidated for financial reporting purposes and is accounted for under the equity method. | |||
| Avalon Del Rey Apartments, LLC - In March 2004, the Company entered into an agreement with an unrelated third party which provided that, upon construction completion, Avalon Del Rey would be owned and operated by a joint venture between the Company and the third party. Avalon Del Rey is a 309 apartment-home community located in Los Angeles, California. Construction for Avalon Del Rey was completed during the third quarter of 2006. During the fourth quarter of 2006, the third-party venture partner invested $49,000 and was granted a 70% ownership interest in the venture, with the Company retaining a 30% equity interest (see Note 7, Real Estate Disposition Activities). The Company will continue to be responsible for the day-to-day operations of the community and will be the management agent subject to the terms of a management agreement. Avalon Del Rey Apartments, LLC has a variable rate $50,000 secured construction loan, of which $40,845 is outstanding as of December 31, 2006 and which matures in September 2007. In conjunction with the construction management services that the Company provided to Avalon Del Rey Apartments, LLC, the Company has provided a construction completion guarantee to the construction loan lender in order to fulfill their standard financing requirements related to construction financing. The obligation of the Company under this guarantee will terminate following satisfaction of the lenders standard completion requirements, which the Company expects to occur in 2007. | ||
In conjunction with the admittance of the joint venture partner to the LLC, the Company provided the third-party investor an operating guarantee. This guarantee, which extends for one year, provides that if the one-year return for the initial year of the joint venture partners investment is less than a threshold return of 7% on its initial equity investment, that the Company will pay the joint venture partner an amount equal to the shortfall, up to the 7% threshold return required. The maximum exposure of this guarantee is approximately $3,400. As of December 31, 2006, the cash flows and return on investment for Avalon Del Rey are expected to meet and exceed the initial year threshold return required by our joint venture partner. As a result, the Companys obligation under this guarantee is insignificant, and the Company has therefore not recorded any liability associated with this guarantee as of December 31, 2006. | |||
The sale of the 70% ownership interest is being accounted for under the deposit method of accounting pursuant to SFAS 66, with the recognition of the sale deferred until the Company is relieved of its obligation under the operating guarantee. Accordingly, the Company continues to consolidate this community for financial reporting purposes, reporting the joint venture partners interest in the net assets of the LLC as a component of accrued expenses and other liabilities, and recognizing the joint venture partners interest in the operating results of the LLC as a component of minority interest in consolidated partnerships. | |||
| Juanita Construction, Inc. - In April 2004, a taxable REIT subsidiary of the Company entered into an agreement to develop Avalon at Juanita Village, a 211 apartment-home community located in Kirkland, Washington, for which construction was completed in late 2005. Avalon at Juanita Village was developed through Juanita Construction, Inc., a wholly-owned taxable REIT subsidiary and was sold to a joint venture in the first quarter of 2006, at which point, the subsidiary was reimbursed for all the costs of construction and retained a promoted residual interest in the profits of the joint venture. The third party joint venture partner received a 100% equity interest in the joint venture and will control the joint venture. The Company was engaged to manage the community for a property management fee. This community is unconsolidated for financial reporting purposes effective with the sale to the joint venture. | ||
| MVP I, LLC In December 2004, the Company entered into a joint venture agreement with an unrelated third party for the development of Avalon at Mission Bay North II. Construction for Avalon at Mission Bay North II, a 313 apartment-home community located in San Francisco, California, was completed in December 2006. The Company has contributed $5,902 to this venture and holds a 25% equity interest. The Company will be responsible for the day-to-day operations of the community and will be the management agent subject to the terms of a management agreement. |
F-20
MVP I, LLC has a variable rate $94,400 secured construction loan, of which $76,739 is outstanding as of December 31, 2006 and which matures in September 2010, assuming exercise of two one-year extensions. In conjunction with the construction management services that the Company provided to MVP I, LLC, the Company has provided a construction completion guarantee to the construction loan lender in order to fulfill their standard financing requirements related to construction financing. Under the terms of the guarantee, in the event of default, the Company would be required to make payment for any excess cost to complete construction over remaining unused loan proceeds. The obligation of the Company under this guarantee will terminate once all of the lenders standard completion requirements have been satisfied, which the Company expects to occur in 2007. The estimated fair value of, and the Companys obligation under this guarantee, both at inception and as of December 31, 2006 was not significant and therefore no liability for this guarantee has been recorded by the Company at December 31, 2006. This community is unconsolidated for financial reporting purposes and is accounted for under the equity method. | |||
| AvalonBay Value Added Fund, L.P. (the Fund) In March 2005, the Company admitted outside investors into the Fund, a private, discretionary investment vehicle, which will acquire and operate communities in the Companys markets. The Fund will serve, until March 16, 2008 or until 80% of its committed capital is invested, as the principal vehicle through which the Company will acquire apartment communities, subject to certain exceptions. The Fund has nine institutional investors, including the Company, and a combined equity capital commitment of $330,000. A significant portion of the investments made in the Fund by its investors are being made through AvalonBay Value Added Fund, Inc., a Maryland corporation that qualifies as a REIT under the Internal Revenue Code (the Fund REIT). A wholly-owned subsidiary of the Company is the general partner of the Fund and has committed $50,000 to the Fund and the Fund REIT, representing a 15.2% combined general partner and limited partner equity interest, with $22,944 of this commitment funded as of December 31, 2006. Under the Fund documents, the Fund has the ability to employ leverage of up to 65% on a portfolio basis, which, if achieved, would enable the Fund to invest up to approximately $940,000. Upon the admittance of the outside investors, the Fund held four communities, containing a total of 879 apartment homes with an aggregate gross real estate value of $112,852, that were acquired in 2004. Prior to the admittance of outside investors, the Fund was directly or indirectly wholly-owned by the Company, and therefore the revenues and expenses, and assets and liabilities of these four communities were consolidated in the Companys results of operations and financial position. However, upon admittance of the outside investors in March 2005, the Company deconsolidated the revenue and expenses, and assets and liabilities of these four communities and accounts for its 15.2% equity interest in the Fund under the equity method of accounting. The Company received net proceeds of $87,948 as reimbursement for acquiring and warehousing these communities. The Company receives asset management fees, property management fees and redevelopment fees, as well as a promoted interest if certain thresholds are met (which were not achieved in 2006). | ||
As of December 31, 2006, the Fund owns the following 13 communities, subject to certain mortgage debt. In addition, as of December 31, 2006, the Fund has $57,400 outstanding under its variable rate credit facility, which matures in January 2008. The Company has not guaranteed any of the Fund debt, nor does it have any obligation to fund this debt should the Fund be unable to do so. |
| Avalon at Redondo Beach, a 105 apartment-home community located in Los Angeles, California. As of December 31, 2006, Avalon at Redondo Beach has $16,765 in 4.8% fixed rate debt outstanding, which matures in October 2011; | ||
| Avalon Lakeside, a 204 apartment-home community located in Chicago, Illinois. As of December 31, 2006, Avalon Lakeside has no debt outstanding; | ||
| Avalon Columbia, a 170 apartment-home community located in Baltimore, Maryland. As of December 31, 2006, Avalon Columbia has $16,575 in 5.3% fixed rate debt outstanding, which matures in April 2012; | ||
| Avalon Redmond, a 400 apartment-home community located in Seattle, Washington. As of December 31, 2006, Avalon Redmond has $31,500 in 5.0% fixed rate debt outstanding, which matures in July 2012; | ||
| Avalon at Poplar Creek, a 196 apartment-home community located in Chicago, Illinois. As of December 31, 2006, Avalon at Poplar Creek has $16,500 in 4.8% fixed rate debt outstanding, which matures in October 2012; | ||
| Fuller Martel, an 82 apartment-home community located in Los Angeles, California. As of December 31, 2006, Fuller Martel has $11,500 in 5.4% fixed rate debt outstanding, which matures in February 2014; |
F-21
| Civic Center Place, a 192 apartment-home community located in Norwalk, California. As of December 31, 2006, Civic Center Place has $23,806 in 5.3% fixed rate debt outstanding, which matures in August 2013; | ||
| Paseo Park, a 134 apartment-home community located in Fremont, California. As of December 31, 2006, Paseo Park has $11,800 in 5.7% fixed rate debt outstanding, which matures in November 2013; | ||
| Aurora at Yerba Buena, a 160 apartment-home community located in San Francisco, California. As of December 31, 2006, Aurora at Yerba Buena has $41,500 in 5.9% fixed rate debt outstanding, which matures in March 2014; | ||
| Avalon at Aberdeen Station, a 290 apartment-home community located in Aberdeen, New Jersey. As of December 31, 2006, Avalon at Aberdeen Station has $34,456 in 5.7% fixed rate debt outstanding, which matures in September 2013; | ||
| The Springs, a 320 apartment-home community located in Corona, California. As of December 31, 2006, The Springs has $26,000 in 6.1% fixed rate debt outstanding, which matures in October 2014; | ||
| The Covington, a 256 apartment-home community located in Lombard, Illinois. As of December 31, 2006, The Covington has $17,243 in 5.4% fixed rate debt outstanding, which matures in January 2014; and | ||
| Cedar Valley, a 156 apartment-home community located in Columbia, Maryland. As of December 31, 2006, Cedar Valley has $12,000 in 6.3% variable rate debt outstanding, which matures in February 2007. |
F-22
12-31-06 | 12-31-05 | |||||||
Assets:
|
||||||||
Real estate, net
|
$ | 707,227 | $ | 520,556 | ||||
Other assets
|
55,716 | 40,485 | ||||||
|
||||||||
Total assets
|
$ | 762,943 | $ | 561,041 | ||||
|
||||||||
Liabilities and partners capital:
|
||||||||
Mortgage notes payable and credit facility
|
$ | 510,784 | $ | 332,760 | ||||
Other liabilities
|
33,505 | 26,745 | ||||||
Partners capital
|
218,654 | 201,536 | ||||||
|
||||||||
Total liabilities and partners capital
|
$ | 762,943 | $ | 561,041 | ||||
|
For the year ended | ||||||||||||
12-31-06 | 12-31-05 | 12-31-04 | ||||||||||
Rental income
|
$ | 67,207 | $ | 35,826 | $ | 21,148 | ||||||
Operating and other expenses
|
(31,281 | ) | (19,582 | ) | (8,291 | ) | ||||||
Gain on Sale of Communities | 26,661 | | | |||||||||
Interest expense, net
|
(23,142 | ) | (7,648 | ) | (1,786 | ) | ||||||
Depreciation expense
|
(18,054 | ) | (8,482 | ) | (4,003 | ) | ||||||
|
||||||||||||
Net income
|
$ | 21,391 | $ | 114 | $ | 7,068 | ||||||
|
F-23
For the year ended | ||||||||||||
12-31-06 | 12-31-05 | 12-31-04 | ||||||||||
Town Grove, LLC
|
$ | 1,457 | $ | 1,286 | $ | 950 | ||||||
CVP I, LLC
|
(68 | ) | (339 | ) | | |||||||
Town Run Associates
|
298 | 266 | 43 | |||||||||
Avalon Terrace, LLC
|
6,736 | 58 | (28 | ) | ||||||||
MVP I, LLC
|
(662 | ) | (57 | ) | | |||||||
AvalonBay Value Added Fund, L.P.
|
(799 | ) | (341 | ) | | |||||||
AvalonBay Redevelopment, LLC
|
| 73 | | |||||||||
Rent.com
|
433 | 6,252 | 135 | |||||||||
Constellation Real Technologies
|
60 | | | |||||||||
Total
|
$ | 7,455 | $ | 7,198 | $ | 1,100 |
Period | Apartment | Gross sales | Net | |||||||||||||||||
Community Name | Location | of sale | homes | Debt | price | proceeds | ||||||||||||||
Avalon Estates
|
Boston, MA | Q106 | 162 | | 34,550 | 33,563 | ||||||||||||||
Avalon Cupertino
|
San Jose, CA | Q106 | 311 | | 88,000 | 86,602 | ||||||||||||||
Avalon Corners
|
Stamford, CT | Q206 | 195 | | 60,200 | 58,248 | ||||||||||||||
Avalon Bedford
(1)
|
Stamford, CT | Q406 | 368 | 37,200 | 79,100 | 40,079 | ||||||||||||||
|
||||||||||||||||||||
Total of all 2006 asset sales
|
1,036 | $ | 37,200 | $ | 261,850 | $ | 218,492 | |||||||||||||
|
||||||||||||||||||||
Total of all 2005 asset sales
|
1,305 | $ | | $ | 351,450 | $ | 344,185 | |||||||||||||
|
||||||||||||||||||||
Total of all 2004 asset sales
|
1,360 | $ | 38,735 | $ | 241,050 | $ | 210,001 | |||||||||||||
|
(1) | The Company held a 25% ownership interest and right to 50% of cash flow distributions after achievement of a threshold return for this community |
F-24
For the year ended | ||||||||||||
12-31-06 | 12-31-05 | 12-31-04 | ||||||||||
Rental income
|
$ | 1,787 | $ | 26,867 | $ | 48,018 | ||||||
Operating and other expenses
|
(639 | ) | (8,684 | ) | (15,646 | ) | ||||||
Interest expense, net
|
| | (525 | ) | ||||||||
Minority interest expense
|
| | (37 | ) | ||||||||
Depreciation expense
|
| (3,241 | ) | (10,676 | ) | |||||||
|
||||||||||||
Income from discontinued operations
|
$ | 1,148 | $ | 14,942 | $ | 21,134 | ||||||
|
F-25
F-26
Payments due by period | ||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | |||||
|
||||||||||
$8,045 | $8,288 | $8,123 | $8,091 | $8,065 | $1,828,108 |
| Established Communities (also known as Same Store Communities) are communities where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year. For the year ended December 31, 2006, the Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy and operating expenses as of January 1, 2005, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment. |
F-27
| Other Stabilized Communities includes all other completed communities that have stabilized occupancy, as defined above. Other Stabilized Communities do not include communities that are conducting or planning to conduct substantial redevelopment activities within the current year. | ||
| Development/Redevelopment Communities consists of communities that are under construction and have not received a final certificate of occupancy, communities where substantial redevelopment is in progress or is planned to begin during the current year and communities under lease-up, that had not reached stabilized occupancy, as defined above, as of January 1, 2006. |
For the year ended | ||||||||||||
12-31-06 | 12-31-05 | 12-31-04 | ||||||||||
Net income
|
$ | 278,399 | $ | 322,378 | $ | 219,745 | ||||||
Indirect operating expenses, net of corporate income
|
28,809 | 26,675 | 26,612 | |||||||||
Investments and investment management
|
7,033 | 4,834 | 4,690 | |||||||||
Interest expense, net
|
111,046 | 127,099 | 131,103 | |||||||||
General and administrative expense
|
24,767 | 25,761 | 18,074 | |||||||||
Equity in income of unconsolidated entities
|
(7,455 | ) | (7,198 | ) | (1,100 | ) | ||||||
Minority interest in consolidated partnerships
|
573 | 1,481 | 150 | |||||||||
Venture partner interest in profit-sharing
|
| | 1,178 | |||||||||
Depreciation expense
|
162,896 | 158,822 | 151,991 | |||||||||
Cumulative effect of change in accounting principle
|
| | (4,547 | ) | ||||||||
Gain on sale of real estate assets
|
(110,930 | ) | (199,766 | ) | (122,425 | ) | ||||||
Income from discontinued operations
|
(1,148 | ) | (14,942 | ) | (21,134 | ) | ||||||
|
||||||||||||
Net operating income
|
$ | 493,990 | $ | 445,144 | $ | 404,337 | ||||||
|
F-28
Total | % NOI change | Gross | ||||||||||||||
revenue | NOI | from prior year | real estate (1) | |||||||||||||
For the year ended December 31, 2006
|
||||||||||||||||
|
||||||||||||||||
Established
|
||||||||||||||||
Northeast
|
$ | 204,374 | $ | 137,379 | 5.1 | % | $ | 1,263,190 | ||||||||
Mid-Atlantic
|
100,462 | 72,033 | 12.5 | % | 591,996 | |||||||||||
Midwest
|
11,478 | 7,121 | 7.4 | % | 92,408 | |||||||||||
Pacific Northwest
|
33,103 | 21,819 | 13.0 | % | 316,089 | |||||||||||
Northern California
|
153,151 | 107,135 | 11.6 | % | 1,441,418 | |||||||||||
Southern California
|
57,632 | 41,572 | 9.1 | % | 373,421 | |||||||||||
|
||||||||||||||||
Total Established
|
560,200 | 387,059 | 9.1 | % | 4,078,522 | |||||||||||
|
||||||||||||||||
Other Stabilized
|
93,878 | 59,432 | n/a | 865,338 | ||||||||||||
Development / Redevelopment
|
76,356 | 47,499 | n/a | 1,324,929 | ||||||||||||
Land Held for Future Development
|
n/a | n/a | n/a | 209,568 | ||||||||||||
Non-allocated (2)
|
6,866 | n/a | n/a | 35,183 | ||||||||||||
|
||||||||||||||||
|
||||||||||||||||
Total
|
$ | 737,300 | $ | 493,990 | 10.9 | % | $ | 6,513,540 | ||||||||
|
||||||||||||||||
|
||||||||||||||||
For the year ended December 31, 2005
|
||||||||||||||||
|
||||||||||||||||
Established
|
||||||||||||||||
Northeast
|
$ | 167,636 | $ | 111,734 | 3.5 | % | $ | 1,062,981 | ||||||||
Mid-Atlantic
|
68,575 | 48,613 | 3.9 | % | 387,801 | |||||||||||
Midwest
|
11,113 | 6,627 | 7.1 | % | 91,755 | |||||||||||
Pacific Northwest
|
30,080 | 19,312 | 8.0 | % | 315,331 | |||||||||||
Northern California
|
146,432 | 99,769 | 3.5 | % | 1,489,363 | |||||||||||
Southern California
|
48,800 | 35,319 | 6.7 | % | 331,315 | |||||||||||
|
||||||||||||||||
Total Established
|
472,636 | 321,374 | 4.2 | % | 3,678,546 | |||||||||||
|
||||||||||||||||
Other Stabilized
|
77,552 | 50,621 | n/a | 653,399 | ||||||||||||
Development / Redevelopment
|
116,144 | 73,149 | n/a | 1,158,482 | ||||||||||||
Land Held for Future Development
|
n/a | n/a | n/a | 179,739 | ||||||||||||
Non-allocated (2)
|
4,348 | n/a | n/a | 30,741 | ||||||||||||
|
||||||||||||||||
|
||||||||||||||||
Total
|
$ | 670,680 | $ | 445,144 | 10.1 | % | $ | 5,700,907 | ||||||||
|
||||||||||||||||
|
||||||||||||||||
For the year ended December 31, 2004
|
||||||||||||||||
|
||||||||||||||||
Established
|
||||||||||||||||
Northeast
|
$ | 135,059 | $ | 89,547 | (2.5 | %) | $ | 722,482 | ||||||||
Mid-Atlantic
|
51,390 | 36,316 | (0.2 | %) | 273,774 | |||||||||||
Midwest
|
10,734 | 6,188 | 6.8 | % | 91,121 | |||||||||||
Pacific Northwest
|
28,836 | 17,874 | 1.1 | % | 314,717 | |||||||||||
Northern California
|
126,196 | 87,067 | (5.9 | %) | 1,270,848 | |||||||||||
Southern California
|
56,124 | 39,634 | 1.8 | % | 401,204 | |||||||||||
|
||||||||||||||||
Total Established
|
408,339 | 276,626 | (1.2 | %) | 3,074,146 | |||||||||||
|
||||||||||||||||
Other Stabilized
|
111,894 | 71,744 | n/a | 1,068,859 | ||||||||||||
Development / Redevelopment
|
93,096 | 55,967 | n/a | 1,019,396 | ||||||||||||
Land Held for Future Development
|
n/a | n/a | n/a | 156,350 | ||||||||||||
Non-allocated (2)
|
515 | n/a | n/a | 27,401 | ||||||||||||
|
||||||||||||||||
|
||||||||||||||||
Total
|
$ | 613,844 | $ | 404,337 | 9.7 | % | $ | 5,346,152 | ||||||||
|
(1) | Does not include gross real estate assets for discontinued operations of $65,075, $202,261 and $350,992 as of December 31, 2006, 2005 and 2004 respectively. | |
(2) | Revenue represents third-party management, accounting and developer fees and miscellaneous income which are not allocated to a reportable segment. |
F-29
F-30
Weighted | Avalon 1995 | Weighted | ||||||||||||||
average | and Avalon | average | ||||||||||||||
1994 Plan | exercise price | 1993 Plan | exercise price | |||||||||||||
shares | per share | shares | per share | |||||||||||||
Options Outstanding, December 31, 2003
|
2,979,265 | $ | 39.57 | 473,962 | $ | 37.32 | ||||||||||
Exercised
|
(1,167,679 | ) | 39.06 | (287,700 | ) | 37.05 | ||||||||||
Granted
|
545,809 | 50.71 | | | ||||||||||||
Forfeited
|
(80,577 | ) | 43.98 | | | |||||||||||
|
||||||||||||||||
Options Outstanding, December 31, 2004
|
2,276,818 | $ | 42.39 | 186,262 | $ | 36.23 | ||||||||||
|
||||||||||||||||
Exercised
|
(743,524 | ) | 41.89 | (159,638 | ) | 37.82 | ||||||||||
Granted
|
725,988 | 70.09 | | | ||||||||||||
Forfeited
|
(29,504 | ) | 55.66 | | | |||||||||||
|
||||||||||||||||
Options Outstanding, December 31, 2005
|
2,229,778 | $ | 51.40 | 26,624 | $ | 37.09 | ||||||||||
|
||||||||||||||||
Exercised
|
(592,308 | ) | 50.09 | (22,384 | ) | 37.15 | ||||||||||
Granted
|
867,113 | 99.28 | | | ||||||||||||
Forfeited
|
(17,344 | ) | 79.72 | | | |||||||||||
|
||||||||||||||||
Options Outstanding, December 31, 2006
|
2,487,239 | $ | 69.65 | 4,240 | $ | 36.81 | ||||||||||
|
||||||||||||||||
|
||||||||||||||||
Options Exercisable:
|
||||||||||||||||
December 31, 2004
|
1,366,009 | $ | 39.72 | 186,262 | $ | 38.15 | ||||||||||
|
||||||||||||||||
December 31, 2005
|
1,158,591 | $ | 42.45 | 26,624 | $ | 37.09 | ||||||||||
|
||||||||||||||||
December 31, 2006
|
1,041,360 | $ | 47.99 | 4,240 | $ | 36.81 | ||||||||||
|
F-31
| Cash equivalents, rents receivable, accounts and construction payable and accrued expenses, and other liabilities are carried at their face amounts, which reasonably approximate their fair values. | ||
| Bond indebtedness and notes payable with an aggregate outstanding per amount of approximately $2,829,000 and $2,268,000 had an estimated aggregate fair value of $2,940,000 and $2,394,000 at December 31, 2006 and 2005, respectively. | ||
| The Company reports all derivative instruments at for value in accordance with SFAS No. 133, as amended. See Note 5, Derivative Instruments and Hedging Activities, for further discussions. |
F-32
F-33
For the three months ended | ||||||||||||||||
3-31-06 | 6-30-06 | 9-30-06 | 12-31-06 | |||||||||||||
Total revenue
|
$ | 175,158 | $ | 180,675 | $ | 187,667 | $ | 193,800 | ||||||||
Income from continuing operations
(1)
|
$ | 47,582 | $ | 37,906 | $ | 45,076 | $ | 49,276 | ||||||||
Income from discontinued operations
(1)
|
$ | 66,495 | $ | 32,063 | | | ||||||||||
Net income available to common stockholders
|
$ | 111,902 | $ | 67,794 | $ | 42,901 | $ | 47,101 | ||||||||
Net income
per common share basic
(2)
|
$ | 1.52 | $ | 0.91 | $ | 0.58 | $ | 0.63 | ||||||||
Net income
per common share diluted
(2)
|
$ | 1.49 | $ | 0.90 | $ | 0.57 | $ | 0.62 |
For the three months ended | ||||||||||||||||
3-31-05 | 6-30-05 | 9-30-05 | 12-31-05 | |||||||||||||
Total revenue
|
$ | 161,245 | $ | 165,586 | $ | 170,751 | $ | 173,098 | ||||||||
Income from continuing operations
(1)
|
$ | 27,861 | $ | 29,977 | $ | 26,885 | $ | 27,426 | ||||||||
Income from discontinued operations
(1)
|
$ | 41,749 | $ | 26,934 | $ | 72,243 | $ | 69,303 | ||||||||
Net income available to common stockholders
|
$ | 67,435 | $ | 54,736 | $ | 96,953 | $ | 94,554 | ||||||||
Net income
per common share basic
(2)
|
$ | 0.93 | $ | 0.75 | $ | 1.32 | $ | 1.29 | ||||||||
Net income
per common share diluted
(2)
|
$ | 0.92 | $ | 0.74 | $ | 1.30 | $ | 1.26 |
(1) | Amounts may not equal previously reported results due to reclassification between income from continuing operations and income from discontinued operations. | |
(2) | Amounts may not equal full year results due to rounding. |
F-34
Initial Cost | Total Cost | |||||||||||||||||||||||||||||||||||||
Building / | Costs | Building / | ||||||||||||||||||||||||||||||||||||
Construction in | Subsequent to | Construction in | Total Cost, Net of | Year of | ||||||||||||||||||||||||||||||||||
Progress & | Acquisition / | Progress & | Accumulated | Accumulated | Completion / | |||||||||||||||||||||||||||||||||
Land | Improvements | Construction | Land | Improvements | Total | Depreciation | Depreciation | Encumbrances | Acquisition | |||||||||||||||||||||||||||||
Current Communities
|
||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||
Avalon at Bedford Center
|
4,238 | 20,477 | 1 | 4,238 | 20,478 | 24,716 | 763 | 23,953 | | 2006 | ||||||||||||||||||||||||||||
Avalon at Center Place
|
| 26,816 | 1,928 | | 28,744 | 28,744 | 9,561 | 19,183 | | 1991/1997 | ||||||||||||||||||||||||||||
Avalon at Crane Brook
|
12,381 | 42,298 | 102 | 12,381 | 42,400 | 54,781 | 3,569 | 51,212 | 33,535 | 2004 | ||||||||||||||||||||||||||||
Avalon at Faxon Park
|
1,136 | 14,001 | 520 | 1,136 | 14,521 | 15,657 | 4,540 | 11,117 | | 1998 | ||||||||||||||||||||||||||||
Avalon at Flanders Hill
|
3,572 | 33,504 | 126 | 3,572 | 33,630 | 37,202 | 5,198 | 32,004 | 21,245 | 2003 | ||||||||||||||||||||||||||||
Avalon at Lexington
|
2,124 | 12,599 | 1,311 | 2,124 | 13,910 | 16,034 | 5,898 | 10,136 | 12,467 | 1994 | ||||||||||||||||||||||||||||
Avalon at Newton Highlands
|
11,038 | 45,527 | 99 | 11,038 | 45,626 | 56,664 | 5,385 | 51,279 | 37,650 | 2003 | ||||||||||||||||||||||||||||
Avalon at Prudential Center
|
25,811 | 104,399 | 26,443 | 25,811 | 130,842 | 156,653 | 34,972 | 121,681 | | 1968/1998 | ||||||||||||||||||||||||||||
Avalon at Stevens Pond
|
10,704 | 43,506 | 75 | 10,704 | 43,581 | 54,285 | 5,005 | 49,280 | | 2004 | ||||||||||||||||||||||||||||
Avalon at The Pinehills I
|
3,623 | 16,292 | 28 | 3,623 | 16,320 | 19,943 | 1,361 | 18,582 | | 2004 | ||||||||||||||||||||||||||||
Avalon Essex
|
5,230 | 16,303 | 284 | 5,230 | 16,587 | 21,817 | 4,105 | 17,712 | | 2000 | ||||||||||||||||||||||||||||
Avalon Ledges
|
2,627 | 33,443 | 297 | 2,627 | 33,740 | 36,367 | 5,515 | 30,852 | 18,635 | 2002 | ||||||||||||||||||||||||||||
Avalon Oaks
|
2,129 | 18,656 | 472 | 2,129 | 19,128 | 21,257 | 5,357 | 15,900 | 17,205 | 1999 | ||||||||||||||||||||||||||||
Avalon Oaks West
|
3,303 | 13,467 | 74 | 3,303 | 13,541 | 16,844 | 2,430 | 14,414 | 17,036 | 2002 | ||||||||||||||||||||||||||||
Avalon Orchards
|
2,975 | 18,037 | 138 | 2,975 | 18,175 | 21,150 | 3,134 | 18,016 | 19,883 | 2002 | ||||||||||||||||||||||||||||
Avalon Summit
|
1,743 | 14,670 | 932 | 1,743 | 15,602 | 17,345 | 5,747 | 11,598 | | 1986/1996 | ||||||||||||||||||||||||||||
Avalon West
|
943 | 9,881 | 508 | 943 | 10,389 | 11,332 | 3,702 | 7,630 | 8,179 | 1996 | ||||||||||||||||||||||||||||
Essex Place
|
4,643 | 19,007 | 77 | 4,643 | 19,084 | 23,727 | 1,571 | 22,156 | | 2004 | ||||||||||||||||||||||||||||
Avalon at Greyrock Place
|
13,819 | 56,499 | 75 | 13,819 | 56,574 | 70,393 | 8,883 | 61,510 | | 2002 | ||||||||||||||||||||||||||||
Avalon Danbury
|
4,905 | 30,520 | 29 | 4,905 | 30,549 | 35,454 | 1,573 | 33,881 | | 2005 | ||||||||||||||||||||||||||||
Avalon Darien
|
6,922 | 34,594 | 3 | 6,922 | 34,597 | 41,519 | 3,857 | 37,662 | | 2004 | ||||||||||||||||||||||||||||
Avalon Gates
|
4,414 | 31,268 | 1,423 | 4,414 | 32,691 | 37,105 | 10,820 | 26,285 | | 1997 | ||||||||||||||||||||||||||||
Avalon Glen
|
5,956 | 23,993 | 2,194 | 5,956 | 26,187 | 32,143 | 11,465 | 20,678 | | 1991 | ||||||||||||||||||||||||||||
Avalon Haven
|
1,264 | 12,491 | 232 | 1,264 | 12,723 | 13,987 | 3,066 | 10,921 | | 2000 | ||||||||||||||||||||||||||||
Avalon Milford I
|
8,746 | 22,695 | (0 | ) | 8,746 | 22,695 | 31,441 | 1,931 | 29,510 | | 2004 | |||||||||||||||||||||||||||
Avalon New Canaan
|
4,835 | 19,485 | 44 | 4,835 | 19,529 | 24,364 | 3,172 | 21,192 | | 2002 | ||||||||||||||||||||||||||||
Avalon on Stamford Harbor
|
10,836 | 51,989 | 61 | 10,836 | 52,050 | 62,886 | 8,328 | 54,558 | | 2003 | ||||||||||||||||||||||||||||
Avalon Orange
|
2,108 | 19,983 | 5 | 2,108 | 19,988 | 22,096 | 1,282 | 20,814 | | 2005 | ||||||||||||||||||||||||||||
Avalon Springs
|
2,116 | 14,664 | 414 | 2,116 | 15,078 | 17,194 | 5,105 | 12,089 | | 1996 | ||||||||||||||||||||||||||||
Avalon Valley
|
2,277 | 23,781 | 252 | 2,277 | 24,033 | 26,310 | 6,525 | 19,785 | | 1999 | ||||||||||||||||||||||||||||
Avalon Walk I & II
|
9,102 | 48,796 | 7,563 | 9,102 | 56,359 | 65,461 | 21,389 | 44,072 | | 1992/1994 | ||||||||||||||||||||||||||||
Avalon at Glen Cove South
|
7,871 | 59,969 | 62 | 7,871 | 60,031 | 67,902 | 5,150 | 62,752 | | 2004 | ||||||||||||||||||||||||||||
Avalon Commons
|
4,679 | 28,509 | 527 | 4,679 | 29,036 | 33,715 | 9,454 | 24,261 | | 1997 | ||||||||||||||||||||||||||||
Avalon Court
|
9,228 | 50,021 | 573 | 9,228 | 50,594 | 59,822 | 14,172 | 45,650 | | 1997/2000 | ||||||||||||||||||||||||||||
Avalon Pines I
|
6,178 | 40,564 | (205 | ) | 6,178 | 40,359 | 46,537 | 2,625 | 43,912 | | 2005 | |||||||||||||||||||||||||||
Avalon Pines II
|
2,943 | 20,923 | 0 | 2,943 | 20,923 | 23,866 | 556 | 23,310 | | 2006 | ||||||||||||||||||||||||||||
Avalon Towers
|
3,118 | 12,709 | 5,451 | 3,118 | 18,160 | 21,278 | 6,102 | 15,176 | | 1990/1995 | ||||||||||||||||||||||||||||
Avalon at Edgewater
|
14,529 | 60,240 | 445 | 14,529 | 60,685 | 75,214 | 11,184 | 64,030 | | 2002 | ||||||||||||||||||||||||||||
Avalon at Florham Park
|
6,647 | 34,909 | 260 | 6,647 | 35,169 | 41,816 | 7,842 | 33,974 | | 2001 | ||||||||||||||||||||||||||||
Avalon Cove
|
8,760 | 82,442 | 1,670 | 8,760 | 84,112 | 92,872 | 28,326 | 64,546 | | 1997 | ||||||||||||||||||||||||||||
Avalon at Freehold
|
4,116 | 30,514 | 118 | 4,116 | 30,632 | 34,748 | 5,527 | 29,221 | | 2002 |
F-35
Initial Cost | Total Cost | |||||||||||||||||||||||||||||||||||||
Building / | Costs | Building / | ||||||||||||||||||||||||||||||||||||
Construction in | Subsequent to | Construction in | Total Cost, Net of | Year of | ||||||||||||||||||||||||||||||||||
Progress & | Acquisition / | Progress & | Accumulated | Accumulated | Completion / | |||||||||||||||||||||||||||||||||
Land | Improvements | Construction | Land | Improvements | Total | Depreciation | Depreciation | Encumbrances | Acquisition | |||||||||||||||||||||||||||||
Avalon Run
|
13,060 | 45,855 | 1,130 | 13,060 | 46,985 | 60,045 | 145 | 59,900 | | 1994 | ||||||||||||||||||||||||||||
Avalon Run East
|
1,579 | 14,668 | 111 | 1,579 | 14,779 | 16,358 | 5,232 | 11,126 | | 1996 | ||||||||||||||||||||||||||||
Avalon Run East II
|
6,765 | 45,377 | 2 | 6,765 | 45,379 | 52,144 | 3,409 | 48,735 | | 2003 | ||||||||||||||||||||||||||||
Avalon Watch
|
5,585 | 22,394 | 2,159 | 5,585 | 24,553 | 30,138 | 11,357 | 18,781 | | 1988 | ||||||||||||||||||||||||||||
Avalon Bowery Place
|
18,668 | 70,739 | 170 | 18,668 | 70,909 | 89,577 | 433 | 89,144 | 93,800 | 2006 | ||||||||||||||||||||||||||||
Avalon Gardens
|
8,428 | 45,660 | 1,024 | 8,428 | 46,684 | 55,112 | 14,590 | 40,522 | | 1998 | ||||||||||||||||||||||||||||
Avalon Green
|
1,820 | 10,525 | 898 | 1,820 | 11,423 | 13,243 | 4,361 | 8,882 | | 1995 | ||||||||||||||||||||||||||||
Avalon on the Sound
|
| 116,231 | 867 | | 117,098 | 117,098 | 18,931 | 98,167 | | 2001 | ||||||||||||||||||||||||||||
Avalon Riverview I
|
| 94,166 | 395 | | 94,561 | 94,561 | 14,611 | 79,950 | | 2002 | ||||||||||||||||||||||||||||
Avalon View
|
3,529 | 14,140 | 1,598 | 3,529 | 15,738 | 19,267 | 6,871 | 12,396 | 15,980 | 1993 | ||||||||||||||||||||||||||||
Avalon Willow
|
6,207 | 40,791 | 516 | 6,207 | 41,307 | 47,514 | 10,373 | 37,141 | | 2000 | ||||||||||||||||||||||||||||
The Avalon
|
2,889 | 28,324 | 143 | 2,889 | 28,467 | 31,356 | 7,457 | 23,899 | | 1999 | ||||||||||||||||||||||||||||
Avalon at Fairway Hills I
& II
|
4,147 | 16,599 | 2,025 | 4,147 | 18,624 | 22,771 | 7,546 | 15,225 | 11,500 | 1987/1996 | ||||||||||||||||||||||||||||
Avalon at Fairway Hills III
|
4,465 | 17,864 | 7,024 | 4,465 | 24,888 | 29,353 | 7,301 | 22,052 | | 1987/1996 | ||||||||||||||||||||||||||||
Avalon at Symphony Glen
|
1,594 | 6,384 | 1,377 | 1,594 | 7,761 | 9,355 | 3,875 | 5,480 | 9,780 | 1986 | ||||||||||||||||||||||||||||
Avalon Landing
|
1,849 | 7,409 | 930 | 1,849 | 8,339 | 10,188 | 3,460 | 6,728 | 5,903 | 1984/1995 | ||||||||||||||||||||||||||||
Southgate Crossing
|
7,207 | 29,151 | 0 | 7,207 | 29,151 | 36,358 | 203 | 36,155 | | 2006 | ||||||||||||||||||||||||||||
AutumnWoods
|
6,096 | 24,400 | 2,705 | 6,096 | 27,105 | 33,201 | 8,858 | 24,343 | | 1989/1996 | ||||||||||||||||||||||||||||
Avalon at Arlington Square
|
22,041 | 90,296 | 272 | 22,041 | 90,568 | 112,609 | 17,183 | 95,426 | | 2001 | ||||||||||||||||||||||||||||
Avalon at Ballston
Washington
|
7,291 | 29,177 | 1,642 | 7,291 | 30,819 | 38,110 | 13,310 | 24,800 | | 1990 | ||||||||||||||||||||||||||||
Avalon at Cameron Court
|
10,292 | 32,930 | 311 | 10,292 | 33,241 | 43,533 | 10,421 | 33,112 | | 1998 | ||||||||||||||||||||||||||||
Avalon at Decoverly
|
6,157 | 24,800 | 1,341 | 6,157 | 26,141 | 32,298 | 10,160 | 22,138 | | 1991/1995 | ||||||||||||||||||||||||||||
Avalon at Foxhall
|
6,848 | 27,614 | 9,926 | 6,848 | 37,540 | 44,388 | 13,727 | 30,661 | | 1982 | ||||||||||||||||||||||||||||
Avalon at Gallery Place I
|
9,084 | 39,731 | 58 | 9,084 | 39,789 | 48,873 | 5,138 | 43,735 | | 2003 | ||||||||||||||||||||||||||||
Avalon at Grosvenor Station
|
24,751 | 57,331 | 75 | 24,751 | 57,406 | 82,157 | 5,649 | 76,508 | | 2004 | ||||||||||||||||||||||||||||
Avalon at Providence Park
|
2,152 | 8,907 | 621 | 2,152 | 9,528 | 11,680 | 3,207 | 8,473 | | 1988/1997 | ||||||||||||||||||||||||||||
Avalon at Rock Spring
|
| 46,003 | 257 | | 46,260 | 46,260 | 6,524 | 39,736 | | 2003 | ||||||||||||||||||||||||||||
Avalon at Traville
|
14,360 | 55,382 | 5 | 14,360 | 55,387 | 69,747 | 5,504 | 64,243 | | 2004 | ||||||||||||||||||||||||||||
Avalon Crescent
|
13,851 | 43,397 | 353 | 13,851 | 43,750 | 57,601 | 14,666 | 42,935 | | 1996 | ||||||||||||||||||||||||||||
Avalon Fields I & II
|
4,047 | 18,553 | 178 | 4,047 | 18,731 | 22,778 | 6,712 | 16,066 | 10,483 | 1998 | ||||||||||||||||||||||||||||
Avalon Knoll
|
1,528 | 6,136 | 1,731 | 1,528 | 7,867 | 9,395 | 3,795 | 5,600 | 11,957 | 1985 | ||||||||||||||||||||||||||||
Avalon Arlington Heights
|
9,728 | 39,661 | 6,468 | 9,728 | 46,129 | 55,857 | 8,787 | 47,070 | | 1987/2000 | ||||||||||||||||||||||||||||
Avalon at Danada Farms
|
7,535 | 30,623 | 814 | 7,535 | 31,437 | 38,972 | 9,721 | 29,251 | | 1997 | ||||||||||||||||||||||||||||
Avalon at Stratford Green
|
4,326 | 17,569 | 269 | 4,326 | 17,838 | 22,164 | 5,520 | 16,644 | | 1997 | ||||||||||||||||||||||||||||
Avalon at West Grove
|
5,149 | 20,656 | 5,467 | 5,149 | 26,123 | 31,272 | 8,324 | 22,948 | | 1967 | ||||||||||||||||||||||||||||
Avalon at Bear Creek
|
6,786 | 27,154 | 917 | 6,786 | 28,071 | 34,857 | 8,297 | 26,560 | | 1998 | ||||||||||||||||||||||||||||
Avalon Bellevue
|
6,664 | 24,119 | 79 | 6,664 | 24,198 | 30,862 | 5,264 | 25,598 | | 2001 | ||||||||||||||||||||||||||||
Avalon Belltown
|
5,644 | 12,733 | 67 | 5,644 | 12,800 | 18,444 | 2,555 | 15,889 | | 2001 | ||||||||||||||||||||||||||||
Avalon Brandemoor
|
8,630 | 36,679 | 337 | 8,630 | 37,016 | 45,646 | 7,565 | 38,081 | | 2001 | ||||||||||||||||||||||||||||
Avalon HighGrove
|
7,569 | 32,041 | 269 | 7,569 | 32,310 | 39,879 | 6,991 | 32,888 | | 2000 | ||||||||||||||||||||||||||||
Avalon ParcSquare
|
3,789 | 15,143 | 313 | 3,789 | 15,456 | 19,245 | 3,631 | 15,614 | | 2000 | ||||||||||||||||||||||||||||
Avalon Redmond Place
|
4,558 | 17,568 | 4,283 | 4,558 | 21,851 | 26,409 | 7,181 | 19,228 | | 1991/1997 | ||||||||||||||||||||||||||||
Avalon RockMeadow
|
4,777 | 19,726 | 303 | 4,777 | 20,029 | 24,806 | 4,656 | 20,150 | | 2000 |
F-36
Initial Cost | Total Cost | |||||||||||||||||||||||||||||||||||||
Building / | Costs | Building / | ||||||||||||||||||||||||||||||||||||
Construction in | Subsequent to | Construction in | Total Cost, Net of | Year of | ||||||||||||||||||||||||||||||||||
Progress & | Acquisition / | Progress & | Accumulated | Accumulated | Completion / | |||||||||||||||||||||||||||||||||
Land | Improvements | Construction | Land | Improvements | Total | Depreciation | Depreciation | Encumbrances | Acquisition | |||||||||||||||||||||||||||||
Avalon WildReed
|
4,253 | 18,676 | 166 | 4,253 | 18,842 | 23,095 | 4,343 | 18,752 | | 2000 | ||||||||||||||||||||||||||||
Avalon Wynhaven
|
11,412 | 41,142 | 290 | 11,412 | 41,432 | 52,844 | 8,424 | 44,420 | | 2001 | ||||||||||||||||||||||||||||
Avalon at Union Square
|
4,249 | 16,820 | 1,512 | 4,249 | 18,332 | 22,581 | 5,654 | 16,927 | | 1973/1996 | ||||||||||||||||||||||||||||
Avalon at Willow Creek
|
6,581 | 26,583 | 3,048 | 6,581 | 29,631 | 36,212 | 8,958 | 27,254 | | 1985/1994 | ||||||||||||||||||||||||||||
Avalon Dublin
|
5,276 | 19,642 | 2,948 | 5,276 | 22,590 | 27,866 | 6,574 | 21,292 | | 1989/1997 | ||||||||||||||||||||||||||||
Avalon Fremont
|
10,746 | 43,399 | 2,467 | 10,746 | 45,866 | 56,612 | 13,721 | 42,891 | | 1994 | ||||||||||||||||||||||||||||
Avalon Pleasanton
|
11,610 | 46,552 | 4,188 | 11,610 | 50,740 | 62,350 | 15,564 | 46,786 | | 1988/1994 | ||||||||||||||||||||||||||||
Waterford
|
11,324 | 45,717 | 4,645 | 11,324 | 50,362 | 61,686 | 15,675 | 46,011 | 33,100 | 1985/1986 | ||||||||||||||||||||||||||||
Avalon at Cedar Ridge
|
4,230 | 9,659 | 12,657 | 4,230 | 22,316 | 26,546 | 6,810 | 19,736 | | 1972/1997 | ||||||||||||||||||||||||||||
Avalon at Diamond Heights
|
4,726 | 19,130 | 1,471 | 4,726 | 20,601 | 25,327 | 6,290 | 19,037 | | 1972/1994 | ||||||||||||||||||||||||||||
Avalon at Mission Bay North
|
13,814 | 78,452 | 546 | 13,814 | 78,998 | 92,812 | 10,517 | 82,295 | | 2003 | ||||||||||||||||||||||||||||
Avalon at Nob Hill
|
5,403 | 21,567 | 1,101 | 5,403 | 22,668 | 28,071 | 6,750 | 21,321 | 20,800 | 1990/1995 | ||||||||||||||||||||||||||||
Avalon Foster City
|
7,852 | 31,445 | 4,291 | 7,852 | 35,736 | 43,588 | 10,340 | 33,248 | | 1973/1994 | ||||||||||||||||||||||||||||
Avalon Pacifica
|
6,125 | 24,796 | 1,244 | 6,125 | 26,040 | 32,165 | 7,775 | 24,390 | 17,600 | 1971/1995 | ||||||||||||||||||||||||||||
Avalon Sunset Towers
|
3,561 | 21,321 | 3,896 | 3,561 | 25,217 | 28,778 | 8,140 | 20,638 | | 1961/1996 | ||||||||||||||||||||||||||||
Avalon Towers by the Bay
|
9,155 | 57,624 | 227 | 9,155 | 57,851 | 67,006 | 14,606 | 52,400 | | 1999 | ||||||||||||||||||||||||||||
Crowne Ridge
|
5,982 | 16,885 | 10,196 | 5,982 | 27,081 | 33,063 | 8,283 | 24,780 | | 1973/1996 | ||||||||||||||||||||||||||||
Avalon at Blossom Hill
|
11,933 | 48,247 | 1,880 | 11,933 | 50,127 | 62,060 | 14,967 | 47,093 | | 1995 | ||||||||||||||||||||||||||||
Avalon at Cahill Park
|
4,760 | 47,600 | 210 | 4,760 | 47,810 | 52,570 | 7,528 | 45,042 | | 2002 | ||||||||||||||||||||||||||||
Avalon at Creekside
|
6,546 | 26,301 | 10,576 | 6,546 | 36,877 | 43,423 | 10,485 | 32,938 | | 1962/1997 | ||||||||||||||||||||||||||||
Avalon at Foxchase I & II
|
11,340 | 45,532 | 3,798 | 11,340 | 49,330 | 60,670 | 15,288 | 45,382 | 26,400 | 1988/1987 | ||||||||||||||||||||||||||||
Avalon at Parkside
|
7,406 | 29,823 | 989 | 7,406 | 30,812 | 38,218 | 9,257 | 28,961 | | 1991/1996 | ||||||||||||||||||||||||||||
Avalon at Pruneyard
|
3,414 | 15,469 | 13,258 | 3,414 | 28,727 | 32,141 | 9,002 | 23,139 | | 1968/1997 | ||||||||||||||||||||||||||||
Avalon at River Oaks
|
8,904 | 35,121 | 984 | 8,904 | 36,105 | 45,009 | 10,635 | 34,374 | | 1990/1996 | ||||||||||||||||||||||||||||
Avalon Campbell
|
11,830 | 47,828 | 456 | 11,830 | 48,284 | 60,114 | 14,365 | 45,749 | 38,800 | 1995 | ||||||||||||||||||||||||||||
Avalon Mountain View
|
9,755 | 39,393 | 2,461 | 9,755 | 41,854 | 51,609 | 12,634 | 38,975 | 18,300 | 1986 | ||||||||||||||||||||||||||||
Avalon on the Alameda
|
6,119 | 50,230 | 157 | 6,119 | 50,387 | 56,506 | 13,929 | 42,577 | | 1999 | ||||||||||||||||||||||||||||
Avalon Rosewalk
|
15,814 | 62,028 | 1,522 | 15,814 | 63,550 | 79,364 | 18,233 | 61,131 | | 1997/1999 | ||||||||||||||||||||||||||||
Avalon Silicon Valley
|
20,713 | 99,573 | 1,837 | 20,713 | 101,410 | 122,123 | 29,967 | 92,156 | | 1997 | ||||||||||||||||||||||||||||
Avalon Towers on the
Peninsula
|
9,560 | 56,136 | 56 | 9,560 | 56,192 | 65,752 | 9,588 | 56,164 | | 2002 | ||||||||||||||||||||||||||||
Countrybrook
|
9,384 | 34,958 | 4,448 | 9,384 | 39,406 | 48,790 | 11,872 | 36,918 | 15,990 | 1985/1996 | ||||||||||||||||||||||||||||
San Marino
|
6,607 | 26,673 | 1,737 | 6,607 | 28,410 | 35,017 | 8,616 | 26,401 | | 1984/1988 | ||||||||||||||||||||||||||||
Avalon at Media Center
|
22,483 | 28,104 | 25,874 | 22,483 | 53,978 | 76,461 | 15,382 | 61,079 | | 1961/1997 | ||||||||||||||||||||||||||||
Avalon at Warner Center
|
7,045 | 12,986 | 6,912 | 7,045 | 19,898 | 26,943 | 6,935 | 20,008 | | 1979/1998 | ||||||||||||||||||||||||||||
Avalon Camarillo
|
8,454 | 38,720 | (0 | ) | 8,454 | 38,720 | 47,174 | 866 | 46,308 | | 2006 | |||||||||||||||||||||||||||
Avalon at Glendale
|
| 40,248 | 0 | | 40,248 | 40,248 | 4,757 | 35,491 | | 2003 | ||||||||||||||||||||||||||||
Avalon Woodland Hills
|
23,828 | 40,372 | 7,873 | 23,828 | 48,245 | 72,073 | 16,163 | 55,910 | | 1989/1997 | ||||||||||||||||||||||||||||
The Promenade
|
14,052 | 56,827 | 124 | 14,052 | 56,951 | 71,003 | 8,957 | 62,046 | 31,495 | 1988/2002 | ||||||||||||||||||||||||||||
Avalon Del Rey
|
6,541 | 58,535 | (1 | ) | 6,541 | 58,534 | 65,075 | 724 | 64,351 | 40,845 | 2006 | |||||||||||||||||||||||||||
Avalon at Pacific Bay
|
4,871 | 19,745 | 7,680 | 4,871 | 27,425 | 32,296 | 8,256 | 24,040 | | 1971/1997 | ||||||||||||||||||||||||||||
Avalon at South Coast
|
4,709 | 16,063 | 4,718 | 4,709 | 20,781 | 25,490 | 6,554 | 18,936 | | 1973/1996 | ||||||||||||||||||||||||||||
Avalon Mission Viejo
|
2,517 | 9,257 | 2,238 | 2,517 | 11,495 | 14,012 | 3,521 | 10,491 | 7,635 | 1984/1996 | ||||||||||||||||||||||||||||
Avalon Newport
|
1,975 | 3,814 | 4,563 | 1,975 | 8,377 | 10,352 | 2,537 | 7,815 | | 1956/1996 |
F-37
Initial Cost | Total Cost | |||||||||||||||||||||||||||||||||||||
Building / | Costs | Building / | ||||||||||||||||||||||||||||||||||||
Construction in | Subsequent to | Construction in | Total Cost, Net of | Year of | ||||||||||||||||||||||||||||||||||
Progress & | Acquisition / | Progress & | Accumulated | Accumulated | Completion / | |||||||||||||||||||||||||||||||||
Land | Improvements | Construction | Land | Improvements | Total | Depreciation | Depreciation | Encumbrances | Acquisition | |||||||||||||||||||||||||||||
Avalon Santa Margarita
|
4,607 | 16,911 | 2,843 | 4,607 | 19,754 | 24,361 | 6,055 | 18,306 | | 1990/1997 | ||||||||||||||||||||||||||||
Avalon at Cortez Hill
|
2,768 | 20,134 | 11,654 | 2,768 | 31,788 | 34,556 | 9,344 | 25,212 | | 1973/1998 | ||||||||||||||||||||||||||||
Avalon at Mission Bay
|
9,922 | 40,633 | 15,726 | 9,922 | 56,359 | 66,281 | 16,313 | 49,968 | | 1969/1997 | ||||||||||||||||||||||||||||
Avalon at Mission Ridge
|
2,710 | 10,924 | 8,787 | 2,710 | 19,711 | 22,421 | 6,021 | 16,400 | | 1960/1997 | ||||||||||||||||||||||||||||
|
$ | 921,900 | $ | 4,356,642 | $ | 312,294 | $ | 921,900 | $ | 4,668,936 | $ | 5,590,836 | $ | 1,076,823 | $ | 4,514,013 | $ | 596,203 | ||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||
Development Communities
|
||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||
Avalon Decoverly II
|
3,364 | 14,864 | 11,195 | 3,364 | 26,059 | 29,423 | 132 | 29,291 | | |||||||||||||||||||||||||||||
Avalon at Dublin Station
|
| 17 | 42,334 | | 42,351 | 42,351 | | 42,351 | | |||||||||||||||||||||||||||||
Avalon at Glen Cove North
|
| 107 | 27,030 | | 27,137 | 27,137 | | 27,137 | | |||||||||||||||||||||||||||||
Avalon at Lexington Hills
|
| 52 | 22,559 | | 22,611 | 22,611 | | 22,611 | | |||||||||||||||||||||||||||||
Avalon Acton
|
| | 16,672 | | 16,672 | 16,672 | | 16,672 | 45,000 | |||||||||||||||||||||||||||||
Avalon
Bowery Place II
|
| 41 | 14,966 | | 15,007 | 15,007 | | 15,007 | 48,500 | |||||||||||||||||||||||||||||
Avalon Chestnut Hill
|
10,626 | 34,527 | 14,773 | 10,626 | 49,300 | 59,926 | 223 | 59,703 | | |||||||||||||||||||||||||||||
Avalon Danvers
|
| 127 | 46,306 | | 46,433 | 46,433 | | 46,433 | | |||||||||||||||||||||||||||||
Avalon Encino
|
| 38 | 22,833 | | 22,871 | 22,871 | | 22,871 | | |||||||||||||||||||||||||||||
Avalon Lyndhurst
|
| 285 | 63,941 | | 64,226 | 64,226 | | 64,226 | | |||||||||||||||||||||||||||||
Avalon Meydenbauer
|
| 147 | 35,942 | | 36,089 | 36,089 | | 36,089 | | |||||||||||||||||||||||||||||
Avalon on the Sound II
|
| 71 | 102,002 | | 102,073 | 102,073 | | 102,073 | | |||||||||||||||||||||||||||||
Avalon Riverview North
|
| 49 | 85,765 | | 85,814 | 85,814 | | 85,814 | | |||||||||||||||||||||||||||||
Avalon Shrewsbury
|
3,258 | 19,798 | 10,487 | 3,258 | 30,285 | 33,543 | 223 | 33,320 | | |||||||||||||||||||||||||||||
Avalon Wilshire
|
| 222 | 38,116 | | 38,338 | 38,338 | | 38,338 | | |||||||||||||||||||||||||||||
Avalon Woburn
|
3,320 | 10,125 | 47,832 | 3,320 | 57,957 | 61,277 | 84 | 61,193 | | |||||||||||||||||||||||||||||
Avalon Canoga Park
|
| 19 | 14,012 | | 14,031 | 14,031 | | 14,031 | | |||||||||||||||||||||||||||||
|
$ | 20,568 | $ | 80,490 | $ | 616,764 | $ | 20,568 | $ | 697,254 | $ | 717,822 | $ | 662 | $ | 717,160 | $ | 93,500 | ||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||
Land held for development
|
209,568 | | | 209,568 | | 209,568 | | 209,568 | 23,650 | |||||||||||||||||||||||||||||
Corporate Overhead
|
22,327 | 13,370 | 24,692 | 22,327 | 38,062 | 60,389 | 23,073 | 37,316 | 2,153,078 | |||||||||||||||||||||||||||||
|
$ | 1,174,363 | $ | 4,450,502 | $ | 953,750 | $ | 1,174,363 | $ | 5,404,252 | $ | 6,578,615 | $ | 1,100,558 | $ | 5,478,057 | $ | 2,866,431 | ||||||||||||||||||||
F-38
Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Balance, beginning of period
|
$ | 5,903,168 | $ | 5,697,144 | $ | 5,431,757 | ||||||
Acquisitions, construction costs and improvements
|
825,981 | 528,118 | 520,643 | |||||||||
Dispositions, including impairment loss on
planned dispositions
|
(150,534 | ) | (322,094 | ) | (255,256 | ) | ||||||
|
||||||||||||
Balance, end of period
|
$ | 6,578,615 | $ | 5,903,168 | $ | 5,697,144 | ||||||
|
Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Balance, beginning of period
|
$ | 957,380 | $ | 819,319 | $ | 695,368 | ||||||
Depreciation, including discontinued operations
|
162,896 | 162,063 | 162,667 | |||||||||
Dispositions
|
(19,718 | ) | (24,002 | ) | (38,716 | ) | ||||||
|
||||||||||||
Balance, end of period
|
$ | 1,100,558 | $ | 957,380 | $ | 819,319 | ||||||
|
F-39
EXHIBIT 3(i).1
ARTICLES OF
AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
BAY APARTMENT COMMUNITIES, INC.
Dated: June 4, 1998
ARTICLES OF
AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
BAY APARTMENT COMMUNITIES, INC.
ARTICLE I
PREAMBLE
Bay Apartment Communities, Inc., a corporation organized and existing under the laws of the State of Maryland (the "Corporation"), hereby certifies as follows:
1.1 The name of the Corporation is Bay Apartment Communities, Inc. The date of the filing of its Articles of Incorporation with the State Department of Assessments and Taxation of the State of Maryland (the "Department") was March 13, 1995 (as thereafter amended from time to time prior to the date hereof, the "Original Charter").
1.2 The total number of shares of stock which the Corporation has authority to issue (the "Stock") prior to the date of this Amendment and Restatement is eighty-five million (85,000,000) shares, consisting of (i) twenty-five million (25,000,000) shares of preferred stock, par value $.01 per share ("Preferred Stock"); (ii) forty million (40,000,000) shares of common stock, par value $.01 per share ("Common Stock"); and (iii) twenty million (20,000,000) shares of excess common stock, par value $.01 per share. The aggregate par value of all of the shares of all classes of Stock prior to the date of this Amendment and Restatement is $850,000.
1.3 The total number of shares of Stock which the Corporation has authority to issue immediately following this Amendment and Restatement is three hundred seventy million (370,000,000) shares, initially consisting of (i) fifty million (50,000,000) shares of Preferred Stock; (ii) three hundred million (300,000,000) shares of Common Stock; and (iii) twenty million (20,000,000) shares of excess stock, par value $.01 per share ("Excess Stock"). The aggregate par value of all the shares of all classes of Stock immediately following this Amendment and Restatement is $3,700,000.
1.4 These Articles of Amendment and Restatement of Articles of Incorporation (the "Articles"), which amend, restate and integrate the provisions of the Original Charter were deemed advisable and approved by a majority of the Board of Directors of the Corporation and were approved by the stockholders of the Corporation in accordance with the Maryland General Corporation Law (the "MGCL").
1.5 The Corporation desires to amend and restate the Original Charter as currently in effect, and upon acceptance for record by the Department the provisions set forth in these
Articles shall be all of the provisions of the charter of the Corporation.
ARTICLE II
NAME
The name of the Corporation is:
"Avalon Bay Communities, Inc."
ARTICLE III
PURPOSES
Purpose and Powers. The purposes for which the Corporation is formed are to engage in business as a real estate investment trust (a "REIT") (as that phrase is defined under Section 856 of the Internal Revenue Code of 1986, as amended (the "Code")) and to engage in any other lawful act or activity for which corporations may be organized under the Maryland General Corporation Law. The foregoing purposes shall be in no way limited or restricted by reference to, or inference from, the terms of any other clause of these Articles, as amended from time to time, and each shall be regarded as independent. The foregoing purposes are also to be construed as powers of the Corporation, and shall be in addition to and not in limitation of the general powers of corporations under the laws of the State of Maryland.
ARTICLE IV
PRINCIPAL OFFICE ADDRESS
The address of the principal office of the Corporation in Maryland is c/o The Corporation Trust Incorporated, 300 East Lombard Street, Suite 1400, Baltimore, Maryland 21202.
ARTICLE V
THE RESIDENT AGENT
The resident agent of the Corporation in Maryland is The Corporation Trust Incorporated, whose address is 300 East Lombard Street, Suite 1400, Baltimore, Maryland 21202.
ARTICLE VI
BOARD OF DIRECTORS
6.1 General Powers; Action by Committee. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors and, except as otherwise expressly provided by law, these Articles or the bylaws, as amended from time to time (the "Bylaws"), of the Corporation, all of the powers of the Corporation shall be vested in such Board. Any action which the Board of Directors is empowered to take may be taken on behalf of the Board of Directors by a duly authorized committee thereof except (i) to the extent limited by Maryland law, these Articles or the Bylaws and (ii) for any action which requires the affirmative vote or approval of a majority of all Directors then in office (unless, in such case, these Articles or the Bylaws specifically provide that a duly authorized committee can take such action on behalf of the Board of Directors). A majority of the Board of Directors shall constitute a quorum and, except as otherwise specifically provided in these Articles, the affirmative vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
6.2 Number. The number of Directors of the Corporation shall be fixed from time to time by a resolution duly adopted by the Board of Directors; provided, however, that the total number of Directors shall be not fewer than three (3). No reduction in the number of Directors shall cause the removal of any Director from office prior to the expiration of his or her term. Immediately following the effectiveness of this Amendment and Restatement the Corporation shall have twelve (12) Directors, whose names shall be as follows:
Gilbert M. Meyer Charles H. Berman Bruce A. Choate Michael A. Futterman John J. Healy, Jr.
Christopher B. Leinberger
Richard L. Michaux
Richard W. Miller
Brenda J. Mixson
Thomas H. Nielsen
Lance R. Primis
Allan D. Schuster
6.3 Term; Election. The term of office of each Director shall expire at the next succeeding annual meeting of stockholders. The Directors elected at each annual meeting of stockholders shall hold office until their successors are duly elected and qualified or until their earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of Article VII or Article XIV of these Articles, the holders of any one or more series of Stock shall have the right, voting separately as a series or together with holders of other such series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of these
Articles and any articles supplementary applicable thereto.
During any period when the holders of any series of Stock have the
right to elect additional Directors as provided for or fixed pursuant to the
provisions of Article VII or Article XIV of these Articles, then upon
commencement and for the duration of the period during which such right
continues: (a) the then otherwise total authorized number of Directors of the
Corporation shall automatically be increased by such specified number of
Directors, and the holders of such Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions and
(b) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification,
resignation or removal. Except as otherwise provided by the Board of Directors
in the resolution or resolutions establishing such series, whenever the holders
of any series of Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such Stock, the terms of
office of all such additional Directors elected by the holders of such Stock,
or elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total authorized number of Directors of the Corporation shall
be reduced accordingly.
6.4 Resignation or Removal of Directors. Any Director may resign from the Board of Directors or any committee thereof at any time by written notice to the Board of Directors, effective upon execution and delivery to the Corporation of such notice or upon any future date specified in the notice. Subject to the rights, if any, of the holders of any series of Stock to elect Directors and to remove any Director whom such holders have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office (a) only with cause and (b) only by the affirmative vote of the holders of at least 75% of the shares then entitled to vote at a meeting of the stockholders called for that purpose. At least 30 days prior to any meeting of stockholders at which it is proposed that any Director be removed from office, written notice of such proposed removal shall be sent to the Director whose removal will be considered at the meeting. For purposes of these Articles, "cause," with respect to the removal of any Director, shall mean only (i) conviction of a felony, (ii) declaration of unsound mind by order of a court, (iii) gross dereliction of duty, (iv) commission of any act involving moral turpitude or (v) commission of an act that constitutes intentional misconduct or a knowing violation of law if such action in either event results both in an improper substantial personal benefit to such Director and a material injury to the Corporation.
6.5 Vacancies. Subject to the rights, if any, of the holders of any class or series of Stock to elect Directors and to fill vacancies on the Board of Directors relating thereto, any vacancy on the Board of Directors which results from the removal of a Director for cause shall be filled by the affirmative vote of a majority of votes cast by the stockholders normally entitled to vote in the election of Directors at a meeting of stockholders. Any vacancy occurring on the Board of Directors for any other reason, except as a result of an increase in the number of Directors, may be filled by a majority vote of the remaining Directors,
notwithstanding that such majority is less than a quorum; provided, however, that any Director appointed to fill the vacancy for an Independent Director (as hereinafter defined) shall also require the vote affirmative vote of a majority of the remaining Independent Directors. Any vacancy occurring on the Board of Directors as a result of an increase in the number of Directors may be filled by a majority vote of the entire Board of Directors. A Director elected by the Board of Directors or the stockholders to fill a vacancy shall hold office until the next annual meeting of stockholders and until his or her successor is elected and qualified. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until such vacancy is filled.
6.6 Independent Directors. Notwithstanding anything herein to the contrary, at all times (except during a period not to exceed sixty (60) days following the death, resignation, incapacity, or removal from office of a Director prior to the expiration of the Director's term of office), a majority of the Board of Directors shall be comprised of persons ("Independent Directors") who are not officers or employees of the Corporation or any affiliate thereof and who do not have a material business or professional relationship with the Corporation or any affiliate thereof.
6.7 Powers. Subject to the express limitations herein or in the Bylaws, the business and affairs of the Corporation shall be managed under the direction of the Board of Directors. These Articles, as amended or supplemented from time to time, shall be construed with a presumption in favor of the grant of power and authority to the Directors. The determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board of Directors consistent with these Articles and in the absence of actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a court, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares of its Stock: the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its Stock or the payment of other distributions on its Stock; the amount of paid-in surplus, net assets, other surplus, annual or other net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Corporation; any matter relating to the acquisition, holding and disposition of any assets by the Corporation; or any other matter relating to the business and affairs of the Corporation.
ARTICLE VII
STOCK
7.1 Authorized Stock. The total number of shares of Stock which the Corporation has authority to issue is three hundred seventy million (370,000,000) shares, initially
consisting of (i) fifty million (50,000,000) shares of Preferred Stock, par value $.01 per share; (ii) three hundred million (300,000,000) shares of Common Stock, par value $.01 per share; and (iii) twenty million (20,000,000) shares of Excess Stock, par value $.01 per share. The aggregate par value of all the shares of all classes of Stock is $3,700,000. If shares of one class of Stock are classified or reclassified into shares of another class of Stock pursuant to this Article VII, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of Stock of all classes that the Corporation has authority to issue shall not be more than the total number of shares of Stock set forth in the first sentence of this paragraph.
7.2 Preferred Stock. Subject to any limitations prescribed by law, the Board of Directors is expressly authorized to classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, in one or more classes or series of such Stock and, by filing articles supplementary with the Department, to establish or change from time to time the number of shares to be included in each such class or series, and to fix the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class or series. Any action by the Board of Directors under this Section 7.2 of Article VII shall require the affirmative vote of a majority of the Directors then in office; provided, however, that by the affirmative vote of a majority of the Directors then in office, the Board of Directors may appoint a committee to act on behalf of the Board of Directors under this Section 7.2, and in such event the affirmative vote of a majority of the members of such committee then in office shall be required for any action under this Section 7.2.
At the time of acceptance for record of these Articles, the Board of Directors had duly divided and classified 18,238,800 shares of Preferred Stock into seven series of Preferred Stock. The rights, preferences and privileges of these series are set forth herein in Article XIV.
7.3 Common Stock. Subject to all of the rights, powers and preferences of the Preferred Stock and except as provided by law or in this Article VII or Article XIV (or in any articles supplementary regarding any class or series of Preferred Stock):
7.3.1 Voting Rights. The holders of shares of Common Stock shall be entitled to vote for the election of Directors and on all other matters requiring stockholder action, and each holder of shares of Common Stock shall be entitled to one vote for each share of Common Stock held by such stockholder.
7.3.2 Dividend Rights. Holders of Common Stock shall be entitled to receive such dividends and other distributions in cash, Stock or property of the Corporation as may be authorized and declared by the Board of Directors upon the Common Stock and, if any Excess Stock resulting from the conversion of Common Stock is then outstanding, such Excess Stock out of any assets or funds of the Corporation legally available therefor, but only when and as authorized by the Board of Directors or any
authorized committee thereof from time to time, and shall share ratably with the holders of such Excess Stock resulting from the conversion of Common Stock in any such dividend or distribution.
Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
7.3.3 Rights Upon Liquidation. Upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, subject to the rights of holders of any shares of Preferred Stock and Excess Stock resulting from the conversion of Preferred Stock, the net assets of the Corporation available for distribution to the holders of Common Stock, and, if any Excess Stock resulting from the conversion of Common Stock is then outstanding, such Excess Stock, shall be distributed pro rata to such holders in proportion to the number of shares of Common Stock and such Excess Stock held by each.
7.4 Excess Stock. For the purposes of this Section 7.4, terms not otherwise defined shall have the meanings set forth in Article IX.
7.4.1 Conversion into Excess Stock.
(a) If, notwithstanding the other provisions
contained in these Articles, prior to the Restriction
Termination Date, there is a purported Transfer or
Non-Transfer Event such that any Person (other than a
Look-Through Entity) would Beneficially Own shares of Equity
Stock in excess of the Ownership Limit, or such that any
Person that is a Look-Through Entity would Beneficially Own
shares of Equity Stock in excess of the Look-Through Limit,
then, (i) except as otherwise provided in Section 9.4 of
Article IX, the purported transferee shall be deemed to be a
Prohibited Owner and shall acquire no right or interest (or,
in the case of a Non-Transfer Event, the Person holding record
title to the shares of Equity Stock Beneficially Owned by such
Beneficial Owner shall cease to own any right or interest) in
such number of shares of Equity Stock which would cause such
Beneficial Owner to Beneficially Own shares of Equity Stock in
excess of the Ownership Limit or the Look-Through Limit, as
the case may be, (ii) such number of shares of Equity Stock in
excess of the Ownership Limit or the Look-Through Limit, as
the case may be (rounded up to the nearest whole share), shall
be automatically converted into an equal number of shares of
Excess Stock and transferred to a Trust in accordance with
Section 7.4.4 of this Article VII and (iii) the Prohibited
Owner shall submit the
certificates representing such number of shares of Equity Stock to the Corporation, accompanied by all requisite and duly executed assignments of transfer thereof, for registration in the name of the Trustee of the Trust. If the shares of Equity Stock that are converted into Excess Stock are not shares of Common Stock, then the Excess Stock into which they are converted shall be deemed to be a separate series of Excess Stock with a designation and title corresponding to the designation and title of the shares that have been converted into the Excess Stock. Such conversion into Excess Stock and transfer to a Trust shall be effective as of the close of trading on the Trading Day prior to the date of the purported Transfer or Non-Transfer Event, as the case may be, even though the certificates representing the shares of Equity Stock so converted may be submitted to the Corporation at a later date.
(b) If, notwithstanding the other provisions contained in these Articles, prior to the Restriction Termination Date there is a purported Transfer or Non-Transfer Event that, if effective, would (i) result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, (ii) cause the Corporation to Constructively Own 10% or more of the ownership interest in a tenant of the Corporation's or a Subsidiary's real property within the meaning of Section 856(d)(2)(B) of the Code or (iii) result in the shares of Equity Stock being beneficially owned by fewer than 100 persons within the meaning of Section 856(a)(5) of the Code, then (x) the purported transferee shall be deemed to be a Prohibited Owner and shall acquire no right or interest (or, in the case of a Non-Transfer Event, the Person holding record title of the shares of Equity Stock with respect to which such Non-Transfer Event occurred shall cease to own any right or interest) in such number of shares of Equity Stock, the ownership of which by such purported transferee or record holder would (A) result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, (B) cause the Corporation to Constructively Own 10% or more of the ownership interests in a tenant of the Corporation's or a Subsidiary's real property within the meaning of Section 856(d)(2)(B) of the Code or (c) result in the shares of Equity Stock being beneficially owned by fewer than 100 persons within the meaning of Section 856(a)(5) of the Code, (y) such number of shares of Equity Stock (rounded up to the nearest whole share) shall be automatically converted into an equal number of shares of Excess Stock and transferred to a Trust in accordance with Section 7.4.4 of this Article VII and (z) the Prohibited Owner shall submit such number of shares of Equity Stock to the Corporation, accompanied by all requisite and duly executed assignments of transfer thereof, for registration in the name of the Trustee of the Trust. If the shares of Equity Stock that are converted into Excess Stock are not shares of Common Stock, then the Excess Stock into which they are converted shall be deemed to be a separate series of Excess Stock with a designation and title corresponding to the designation and title of the shares that have been converted into the Excess Stock. Such conversion into Excess Stock and transfer to a Trust shall be effective as of the close of trading on the Trading
Day prior to the date of the purported Transfer or Non-Transfer Event, as the case may be, even though the certificates representing the shares of Equity Stock so converted may be submitted to the Corporation at a later date.
(c) Upon the occurrence of such a conversion of shares of Equity Stock into an equal number of shares of Excess Stock, such shares of Equity Stock shall be automatically retired and canceled, without any action required by the Board of Directors of the Corporation, and shall thereupon be restored to the status of authorized but unissued shares of the particular class or series of Equity Stock from which such Excess Stock was converted and may be reissued by the Corporation as that particular class or series of Equity Stock.
7.4.2 Remedies for Breach. If the Corporation, or its designees, shall at any time determine in good faith that a Transfer has taken place in violation of Section 9.2 of Article IX or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any shares of Equity Stock in violation of Section 9.2 of Article IX, the Corporation shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or acquisition, including, but not limited to, refusing to give effect to such Transfer on the stock transfer books of the Corporation or instituting proceedings to enjoin such Transfer or acquisition, but the failure to take any such action shall not affect the automatic conversion of shares of Equity Stock into Excess Stock and their transfer to a Trust in accordance with Section 7.4.4.
7.4.3 Notice of Restricted Transfer. Any Person who
acquires or attempts to acquire shares of Equity Stock in violation of
Section 9.2 of Article IX, or any Person who owns shares of Equity
Stock that were converted into shares of Excess Stock and transferred
to a Trust pursuant to Sections 7.4.1 and 7.4.4 of this Article VII,
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 Non-Transfer Event, as the case may be, on the
Corporation's status as a REIT.
7.4.4 Ownership in Trust. Upon any purported Transfer or Non-Transfer Event that results in Excess Stock pursuant to Section 7.4.1 of this Article VII, (i) the Corporation shall create, or cause to be created, a Trust, and shall designate a Trustee and name a Beneficiary thereof and (ii) such Excess Stock shall be automatically transferred to such Trust to be held for the exclusive benefit of the Beneficiary. Any conversion of shares of Equity Stock into shares of Excess Stock and transfer to a Trust shall be effective as of the close of trading on the Trading Day prior to the date of the purported Transfer or Non-Transfer Event that results in the conversion. Shares of Excess Stock so held in trust shall remain issued and outstanding shares of Stock of the Corporation.
7.4.5 Dividend Rights. Each share of Excess Stock shall be entitled to the
same dividends and distributions (as to both timing and amount) as may
be authorized by the Board of Directors with respect to shares of the
same class and series as the shares of Equity Stock that were
converted into such Excess Stock. The Trustee, as record holder of
the shares of Excess Stock, shall be entitled to receive all dividends
and distributions and shall hold all such dividends or distributions
in trust for the benefit of the Beneficiary. The Prohibited Owner
with respect to such shares of Excess Stock shall repay to the Trust
the amount of any dividends or distributions received by it that are
(i) attributable to any shares of Equity Stock that have been
converted into shares of Excess Stock and (ii) dividends or
distributions which were distributed by the Corporation to
stockholders of record on a record date which was on or after the date
that such shares were converted into shares of Excess Stock. The
Corporation shall take all measures that it determines reasonably
necessary to recover the amount of any such dividend or distribution
paid to a Prohibited Owner, including, if necessary, withholding any
portion of future dividends or distributions payable on shares of
Equity Stock Beneficially Owned by the Person who, but for the
provisions of Articles VII and IX, would Constructively Own or
Beneficially Own the shares of Equity Stock that were converted into
shares of Excess Stock; and, as soon as reasonably practicable
following the Corporation's receipt or withholding thereof, shall pay
over to the Trust for the benefit of the Beneficiary the dividends so
received or withheld, as the case may be.
7.4.6 Rights upon Liquidation. In the event of any voluntary or involuntary liquidation of, or winding up of, or any distribution of the assets of, the Corporation, each holder of shares of Excess Stock shall be entitled to receive, ratably with each other holder of shares of Equity Stock of the same class and series as the shares which were converted into such Excess Stock and other holders of such Excess Stock, that portion of the assets of the Corporation that is available for distribution to the holders of shares of such class and series of Equity Stock and such Excess Stock. The Trust shall distribute to the Prohibited Owner the amounts received upon such liquidation, dissolution, or winding up, or distribution; provided, however, that the Prohibited Owner shall not be entitled to receive amounts in excess of, in the case of a purported Transfer in which the Prohibited Owner gave value for shares of Equity Stock and which Transfer resulted in the conversion of the shares into shares of Excess Stock, the product of (x) the price per share, if any, such Prohibited Owner paid for the shares of Equity Stock and (y) the number of shares of Equity Stock which were so converted into Excess Stock, and, in the case of a Non-Transfer Event or purported Transfer in which the Prohibited Owner did not give value for such shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or purported Transfer, as the case may be, resulted in the conversion of the shares into shares of Excess Stock, the product of (x) the price per share equal to the Market Price on the date of such Non-Transfer Event or purported Transfer and (y) the number of shares of Equity Stock which were so converted into Excess Stock. Any remaining amount in such Trust shall be distributed to the Beneficiary.
7.4.7 Voting Rights. Each share of Excess Stock shall entitle the holder to no
voting rights other than those voting rights which must accompany a class of Stock under Maryland law. The Trustee, as record holder of the Excess Stock, shall be entitled to vote all shares of Excess Stock in the event voting rights are mandated by Maryland law. Any vote by a Prohibited Owner as a purported holder of shares of Equity Stock prior to the discovery by the Corporation that such shares of Equity Stock have been converted into shares of Excess Stock shall, subject to applicable law, (i) be rescinded and shall be void ab initio with respect to such shares of Excess Stock and (ii) be recast in accordance with the desires of the Trustee acting for the benefit of the Beneficiary; provided, however, that if the Corporation has already taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast such vote.
7.4.8 Designation of Permitted Transferee.
(a) As soon as practicable after the Trustee acquires Excess Stock, but in an orderly fashion so as not to materially adversely affect the trading price of Common Stock, the Trustee shall designate one or more Persons as Permitted Transferees and sell to such Permitted Transferees any shares of Excess Stock held by the Trustee; provided, however, that (i) any Permitted Transferee so designated purchases for valuable consideration (whether in a public or private sale) the shares of Excess Stock and (ii) any Permitted Transferee so designated may acquire such shares of Excess Stock without violating any of the restrictions set forth in Section 9.2 of Article IX and without such acquisition resulting in the conversion of the shares of Equity Stock so acquired into shares of Excess Stock and the transfer of such shares to a Trust pursuant to Sections 7.4.1 and 7.4.4 of this Article VII. The Trustee shall have the exclusive and absolute right to designate Permitted Transferees of any and all shares of Excess Stock. Prior to any transfer by the Trustee of shares of Excess Stock to a Permitted Transferee, the Trustee shall give not less than five Trading Days' prior written notice to the Corporation of such intended transfer and the Corporation must have waived in writing its purchase rights, if any, under Section 7.4.10 of this Article VII.
(b) Subject to Section 7.4.8, upon the designation by the
Trustee of a Permitted Transferee in accordance with the provisions of this
Section 7.4.8, the Trustee shall cause to be transferred to the Permitted
Transferee shares of Excess Stock acquired by the Trustee pursuant to Section
7.4.4 of this Article VII. Upon such transfer of shares of Excess Stock to the
Permitted Transferee, such shares of Excess Stock shall be automatically
converted into an equal number of shares of Equity Stock of the same class and
series which was converted into such Excess Stock. Upon the occurrence of such
a conversion of shares of Excess Stock into an equal number of shares of Equity
Stock, such shares of Excess Stock shall be automatically retired and canceled,
without any action required by the Board of Directors of the Corporation, and
shall thereupon be restored to the status of authorized but unissued shares of
Excess Stock and may be reissued by the Corporation as Excess Stock. The
Trustee shall (i) cause to be recorded on the stock transfer books of the
Corporation that the Permitted Transferee is the holder of record of such
number of shares of Equity Stock, and (ii) distribute to the Beneficiary any
and all amounts held with respect to such shares of Excess Stock after making
payment to the Prohibited Owner pursuant to Section 7.4.9 of this Article VII.
(c) If the Transfer of shares of Excess Stock to a purported Permitted Transferee would or does violate any of the transfer restrictions set forth in Section 9.2 of Article IX, such Transfer shall be void ab initio as to that number of shares of Excess Stock that cause the violation of any such restriction when such shares are converted into shares of Equity Stock (as described in clause (b) above) and the purported Permitted Transferee shall be deemed to be a Prohibited Owner and shall acquire no rights in such shares of Excess Stock or Equity Stock. Such shares of Equity Stock shall be automatically re-converted into Excess Stock and transferred to the Trust from which they were originally Transferred. Such conversion and transfer to the Trust shall be effective as of the close of trading on the Trading Day prior to the date of the Transfer to the purported Permitted Transferee and the provisions of this Article VII shall apply to such shares, including, without limitation, the provisions of Sections 7.4.8 through 7.4.10 with respect to any future Transfer of such shares by the Trust.
7.4.9 Compensation to Record Holder of Shares of Equity
Stock That Are Converted into Shares of Excess Stock. Any Prohibited
Owner shall be entitled (following acquisition of the shares of Excess
Stock and subsequent designation of and sale of Excess Stock to a
Permitted Transferee in accordance with Section 7.4.8 of this Article
VII or following the purchase of such shares in accordance with
Section 7.4.10 of this Article VII) to receive from the Trustee
following the sale or other disposition of such shares of Excess Stock
the lesser of (i) (a) in the case of a purported Transfer in which the
Prohibited Owner gave value for shares of Equity Stock and which
Transfer resulted in the conversion of such shares into shares of
Excess Stock, the product of (x) the price per share, if any, such
Prohibited Owner paid for the shares of Equity Stock and (y) the
number of shares of Equity Stock which were so converted into Excess
Stock and (b) in the case of a Non-Transfer Event or purported
Transfer in which the Prohibited Owner did not give value for such
shares (e.g., if the shares were received through a gift or devise)
and which Non-Transfer Event or purported Transfer, as the case may
be, resulted in the conversion of such shares into shares of Excess
Stock, the product of (x) the price per share equal to the Market
Price on the date of such Non-Transfer Event or purported Transfer and
(y) the number of shares of Equity Stock which were so converted into
Excess Stock or (ii) the proceeds received by the Trustee from the
sale or other disposition of such shares of Excess Stock in accordance
with Section 7.4.8 or Section 7.4.10 of this Article VII. Any amounts
received by the Trustee in respect of such shares of Excess Stock and
in excess of such amounts to be paid to the Prohibited Owner pursuant
to this Section 7.4.9 shall be distributed to the Beneficiary in
accordance with the provisions of Section 7.4.8 of this Article VII.
Each Beneficiary and Prohibited Owner shall be deemed to have waived
any and all claims that it may have against the Trustee and the Trust
arising out of the disposition of shares of Excess Stock, except for
claims arising out of the gross negligence or willful misconduct of,
or any failure to make payments in accordance with this Section 7.4 of
this Article VII, by such Trustee.
7.4.10 Purchase Right in Excess Stock. Except for shares of Excess Stock which may result from the conversion of shares of Series A Preferred Stock and Series
B Preferred Stock which are outstanding as of the acceptance for
record of these Articles, which shares shall not be subject to this
Section 7.4.10, shares of Excess Stock 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 created such shares of Excess Stock (or, in the case
of a Non-Transfer Event or Transfer in which the Prohibited Owner did
not give value for the shares (e.g., if the shares were received
through a gift or devise), the Market Price on the date of such
Non-Transfer Event or Transfer in which the Prohibited Owner did not
give value for the shares) or (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
following the later of (a) the date of the Non-Transfer Event or
purported Transfer which results in such shares of Excess Stock or (b)
the date the Board of Directors first determines that a Transfer or
Non-Transfer Event resulting in shares of Excess Stock has occurred,
if the Corporation does not receive a notice of such Transfer or
Non-Transfer Event pursuant to Section 7.4.3 of this Article VII.
7.5 Classification of Stock. The Board of Directors may classify or reclassify any unissued shares of Stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption for each class or series, including, but not limited to, the reclassification of unissued shares of Common Stock to shares of Preferred Stock or unissued shares of Preferred Stock to shares of Common Stock or the issuance of any rights plan or similar plan.
7.6 Issuance of Stock. The Board of Directors may authorize the issuance from time to time of shares of Stock of any class or series, whether now or hereafter authorized, or securities or rights convertible into shares of Stock, for such consideration as the Board of Directors may deem advisable (or without consideration in the case of a share split or dividend), subject to such restrictions or limitations, if any, as may be set forth in these Articles or the Bylaws of the Corporation.
7.7 Dividends or Distributions. The Directors may from time to time authorize and declare and pay to stockholders such dividends or distributions in cash, property or other assets of the Corporation or in securities of the Corporation or from any other source as the Directors in their discretion shall determine.
7.8 Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Article VII, the Board of Directors shall have the power to determine the application of the provisions of this Article VII with respect to any situation based on the facts known to it.
7.9 Legend. Except as otherwise determined by the Board of Directors, each certificate for shares of Equity Stock shall bear substantially the following legend:
"The shares of Avalon Bay Communities, Inc. (the
"Corporation") represented by this certificate are subject to restrictions set forth in the Corporation's charter, as the same may be amended from time to time, which prohibit in general (a) any Person (other than a Look-Through Entity) from Beneficially Owning shares of Equity Stock in excess of the Ownership Limit, (b) any Look-Through Entity from Beneficially Owning shares of Equity Stock in excess of the Look-Through Ownership Limit and (c) any Person from acquiring or maintaining any ownership interest in the stock of the Corporation that is inconsistent with (i) the requirements of the Internal Revenue Code of 1986, as amended, pertaining to real estate investment trusts or (ii) the charter of the Corporation, and the holder of this certificate by his, her or its acceptance hereof consents to be bound by such restrictions. Capitalized terms used in this paragraph and not defined herein are defined in the Corporation's charter, as the same may be amended from time to time.
The Corporation will furnish without charge, to each stockholder who so requests, a copy of the relevant provisions of the charter and the bylaws, each as amended, of the Corporation, a copy of the provisions setting forth the designations, preferences, privileges and rights of each class of stock or series thereof that the Corporation is authorized to issue and the qualifications, limitations and restrictions of such preferences and/or rights. Any such request may be addressed to the Secretary of the Corporation or to the transfer agent named on the face hereof."
7.10 Severability. Each provision of this Article VII shall be severable and an adverse determination as to any such provision shall in no way affect the validity of any other provision.
7.11 Articles and Bylaws. All persons who shall acquire Stock in the Corporation shall acquire the same subject to the provisions of these Articles and the Bylaws.
ARTICLE VIII
LIMITATION ON PREEMPTIVE RIGHTS
No holder of any Stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preferential or preemptive rights to subscribe for or purchase any Stock or any other securities of the Corporation other than such rights, if any, as the Board of Directors, in its sole discretion, may fix by articles supplementary, by contract or otherwise; and any Stock or other securities which the Board of Directors may determine to offer for subscription may, within the Board of Directors' sole discretion, be offered to the holders of any class, series or type of Stock or other securities at the time outstanding to the
exclusion of holders of any or all other classes, series or types of Stock or other securities at the time outstanding.
ARTICLE IX
LIMITATIONS ON TRANSFER AND OWNERSHIP OF EQUITY STOCK
9.1 Definitions. For purposes of this Article IX, the following terms shall have the meanings set forth below:
"Beneficial Ownership," when used with respect to ownership of shares of Equity Stock by any Person, shall mean all shares of Equity Stock which are (i) directly owned by such Person, (ii) indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, or (iii) beneficially owned by such Person pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended; provided, however, that in determining the number of shares Beneficially Owned by a Person or group, no share shall be counted more than once although applicable to two or more of clauses (i), (ii) and (iii) of this definition or (in the case of a group) although Beneficially Owned by more than one Person in such group. (If a Person Beneficially Owns shares of Equity Stock that are not actually outstanding (e.g., shares issuable upon the exercise of an option or convertible security) ("Option Shares"), then, whenever these Articles require a determination of the percentage of outstanding shares of a class of Equity Stock Beneficially Owned by that Person, the Option Shares Beneficially Owned by that Person shall also be deemed to be outstanding.)
"Beneficiary" shall mean, with respect to any Trust, one or more organizations described in each of Section 170(b)(1)(A) (other than clauses (vii) and (viii) thereof) and Section 170(c)(2) of the Code that are named by the Corporation as the beneficiary or beneficiaries of such Trust, in accordance with the provisions of Section 7.4.4 of Article VII.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Constructive Ownership" shall mean ownership of shares of Equity Stock by a Person who is or would be treated as a direct or indirect owner of such shares of Equity Stock through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive Owner," "Constructively Owns" and "Constructively Owned" shall have correlative meanings.
"Equity Stock" shall mean a particular class (other than Excess Stock) or series of stock of the Corporation. The use of the term "Equity Stock" or any term defined by reference to the term "Equity Stock" shall refer to the particular class or series of stock which is appropriate under the context.
"Look-Through Entity" shall mean a Person that is either (i) a trust described in Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code as modified by Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, with respect to a class or series of Equity Stock, 15% of the number of outstanding shares of such Equity Stock.
"Market Price" of Equity Stock on any date shall mean the average of the Closing Price for shares of such Equity Stock for the five consecutive Trading Days ending on such date. The "Closing Price" on any date shall mean (A) where there exists a public market for the Corporation's Equity Stock, 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 New York Stock Exchange or, if the shares of Equity Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Equity Stock are listed or admitted to trading or, if the shares of Equity Stock are not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq Stock Market, Inc. or, if such system is no longer in use, the principal other automated quotation system that may then be in use or (B) if no public market for the Equity Stock exists, the Closing Price will be determined by a single, independent appraiser selected by a committee composed of Independent Directors which appraiser shall appraise the Market Price for such Equity Stock within such guidelines as shall be determined by the committee of Independent Directors.
"Non-Transfer Event" shall mean an event other than a purported Transfer that would cause (a) any Person (other than a Look-Through Entity) to Beneficially Own shares of Equity Stock in excess of the Ownership Limit or (b) any Look-Through Entity to Beneficially Own shares of Equity Stock in excess of the Look-Through Ownership Limit. Non-Transfer Events include but are not limited to (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of shares (or of Beneficial Ownership of shares) of Equity Stock or (ii) the sale, transfer, assignment or other disposition of interests in any Person or of any securities or rights convertible into or exchangeable for shares of Equity Stock or for interests in any Person that results in changes in Beneficial Ownership of shares of Equity Stock.
"Ownership Limit" shall mean, with respect to a class or series of Equity Stock, 9.8% of the number of outstanding shares of such Equity Stock.
"Permitted Transferee" shall mean any Person designated as a Permitted Transferee in accordance with the provisions of Section 7.4.8 of Article VII.
"Person" shall mean (a) an individual or any corporation, partnership, estate,
trust, association, private foundation, joint stock company or any other entity and (b) a "group" as that term is used for purposes of Section 13(d)(3) of the Exchange Act; but shall not include an underwriter that participates in a public offering of Equity Stock for a period of 90 days following purchase by such underwriter of such Equity Stock.
"Prohibited Owner" shall mean, with respect to any purported Transfer or Non-Transfer Event, any Person who is prevented from becoming or remaining the owner of record title to shares of Equity Stock by the provisions of Section 7.4.1 of Article VII.
"Restriction Termination Date" shall mean the first day on which the Board of Directors, in accordance with Article VI hereof, determines that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify under the Code as a REIT.
"Trading Day" shall mean a day on which the principal national securities exchange on which any of the shares of Equity Stock are listed or admitted to trading is open for the transaction of business or, if none of the shares of Equity Stock are listed or admitted to trading on any national securities exchange, 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" (as a noun) shall mean any sale, transfer, gift, assignment, devise or other disposition of shares (or of Beneficial Ownership of shares) of Equity Stock, whether voluntary or involuntary, whether of record, constructively or beneficially and whether by operation of law or otherwise. "Transfer" (as a verb) shall have the correlative meaning.
"Trust" shall mean any separate trust created and administered in accordance with the terms of Section 7.4 of Article VII, for the exclusive benefit of any Beneficiary.
"Trustee" shall mean any Person or entity, unaffiliated with both the Corporation and any Prohibited Owner (and, if different than the Prohibited Owner, the Person who would have had Beneficial Ownership of the Shares that would have been owned of record by the Prohibited Owner), designated by the Corporation to act as trustee of any Trust, or any successor trustee thereof.
9.2 Restriction on Ownership and Transfer.
(a) (I) Except as provided in Section 9.4 of this Article IX, until the Restriction Termination Date, (i) no Person (other than a Look-Through Entity) shall Beneficially Own shares of Equity Stock in excess of the Ownership Limit and (ii) no Look-Through Entity shall Beneficially Own shares of Equity Stock in excess of the Look-Through Ownership Limit.
(II) Except as provided in Section 9.4 of this Article IX, until the Restriction Termination Date, any purported Transfer (whether or not the result of a transaction entered into through the facilities of the New York Stock Exchange or any other national securities
exchange or the Nasdaq Stock Market, Inc. or any other automated quotation system) that, if effective, would result in any Person (other than a Look-Through Entity) Beneficially Owning shares of Equity Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer of that number of shares of Equity Stock which would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Equity Stock.
(III) Except as provided in Section 9.4 of this Article IX, until the Restriction Termination Date, any purported Transfer (whether or not the result of a transaction entered into through the facilities of the New York Stock Exchange or any other national securities exchange or the Nasdaq Stock Market, Inc. or any other automated quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Equity Stock in excess of the Look-Through Ownership Limit shall be void ab initio as to the Transfer of that number of shares of Equity Stock which would be otherwise Beneficially Owned by such Look-Through Ownership Entity in excess of the Look-Through Ownership Limit, and the intended transferee Look-Through Entity shall acquire no rights in such shares of Equity Stock.
(b) Until the Restriction Termination Date, any purported Transfer (whether or not the result of a transaction entered into through the facilities of the New York Stock Exchange or any other national securities exchange or the Nasdaq Stock Market, Inc. or any other automated quotation system) of shares of Equity Stock that, if effective, would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of that number of shares of Equity Stock that would cause the Corporation to be "closely held" within the meaning of Section 856(h) of the Code, and the intended transferee shall acquire no rights in such shares of Equity Stock.
(c) Until the Restriction Termination Date, any purported
Transfer (whether or not the result of a transaction entered into through the
facilities of the New York Stock Exchange or any other national securities
exchange or the Nasdaq Stock Market, Inc. or any other automated quotation
system) of shares of Equity Stock that, if effective, would cause the
Corporation to Constructively Own 10% or more of the ownership interests in a
tenant of the real property of the Corporation or any direct or indirect
subsidiary (whether a corporation, partnership, limited liability company or
other entity) of the Corporation (a "Subsidiary"), within the meaning of
Section 856(d)(2)(B) of the Code, shall be void ab initio as to the Transfer of
that number of shares of Equity Stock that would cause the Corporation to
Constructively Own 10% or more of the ownership interests in a tenant of the
real property of the Corporation or a Subsidiary within the meaning of Section
856(d)(2)(B) of the Code, and the intended transferee shall acquire no rights
in such shares of Equity Stock.
(d) Until the Restriction Termination Date, any purported
Transfer (whether or not the result of a transaction entered into through the
facilities of the New York Stock Exchange or any other national securities
exchange or the Nasdaq Stock Market, Inc. or any other automated quotation
system) that, if effective, would result in shares of Equity Stock being
beneficially owned by fewer than 100 persons within the meaning of Section
856(a)(5) of
the Code shall be void ab initio and the intended transferee shall acquire no rights in such shares of Equity Stock.
9.3 Owners Required to Provide Information. Until the Restriction Termination Date:
(a) Every Beneficial Owner of more than 5%, or such lower percentages as are then required pursuant to regulations under the Code, of the outstanding shares of any class or series of Equity Stock of the Corporation as of any dividend record date on the Corporation's Equity Stock shall, within 30 days after January 1 of each year, provide to the Corporation a written statement or affidavit stating the name and address of such Beneficial Owner, the number of shares of Equity Stock Beneficially Owned by such Beneficial Owner as of each such dividend record date, and a description of how such shares are held. Each such Beneficial Owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation's status as a REIT and to ensure compliance with the Ownership Limit.
(b) Each Person who is a Beneficial Owner of shares of Equity Stock and each Person (including the stockholder of record) who is holding shares of Equity Stock for a Beneficial Owner shall provide to the Corporation a written statement or affidavit stating such information as the Corporation may request in order to determine the Corporation's status as a REIT and to ensure compliance with the Ownership Limit.
9.4. Exception. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of counsel or other evidence or undertakings acceptable to it, may, in its sole discretion, waive the application of the Ownership Limit or the Look-Through Ownership Limit to a Person subject, as the case may be, to any such limit, provided that (A) the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that such Person's Beneficial Ownership or Constructive Ownership of shares of Equity Stock will now and in the future (i) not result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, (ii) not cause the Corporation to Constructively Own 10% or more of the ownership interests of a tenant of the Corporation or a Subsidiary within the meaning of Section 856(d)(2)(B) of the Code and to violate the 95% gross income test of Section 856(c)(2) of the Code, and (iii) not result in the shares of Equity Stock of the Corporation being beneficially owned by fewer than 100 persons within the meaning of Section 856(a)(5) of the Code, and (B) such Person agrees in writing that any violation or attempted violation of (x) such other limitation as the Board of Directors may establish at the time of such waiver with respect to such Person or (y) such other restrictions and conditions as the Board of Directors may in its sole discretion impose at the time of such waiver with respect to such Person, will result, as of the time of such violation even if discovered after such violation, in the conversion of such shares in excess of the original limit applicable to such Person into shares of Excess Stock pursuant to Section 7.4.1 of Article VII.
9.5 New York Stock Exchange Transactions. Notwithstanding any provision contained herein to the contrary, nothing in these Articles shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange or any other national securities exchange or the Nasdaq Stock Market, Inc. or any other automated quotation system. In no event shall the existence or application of the preceding sentence have the effect of deterring or preventing the conversion of Equity Stock into Excess Stock as contemplated herein.
9.6 Ambiguity. In the case of an ambiguity in the application of
any of the provisions of this Article IX, including any definition contained in
Section 9.1 of this Article IX, the Board of Directors shall have the power to
determine the application of the provisions of this Article IX with respect to
any situation based on the facts known to it.
9.7 Remedies Not Limited. Except as set forth in Section 9.5 of this Article IX, nothing contained in this Article IX or Article VII shall limit the authority of the Corporation to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders by preservation of the Corporation's status as a REIT and to ensure compliance with the Ownership Limit or the Look-Through Ownership Limit.
ARTICLE X
RIGHTS AND POWERS OF CORPORATION,
BOARD OF DIRECTORS AND OFFICERS
In carrying on its business, or for the purpose of attaining or furthering any of its objects, the Corporation shall have all of the rights, powers and privileges granted to corporations by the laws of the State of Maryland, as well as the power to do any and all acts and things that a natural person or partnership could do as now or hereafter authorized by law, either alone or in partnership or conjunction with others. In furtherance and not in limitation of the powers conferred by statute, the powers of the Corporation and of the Directors and stockholders shall include the following:
10.1 Conflicts of Interest. Any Director or officer individually, or any firm of which any Director or officer may be a member, or any corporation or association of which any Director or officer may be a director or officer or in which any Director or officer may be interested as the holder of any amount of its Stock or otherwise, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation, and, in the absence of fraud, no contract or other transaction shall be thereby affected or invalidated; provided, however, that (a) such fact shall have been disclosed or shall have been known to the Board of Directors or the committee thereof that approved such contract or transaction and such contract or transaction shall have been approved or ratified by the affirmative vote of a majority of the disinterested Directors, or (b) such fact shall have been disclosed or shall have been known to the stockholders entitled to vote, and such contract or transaction shall have been approved or ratified by a majority of the votes cast by the stockholders entitled to vote, other than the votes of shares owned of record or beneficially by the interested Director or
corporation, firm or other entity, or (c) the contract or transaction is fair and reasonable to the Corporation. Any Director of the Corporation who is also a director or officer of or interested in such other corporation or association, or who, or the firm of which he is a member, is so interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract or transaction, with like force and effect as if he were not such director or officer of such other corporation or association or were not so interested or were not a member of a firm so interested.
10.2 Amendment of Articles. The Corporation reserves the right, from time to time, to make any amendment of its Articles, now or hereafter authorized by law, including any amendment which alters the contract rights, as expressly set forth in its Articles, of any outstanding Stock.
No amendment or repeal of these Articles shall be made unless the same is first approved by the Board of Directors pursuant to a resolution adopted by the Board of Directors in accordance with the MGCL, and, except as otherwise provided by law, thereafter approved by the stockholders.
Whenever any vote of the holders of voting stock is required to amend or repeal any provision of these Articles, then in addition to any other vote of the holders of voting stock that is required by these Articles, the affirmative vote of the holders of a majority of the outstanding shares of Stock of the Corporation entitled to vote on such amendment or repeal, voting together as a single class, and the affirmative vote of the holders of a majority of the outstanding shares of each class entitled to vote thereon as a class, shall be required to amend or repeal any provision of these Articles; provided, however, that the affirmative vote of the holders of not less than two-thirds of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class, and the affirmative vote of the holders of not less than two-thirds of the outstanding shares of each class entitled to vote thereon as a class, shall be required to amend or repeal any of the provisions of Sections 6.4, 6.5 or 6.6 of Article VI, Article X or Article XII of these Articles.
ARTICLE XI
INDEMNIFICATION
The Corporation (which for the purpose of this Article XI shall include predecessor entities of the Corporation as set forth in Section 2-418 of the MGCL) shall have the power to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former Director or officer of the Corporation or (b) any individual who, while a Director of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former
Director or officer of the Corporation. The Corporation shall have the power, with the approval of the Board of Directors, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation.
ARTICLE XII
LIMITATION OF LIABILITY
To the fullest extent permitted under the MGCL as in effect on the date of filing these Articles or as the MGCL is thereafter amended from time to time, no Director or officer shall be liable to the Corporation or its stockholders for money damages. Neither the amendment or the repeal of this Article, nor the adoption of any other provision in the Corporation's Articles inconsistent with this Article, shall eliminate or reduce the protection afforded by this Article to a Director or officer of the Corporation with respect to any matter which occurred, or any cause of action, suit or claim which but for this Article would have accrued or arisen, prior to such amendment, repeal or adoption.
ARTICLE XIII
MISCELLANEOUS
13.1 Provisions in Conflict with Law or Regulations.
(a) The provisions of these Articles are severable, and if the Directors shall determine that any one or more of such provisions are in conflict with the REIT provisions of the Code, or other applicable federal or state laws, the conflicting provisions shall be deemed never to have constituted a part of these Articles, even without any amendment of these Articles pursuant to Section 10.2 hereof; provided, however, that such determination by the Directors shall not affect or impair any of the remaining provisions of these Articles or render invalid or improper any action taken or omitted prior to such determination. No Director shall be liable for making or failing to make such a determination.
(b) If any provision of these Articles or any application of such provision shall be held invalid or unenforceable by any federal or state court having jurisdiction, such holding shall not in any manner affect or render invalid or unenforceable such provision in any other jurisdiction, and the validity of the remaining provisions of these Articles shall not be affected. Other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.
ARTICLE XIV
DESIGNATED SERIES OF PREFERRED STOCK
14.1 Series A Preferred Stock. The Board of Directors has duly
divided and classified 2,308,800 shares of the Preferred Stock of the
Corporation into a series designated Series A Preferred Stock and has provided
for the issuance of such series. Subject in all cases to the provisions of
Section 7.4 of Article VII and Article IX of the Articles with respect to
Excess Stock, the following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Series A Preferred
Stock of the Corporation:
14.1.1 Designation and Amount. The designation of the
Preferred Stock described in Section 14.1 hereof shall
be "Series A Preferred Stock (par value $.01 per share)"
(hereinafter "Series A Preferred Stock"). The number of
authorized shares of Series A Preferred Stock is 2,308,800.
The Series A Preferred Stock shall rank (a) senior to the
Corporation's Series E Preferred Stock (as defined in Section
14.5 hereof) and Common Stock, (b) on a pari passu basis with
the Corporation's Series B Preferred Stock (as defined in
Section 14.2 hereof), and (c) junior to the Corporation's
Series C Preferred Stock (as defined in Section 14.3 hereof),
Series D Preferred Stock (as defined in Section 14.4 hereof),
Series F Preferred Stock (as defined in Section 14.6 hereof)
and Series G Preferred Stock (as defined in Section 14.7
hereof), with respect to the payment of dividends.
14.1.2 Dividend Rights.
(a) The holders of record of outstanding shares of Series
A Preferred Stock shall be entitled to receive, when and as authorized by the
Board of Directors, out of funds legally available therefor, cash dividends
which are (i) cumulative, (ii) preferential to the dividends paid on the
Corporation's Series E Preferred Stock and Common Stock, on a pari passu basis
to the dividends paid on the Corporation's Series B Preferred Stock, and junior
to the dividends paid on the Corporation's Series C Preferred Stock, Series D
Preferred Stock, Series F Preferred Stock and Series G Preferred Stock, and
(iii) payable at an annual rate equal to the Series A Dividend Amount, and no
more, on the fifteenth day of each February, May, August and November following
the date of original issuance of the Series A Preferred Stock (the "Series A
Original Issue Date"). Each calendar quarter immediately preceding the
fifteenth day of February, May, August and November (or if the Series A
Original Issue Date is not on the first day of a calendar quarter, the period
beginning on the date of issuance and ending on the last day of the calendar
quarter of issuance) is referred to hereinafter as a "Series A Dividend
Period." The initial per share Series A Dividend Amount per annum shall be
equal to $1.6068. The amount of dividends payable for each full Series A
Dividend Period for the Series A Preferred Stock shall be computed by dividing
the Series A Dividend Amount by four. The amount of dividends on the Series A
Preferred Stock payable for the initial Series A Dividend Period, or any other
period shorter or longer than a full Series A Dividend Period, shall be
computed ratably on the basis of the actual number of days in such Series A
Dividend Period. In the event of any change in the quarterly cash dividend per
share applicable to the Common Stock, the quarterly cash dividend per share on
the Series A Preferred Stock shall be adjusted for the same dividend period by
an amount computed by multiplying the amount of the change in the Common Stock
dividend times the Series A Conversion Ratio (as defined in Section 14.1.4(a)).
(b) In the event the Corporation shall declare a distribution payable in (i) securities of other persons, (ii) evidences of indebtedness issued by the Corporation or other persons, (iii) assets (excluding cash dividends) or (iv) options or rights to purchase capital stock or evidences of indebtedness in the Corporation or other persons, then, in each such case for the purpose of this Section 14.1.2(b), the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series A Preferred Stock are or would be convertible (assuming such shares of Series A Preferred Stock were then convertible).
(c) The Corporation shall not (i) declare or pay or set apart for payment any dividends or distributions on any Stock ranking as to dividends junior to the Series A Preferred Stock (other than dividends paid in shares of such junior Stock) or (ii) make any purchase or redemption of, or any sinking fund payment for the purchase or redemption of, any Stock ranking as to dividends junior to the Series A Preferred Stock (other than a purchase or redemption made by issue or delivery of such junior Stock) unless all dividends payable on all outstanding shares of Series A Preferred Stock for all past Series A Dividend Periods shall have been paid in full or declared and a sufficient sum set apart for payment thereof, provided, however, that any moneys theretofore deposited in any sinking fund with respect to any Preferred Stock of the Corporation in compliance with the provisions of such sinking fund may thereafter be applied to the purchase or redemption of such Preferred Stock in accordance with the terms of such sinking fund.
(d) All dividends declared on shares of Series A Preferred Stock and any other class of Preferred Stock or series thereof ranking on a parity as to dividends with the Series A Preferred Stock shall be declared pro rata, so that the amounts of dividends declared per share on the Series A Preferred Stock for the Series A Dividend Period of the Series A Preferred Stock ending either on the same day or within the dividend period of such other Stock shall, in all cases, bear to each other the same ratio that accrued dividends per share on the shares of Series A Preferred Stock and such other Stock bear to each other.
14.1.3 Liquidation Rights.
(a) Subject to the prior rights of the Corporation's Series C Preferred Stock, Series D Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and any class or series of Stock the terms of which specifically provide that such Stock ranks senior to the Series A Preferred Stock, in the event of any liquidation, dissolution, or winding up of the Corporation, either voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive, on a pari passu basis with the holders of the Corporation's Series B Preferred Stock and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Stock by reason of their ownership of such Stock, an amount equal to all accrued but unpaid dividends for each share of Series A Preferred Stock then held by them. If
upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full amounts to which they are entitled under the preceding sentence, then, subject to any prior rights of any classes or series of Stock, the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably to the holders of the Series A Preferred Stock and the holders of any other shares of Stock on a parity for liquidation purposes with the Series A Preferred Stock in proportion to the aggregate amounts owed to each such holder.
(b) Subject to any prior rights of any other class or
series of Stock, after the payment or setting apart of payment to the holders
of Series A Preferred Stock of the full preferential amounts to which they
shall be entitled pursuant to Section 14.1.3(a) above, the holders of the
Series A Preferred Stock shall be treated pari passu with the holders of the
record of Common Stock, with each holder of record of Series A Preferred Stock
being entitled to receive in addition to the amounts payable pursuant to
Section 14.1.3(a) above, that amount which such holder would be entitled to
receive if such holder had converted all its Series A Preferred Stock into
Common Stock immediately prior to the liquidating distribution in question.
14.1.4 Conversion.
(a) Right to Convert. Beginning on the third anniversary of the Series A Original Issue Date, the holders of shares of Series A Preferred Stock shall have the right, at their option, to convert each such share, at any time and from time to time, into one (the "Series A Conversion Ratio," which shall be subject to adjustment as hereinafter provided) fully paid and nonassessable share of Common Stock; provided, however, that no holder of Series A Preferred Stock shall be entitled to convert shares of such Series A Preferred Stock into Common Stock pursuant to the foregoing provision, if, as a result of such conversion, such person would become the Beneficial Owner of more than 4.9% of the Corporation's outstanding Common Stock (the "4.9% Limitation"). As used in Section 14.1 and 14.2 hereof, Beneficial Owner shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934 (or any successor provision thereto). Notwithstanding the foregoing, such conversion right may be exercised at any time after the Series A Original Issue Date and irrespective of the 4.9% Limitation (and no such limit shall apply) if any of the following circumstances occurs:
(i) For any two consecutive fiscal quarters, the aggregate amount outstanding as of the end of the quarter under (1) all mortgage indebtedness of the Corporation and its consolidated entities and (2) unsecured indebtedness of the Corporation and its consolidated entities exceeds sixty-five percent (65%) of the amount arrived at by (A) taking the Corporation's consolidated gross revenues less property-related expenses, including real estate taxes, insurance, maintenance and utilities, but excluding depreciation, amortization, interest and corporate general and administrative expenses, for the quarter in question and the immediately preceding quarter, (B) multiplying the amount in clause (A) by two (2), and (C) dividing the resulting product in clause (B) by nine percent (9%) (all as such items of indebtedness, revenues and expenses are reported in consolidated financial statements contained in the Corporation's Forms 10-K and Forms 10-Q as filed with the Securities and Exchange Commission); or
(ii) Gilbert M. Meyer has ceased to be an executive officer of the Corporation, unless the holders of a majority of the shares of the Series A Preferred Stock then outstanding have voted on and approved a replacement for Mr. Meyer and the replacement remains an executive officer of the Corporation; or
(iii) If (A) the Corporation shall be party to, or shall have entered into an agreement for, any transaction (including, without limitation, a merger, consolidation, statutory share exchange or sale of all or substantially all of its assets (each of the foregoing a "Series A Transaction")), in each case as a result of which shares of Common Stock shall have been or will be converted into the right to receive stock, securities or other property (including cash or any combination thereof) or which has resulted or will result in the holders of Common Stock immediately prior to the Series A Transaction owning less than 50% of the Common Stock after the Series A Transaction, or (B) a "change of control" as defined in the next sentence occurs with respect to the Corporation. A change of control shall mean the acquisition (including by virtue of a merger, share exchange or other business combination) by one stockholder or a group of stockholders acting in concert of the power to elect a majority of the Corporation's Board of Directors. The Corporation shall notify the holders of Series A Preferred Stock promptly if any of the events listed in this Section 14.1.4(a)(iii) shall occur. Calculations set forth in Section 14.1.4(a)(i) shall be made without regard to unconsolidated indebtedness incurred as a joint venture partner, and the effect of any unconsolidated joint venture, including any income from such unconsolidated joint venture, shall be excluded for purposes of the calculation set forth in Section 14.1.4(a)(i).
(b) Mandatory Conversion. On the tenth anniversary of the Series A Original Issue Date (the "Series A Mandatory Conversion Date"), each issued and outstanding share of Series A Preferred Stock which has not been converted to Common Stock shall mandatorily convert to that number of fully paid and nonassessable shares of Common Stock equal to the Series A Conversion Ratio, as adjusted, regardless of the 4.9% Limitation. From and after the Series A Mandatory Conversion Date, certificates representing shares of Series A Preferred Stock shall be deemed to represent the shares of Common Stock into which they have been converted. Following the Series A Mandatory Conversion Date, the holder of certificates for Series A Preferred Stock may surrender those certificates at the office of any transfer agent for the Common Stock, or if there is no such transfer agent, at the principal offices of the Corporation, or at such other office as may be designated by the Corporation, accompanied by instructions from the holder as to the name(s) and address(es) in which such holder wishes the certificate(s) for the shares of Common Stock issuable upon such conversion to be issued. Promptly following surrender of certificates for Series A Preferred Stock after the Series A Mandatory Conversion Date, the Corporation shall issue and deliver at such office a certificate or certificates for the number of whole shares of Common Stock issuable upon mandatory conversion of the Series A Preferred Stock to the person(s) entitled to receive the same. For purposes of Sections 14.1.4(d) and 14.1.4(e) below, the Series A Mandatory Conversion Date shall constitute the Series A Conversion Date.
(c) Procedure for Conversion. In order to exercise its right to convert shares
of Series A Preferred Stock into Common Stock, the holder of shares of Series A Preferred Stock shall surrender the certificate(s) therefor, duly endorsed if the Corporation shall so require, or accompanied by appropriate instruments of transfer satisfactory to the Corporation, at the office of any transfer agent for the Series A Preferred Stock, or if there is no such transfer agent, at the principal offices of the Corporation, or at such other office as may be designated by the Corporation, together with written notice that such holder elects to convert such shares. Such notice shall also state the name(s) and address(es) in which such holder wishes the certificate(s) for the shares of Common Stock issuable upon conversion to be issued. As soon as practicable after a conversion, the Corporation shall issue and deliver at said office a certificate or certificates for the number of whole shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock duly surrendered for conversion, to the person(s) entitled to receive the same. Shares of Series A Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the date on which the certificates therefor and notice of intention to convert the same are duly received by the Corporation in accordance with the foregoing provisions, and the person(s) entitled to receive the Common Stock issuable upon such conversion shall be deemed for all purposes as record holder(s) of such Common Stock as of the close of business on such date (hereinafter, the "Series A Conversion Date").
(d) Fractional Shares. No fractional shares shall be issued upon conversion of the Series A Preferred Stock into Common Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. As to any final fraction of a share which the holder of one or more shares of Series A Preferred Stock would be entitled to receive upon exercise of his conversion right the Corporation shall pay a cash adjustment in an amount equal to the same fraction of the last sale price (or bid price if there were no sales) per share of Common Stock on the New York Stock Exchange on the business day which next precedes the Series A Conversion Date or, if such Common Stock is not then listed on the New York Stock Exchange, of the market price per share (as determined in a manner prescribed by the Board of Directors of the Corporation) at the close of business on the business day which next precedes the Series A Conversion Date.
(e) Payment of Adjusted Accrued Dividends Upon Conversion. On the next dividend payment date (or such later date as is permitted in this Section 14.1.4(e)) following any Series A Conversion Date hereunder, the Corporation shall pay in cash Series A Adjusted Accrued Dividends (as defined below) on shares of Series A Preferred Stock so converted. The holder shall be entitled to receive accrued and unpaid dividends accrued to and including the Series A Conversion Date on the shares of Series A Preferred Stock converted (assuming that such dividends accrue ratably each day that such shares are outstanding), less an amount equal to the pre-conversion portion of the dividends paid on the shares of Common Stock issued upon such conversion (the "Series A Conversion Stock"). (The record date for the Series A Conversion Stock which occurs after the Series A Conversion Date is hereinafter referred to as the "Series A Subsequent Record Date.") The pre-conversion portion of such Series A Conversion Stock dividend means that portion of such dividend as is attributable to the period that (i) begins on the day after the last Series A Conversion Stock dividend record date occurring before such Series A Subsequent Record Date and (ii) ends on such Series A Conversion Date, assuming that such dividends accrue ratably during the period. The term "Series A Adjusted
Accrued Dividends" means the amount arrived at through the application of the foregoing formula. Series A Adjusted Accrued Dividends shall not be less than zero. The formula for Series A Adjusted Accrued Dividends shall be applied to effectuate the Corporation's intent that the holder converting shares of Series A Preferred Stock to Series A Conversion Stock shall be entitled to receive dividends on such shares of Series A Preferred Stock up to and including the Series A Conversion Date and shall be entitled to the dividends on the shares of Series A Conversion Stock issued upon such conversion which are deemed to accrue beginning on the first day after the Series A Conversion Date, but shall not be entitled to dividends attributable to the same period for both the shares of Series A Preferred Stock converted and the shares of Series A Conversion Stock issued upon such conversion. The Corporation shall be entitled to withhold (to the extent consistent with the intent to avoid double dividends for overlapping portions of Series A Preferred and Series A Conversion Stock dividend periods) the payment of Series A Adjusted Accrued Dividends until the applicable Series A Subsequent Record Date, even though such date occurs after the applicable dividend payment date with respect to the Series A Preferred Stock, in which event the Corporation shall mail to each holder who converted Series A Preferred Stock a check for the Series A Adjusted Accrued Dividends thereon within five (5) business days after such Series A Subsequent Record Date. Series A Adjusted Accrued Dividends shall be accompanied by an explanation of how such Series A Adjusted Accrued Dividends have been calculated. Series A Adjusted Accrued Dividends shall not bear interest.
(f) Adjustments.
(i) In the event the Corporation shall at any time (i) pay a dividend or make a distribution to holders of Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares, the Series A Conversion Ratio shall be adjusted on the effective date of the dividend, distribution, subdivision or combination by multiplying the Series A Conversion Ratio by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such dividend, distribution, subdivision or combination and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such dividend, distribution, subdivision or combination.
(ii) Whenever the Series A Conversion Ratio shall be adjusted as herein provided, the Corporation shall cause to be mailed by first class mail, postage prepaid, as soon as practicable to each holder of record of shares of Series A Preferred Stock a notice stating that the Series A Conversion Ratio has been adjusted and setting forth the adjusted Series A Conversion Ratio, together with an explanation of the calculation of the same.
(iii) If the Corporation shall be party to any Series A Transaction in each case
as a result of which shares of Common Stock shall be converted into
the right to receive stock, securities or other property (including
cash or any combination thereof), the holder of each share of Series A
Preferred Stock shall have the right in connection with such Series A
Transaction to convert such share, pursuant to the optional conversion
provisions hereof, into the number and kind of shares of stock or
other securities and the amount and kind of property receivable upon
such Series A Transaction by a holder of the number of shares of
Common Stock issuable upon conversion of such share of Series A
Preferred Stock immediately prior to such Series A Transaction. The
Corporation shall not be party to any Series A Transaction unless the
terms of such Series A Transaction are consistent with the provisions
of this Section 14.1.4(f)(iii), and it shall not consent to or agree
to the occurrence of any Series A Transaction until the Corporation
has entered into an agreement with the successor or purchasing entity,
as the case may be, for the benefit of the holders of the Series A
Preferred Stock, thereby enabling the holders of the Series A
Preferred Stock to receive the benefits of this Section 14.1.4(f)(iii)
and the other provisions of the Articles. Without limiting the
generality of the foregoing, provision shall be made for adjustments
in the Series A Conversion Ratio which shall be as nearly equivalent
as may be practicable to the adjustments provided for in Section
14.1.4(f)(iii). The provisions of this Section 14.1.4(f)(iii) shall
similarly apply to successive Series A Transactions.
(iv) In the event that the Corporation shall propose to effect any Series A Transaction which would result in an adjustment under Section 14.1.4(f)(iii), the Corporation shall cause to be mailed to the holders of record of Series A Preferred Stock at least 20 days prior to the record date for such Series A Transaction a notice stating the date on which such Series A Transaction is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such Series A Transaction. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such Series A Transaction.
(g) Other.
(i) The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the maximum number of shares of Common Stock issuable upon the conversion of all shares of Series A Preferred Stock then outstanding, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series A Preferred Stock, the Corporation shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.
(ii) The Corporation shall pay any taxes that may be payable in respect of the issuance of shares of Common Stock upon conversion of shares of Series A Preferred
Stock, but the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer of shares of Series A Preferred Stock or any transfer involved in the issuance of shares of Common Stock in a name other than that in which the shares of Series A Preferred Stock so converted are registered, and the Corporation shall not be required to transfer any such shares of Series A Preferred Stock or to issue or deliver any such shares of Common Stock unless and until the person(s) requesting such transfer or issuance shall have paid to the Corporation the amount of any such taxes, or shall have established to the satisfaction of the Corporation that such taxes have been paid.
(iii) The Corporation will not, by amendment of the Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out of all the provisions of the Articles and in the taking of all such action as may be necessary or appropriate to protect the conversion rights of the holders of the Series A Preferred Stock against impairment.
(iv) Holders of Series A Preferred Stock shall be entitled
to receive copies of all communications by the Corporation to its
holders of Common Stock, concurrently with the distribution to such
shareholders.
14.1.5 Voting Rights. Except as indicated in this
Section 14.1.5, or except as otherwise from time to time
required by applicable law, the holders of shares of Series A
Preferred Stock shall not be entitled to vote on any matter on
which the holders of shares of Common Stock are entitled to
vote, except that the holders of a majority of the outstanding
shares of Series A Preferred Stock, voting as a separate
class, shall be required to vote on and approve any material
adverse change in the rights, preferences or privileges of the
Series A Preferred Stock. For purposes of the foregoing, the
creation of a new class of Stock having rights, preferences or
privileges senior to, in parity with or junior to the rights,
preferences or privileges of the Series A Preferred Stock
shall not be treated as a material adverse change in the
rights, preferences or privileges of the Series A Preferred
Stock, and the holders of Series A Preferred Stock shall not
have any right to vote on the creation of such new class of
Stock. Except as provided above and as required by law, the
holders of Series A Preferred Stock are not entitled to vote
on any merger or consolidation involving the Corporation, on
any share exchange or on a sale of all or substantially all of
the assets of the Corporation.
14.1.6 Reacquired Shares. Shares of Series A Preferred Stock converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of Preferred Stock without designation as to series.
14.2 Series B Preferred Stock. The Board of Directors has duly divided and classified 425,000 shares of the Preferred Stock of the Corporation into a series designated Series B Preferred Stock and has provided for the issuance of such series. Subject in all cases to the
provisions of Section 7.4 of Article VII and Article IX of the Articles with respect to Excess Stock, the following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Series B Preferred Stock of the Corporation:
14.2.1 Designation and Amount. The designation of the
Preferred Stock described in Section 14.2 hereof shall be
"Series B Preferred Stock (par value $.01 per share)" (hereinafter,
the "Series B Preferred Stock"). The number of shares of the Series B
Preferred Stock is 425,000. The Series B Preferred Stock shall rank
(a) senior to the Corporation's Series E Preferred Stock and Common
Stock, (b) on a pari passu basis with the Corporation's Series A
Preferred Stock, and (c) junior to the Corporation's Series C
Preferred Stock, Series D Preferred Stock, Series F Preferred Stock
and Series G Preferred Stock, with respect to the payment of
dividends. The Series B Preferred Stock shall have identical
preferences, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption, conversion and
other rights as the Series A Preferred Stock.
14.2.2 Dividend Rights.
(a) The holders of record of outstanding shares of Series B Preferred Stock shall be entitled to receive, when, as and if authorized by the Board of Directors, out of funds legally available therefor, cash dividends which are (1) cumulative (2) preferential to the dividends paid on the Corporation's Series E Preferred Stock and Common Stock, on a pari passu basis with the dividends paid on the Corporation's Series A Preferred Stock, and junior to the dividends paid on the Corporation's Series C Preferred Stock, Series D Preferred Stock, Series F Preferred Stock and Series G Preferred Stock, and (3) payable at an annual rate equal to the Series B Dividend Amount (as defined below) and no more, on the fifteenth day of each February, May, August and November following the date of original issuance of the Series B Preferred Stock (the "Series B Original Issue Date"). Each calendar quarter immediately preceding the fifteenth day of February, May, August and November (or if the Series B Original Issue Date is not on the first day of a calendar quarter, the period beginning on the date of issuance and ending on the last day of the calendar quarter of issuance) is referred to hereinafter as a "Series B Dividend Period." The initial per share Series B Dividend Amount per annum shall be equal to $1.648. The amount of dividends payable for each full Series B Dividend Period for each share of the Series B Preferred Stock shall be computed by dividing the per share Series B Dividend Amount by four. The amount of dividends on the Series B Preferred Stock payable for the initial Series B Dividend Period, or any other period shorter or longer than a full Series B Dividend Period, shall be computed ratably on the basis of the actual number of days in such Series B Dividend Period. In the event of any change in the quarterly cash dividend per share declared on the Common Stock, the quarterly cash dividend per share on the Series B Preferred Stock shall be adjusted for the same Series B Dividend Period by an amount computed by multiplying the amount of the change in the Common Stock dividend times the Series B Conversion Ratio (as defined in Section 14.2.4(a)).
(b) In the event the Corporation shall declare a distribution payable in (i) securities of other persons, (ii) evidences of indebtedness issued by the Corporation or other persons, (iii) assets (excluding cash dividends) or (iv) options or rights to purchase capital stock or evidences of indebtedness in the Corporation or other persons, then, in each such case for the purpose of this Section 14.2.2(b), the holders of the Series B Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series B Preferred Stock are or would be convertible (assuming such shares of Series B Preferred Stock were then convertible).
(c) The Corporation shall not (i) declare or pay or set apart for payment any dividends or distributions on any Stock ranking as to dividends junior to the Series B Preferred Stock (other than dividends paid in shares of such junior Stock) or (ii) make any purchase or redemption of, or any sinking fund payment for the purchase or redemption of, any Stock ranking as to dividends junior to the Series B Preferred Stock (other than a purchase or redemption made by issue or delivery of such junior Stock) unless all dividends payable on all outstanding shares of Series B Preferred Stock for all past Series B Dividend Periods shall have been paid in full or declared and a sufficient sum set apart for payment thereof, provided, however, that any moneys theretofore deposited in any sinking fund with respect to any Preferred Stock of the Corporation in compliance with the provisions of such sinking fund may thereafter be applied to the purchase or redemption of such Preferred Stock in accordance with the terms of such sinking fund.
(d) All dividends declared on shares of Series B Preferred Stock and any other class of Preferred Stock or series thereof ranking on a parity as to dividends with the Series B Preferred Stock and the Series A Preferred Stock shall be declared pro rata, so that the amounts of dividends declared per share on the Series B Preferred Stock and Series A Preferred Stock for the Series B Dividend Period of the Series B Preferred Stock and Series A Preferred Stock ending either on the same day or within the dividend period of such other Stock, shall, in all cases, bear to each other the same ratio that accrued dividends per share on the shares of Series B Preferred Stock, Series A Preferred Stock and such other Stock bear to each other.
14.2.3 Liquidation Rights.
(a) Subject to any prior rights of any class or series of Stock, in the event of any liquidation, dissolution, or winding up of the Corporation, either voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, on a pari passu basis with the holders of the Corporation's Series A Preferred Stock and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Stock by reason of their ownership of such Stock, an amount equal to all accrued but unpaid dividends for each share of Series B Preferred Stock then held by them. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series B Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid amounts to which they are entitled, then, subject to any prior rights of any classes or series of Stock, the
entire assets and funds of the Corporation legally available for distribution shall be distributed ratably to the holders of the Series A Preferred Stock and Series B Preferred Stock, and any other shares of Stock on a parity for liquidation purposes in proportion to the aggregate amounts owed to each such holder.
(b) Subject to any prior rights of any other class or series of Stock, after the payment or setting apart of payment to the holders of Series B Preferred Stock of the full preferential amounts to which they shall be entitled pursuant to Section 14.2.3(a) above, the holders of record of the Series B Preferred Stock shall be treated pari passu with the holders of record of Series A Preferred Stock and Common Stock, with each holder of record of Series B Preferred Stock being entitled to receive, in addition to the amounts payable pursuant to Section 14.2.3(a) above, that amount which such holder would be entitled to receive if such holder had converted all its Series B Preferred Stock into Common Stock immediately prior to the liquidating distribution in question.
14.2.4 Conversion.
(a) Right to Convert. Beginning on October 2, 1998, the holders of shares of Series B Preferred Stock shall have the right, at their option, to convert each such share, at any time and from time to time, into one (the "Series B Conversion Ratio," which shall be subject to adjustment as hereinafter provided) fully paid and nonassessable share of Common Stock; provided, however, that no holder of Series B Preferred Stock shall be entitled to convert shares of such Series B Preferred Stock into Common Stock pursuant to the foregoing provision, if, immediately after such conversion, such person would be the Beneficial Owner of the Corporation's outstanding Common Stock in an amount exceeding the 4.9% Limitation. Notwithstanding the foregoing, such conversion right may be exercised at any time after the Series B Original Issue Date and irrespective of the 4.9% Limitation (and no such limit shall apply) if any of the following circumstances occurs:
(i) For any two consecutive fiscal quarters, the aggregate amount outstanding as of the end of the quarter under (1) all mortgage indebtedness of the Corporation and its consolidated entities and (2) unsecured indebtedness of the Corporation and its consolidated entities exceeds sixty-five percent (65%) of the amount arrived at by (A) taking the Corporation's consolidated gross revenues less property-related expenses, including real estate taxes, insurance, maintenance and utilities, but excluding depreciation, amortization, interest and corporate general and administrative expenses, for the quarter in question and the immediately preceding quarter, (B) multiplying the amount in clause (A) by two (2), and (C) dividing the resulting product in clause B by nine percent (9%) (all as such items of indebtedness, revenues and expenses are reported in consolidated financial statements contained in the Corporation's Forms 10-K and Forms 10-Q as filed with the Securities and Exchange Commission); or
(ii) Gilbert M. Meyer has ceased to be an executive officer of the Corporation, unless the holders of a majority of the shares of the Series B Preferred Stock then outstanding have voted on and approved a replacement for Mr. Meyer and the
replacement remains an executive officer of the Corporation; or
(iii) If (A) the Corporation shall be party to, or shall have entered into an agreement for, any transaction (including, without limitation, a merger, consolidation, statutory share exchange or sale of all or substantially all of its assets (each of the foregoing a "Series B Transaction")), in each case as a result of which shares of Common Stock shall have been or will be converted into the right to receive stock, securities or other property (including cash or any combination thereof) or which has resulted or will result in the holders of Common Stock immediately prior to the Series B Transaction owning less than 50% of the Common Stock after the Series B Transaction, or (B) a "change of control" as defined in the next sentence occurs with respect to the Corporation. A change of control shall mean the acquisition (including by virtue of a merger, share exchange or other business combination) by one stockholder or a group of stockholders acting in concert of the power to elect a majority of the Corporation's Board of Directors. The Corporation shall notify the holders of Series B Preferred Stock promptly if any of the events listed in this Section 14.2.4(a)(iii) shall occur.
Calculations set forth in Section 14.2.4(a)(i) shall be made without regard to unconsolidated indebtedness incurred as a joint venture partner, and the effect of any unconsolidated joint venture, including any income from such unconsolidated joint venture, shall be excluded for purposes of the calculation set forth in Section 14.2.4(a)(i).
(b) Mandatory Conversion. On October 2, 2005 (the "Series B Mandatory Conversion Date"), each issued and outstanding share of Series B Preferred Stock which has not been converted to Common Stock shall mandatorily convert to that number of fully paid and nonassessable shares of Common Stock equal to the Series B Conversion Ratio, as adjusted, regardless of the 4.9% Limitation. From and after the Series B Mandatory Conversion Date, certificates representing shares of Series B Preferred Stock shall be deemed to represent the shares of Common Stock into which they have been converted. Following the Series B Mandatory Conversion Date, the holder of certificates for Series B Preferred Stock may surrender those certificates at the office of any transfer agent for the Common Stock, or if there is no such transfer agent, at the principal offices of the Corporation, or at such other office as may be designated by the Corporation, accompanied by instructions from the holder as to the name(s) and address(es) in which such holder wishes the certificate(s) for the shares of Common Stock issuable upon such conversion to be issued. Promptly following surrender of certificates for Series B Preferred Stock after the Series B Mandatory Conversion Date, the Corporation shall issue and deliver at such office a certificate or certificates for the number of whole shares of Common Stock issuable upon mandatory conversion of the Series B Preferred Stock to the person(s) entitled to receive the same. For purposes of Sections 14.2.4(d) and 14.2.4(e) below, the Series B Mandatory Conversion Date shall constitute the Series B Conversion Date.
(c) Procedure for Conversion. In order to exercise its right to convert shares of Series B Preferred Stock into Common Stock, the holder of shares of Series B Preferred Stock shall surrender the certificate(s) therefor, duly endorsed if the Corporation shall so require, or accompanied by appropriate instruments of transfer satisfactory to the Corporation, at the office
of any transfer agent for the Series B Preferred Stock or if there is no such transfer agent, at the principal offices of the Corporation, or at such other office as may be designated by the Corporation, together with written notice that such holder elects to convert such shares. Such notice shall also state the name(s) and address(es) in which such holder wishes the certificate(s) for the shares of Common Stock issuable upon conversion to be issued. As soon as practicable after a conversion, the Corporation shall issue and deliver at said office a certificate or certificates for the number of whole shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock duly surrendered for conversion, to the person(s) entitled to receive the same. Shares of Series B Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the date on which the certificates therefor and notice of intention to convert the same are duly received by the Corporation in accordance with the foregoing provisions, and the person(s) entitled to receive the Common Stock issuable upon such conversion shall be deemed for all purposes as record holder(s) of such Common Stock as of the close of business on such date (hereinafter, the "Series B Conversion Date").
(d) No Fractional Shares. No fractional shares shall be issued upon conversion of the Series B Preferred Stock into Common Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. As to any final fraction of a share which the holder of one or more shares of Series B Preferred Stock would be entitled to receive upon exercise of his conversion right, the Corporation shall pay a cash adjustment in an amount equal to the same fraction of the last sale price (or bid price if there were no sales) per share of Common Stock on the New York Stock Exchange on the business day which next precedes the Series B Conversion Date or, if such Common Stock is not then listed on the New York Stock Exchange, of the market price per share (as determined in a manner prescribed by the Board of Directors of the Corporation) at the close of business on the business day which next precedes the Series B Conversion Date.
(e) Payment of Adjusted Accrued Dividends Upon Conversion. On the next dividend payment date (or such later date as is permitted in this Section 14.2.4(e)) following any Series B Conversion Date hereunder, the Corporation shall pay in cash Series B Adjusted Accrued Dividends (as defined below) on shares of Series B Preferred Stock so converted. The holder shall be entitled to receive accrued and unpaid dividends, if any, accrued to and including the Series B Conversion Date on the shares of Series B Preferred Stock converted (assuming that such dividends accrue ratably each day that such shares are outstanding based on the Series B Dividend Amount for such quarter), less an amount equal to the pre-conversion portion of the dividends paid on the shares of Common Stock issued upon such conversion (the "Series B Conversion Stock"). (The record date for the Series B Conversion Stock which occurs after the Series B Conversion Date is hereinafter referred to as the "Series B Subsequent Record Date.") The pre-conversion portion of such Series B Conversion Stock dividend means that portion of such dividend as is attributable to the period that (i) begins on the day after the last Series B Conversion Stock dividend record date occurring before such Subsequent Record Date and (ii) ends on such Series B Conversion Date, assuming that such dividends accrue ratably during the period. The term "Series B Adjusted Accrued Dividends" means the amount arrived at through the application of the foregoing formula. Series B Adjusted Accrued Dividends shall not be less than zero. The formula for Series B Adjusted Accrued Dividends shall be applied to effectuate
the Corporation's intent that the holder converting shares of Series B Preferred Stock to Series B Conversion Stock shall be entitled to receive dividends on such shares of Series B Preferred Stock up to and including the Series B Conversion Date and shall be entitled to the dividends on the shares of Series B Conversion Stock issued upon such conversion which are deemed to accrue beginning on the first day after the Series B Conversion Date, but shall not be entitled to dividends attributable to the same period for both the shares of Series B Preferred Stock converted and the shares of Series B Conversion Stock issued upon such conversion. The Corporation shall be entitled to withhold (to the extent consistent with the intent to avoid double dividends for overlapping portions of Series B Preferred Stock and the Series B Conversion Stock dividend periods) the payment of Series B Adjusted Accrued Dividends until the applicable Subsequent Record Date, even though such date occurs after the applicable dividend payment date with respect to the Series B Preferred Stock, in which event the Corporation shall mail to each holder who converted Series B Preferred Stock a check for the Series B Adjusted Accrued Dividends thereon within five (5) business days after such Series B Subsequent Record Date. Series B Adjusted Accrued Dividends shall be accompanied by an explanation of how such Series B Adjusted Accrued Dividends have been calculated. Series B Adjusted Accrued Dividends shall not bear interest.
(f) Adjustments.
(i) In the event the Corporation shall at any time (i) pay a dividend or make a distribution to holders of Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares, the Series B Conversion Ratio shall be adjusted on the effective date of the dividend, distribution, subdivision or combination by multiplying the Series B Conversion Ratio by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such dividend, distribution, subdivision or combination and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such dividend, distribution, subdivision or combination.
(ii) Whenever the Series B Conversion Ratio shall be adjusted as herein provided, the Corporation shall cause to be mailed by first class mail, postage prepaid, as soon as practicable to each holder of record of shares of Series B Preferred Stock a notice stating that the Series B Conversion Ratio has been adjusted and setting forth the adjusted Series B Conversion Ratio, together with an explanation of the calculation of the same.
(iii) If the Corporation shall be party to any Series B Transaction in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), the holder of each share of Series B Preferred Stock shall have the right in connection with such Series B Transaction to convert such share, pursuant to the optional conversion provisions hereof, into the number and kind of shares of stock or other securities and the amount and kind of property receivable upon such Series B Transaction by a holder of the number of shares of Common Stock issuable upon conversion of such share of Series B
Preferred Stock immediately prior to such Series B Transaction. The Corporation shall not be party to any Series B Transaction unless the terms of such Series B Transaction are consistent with the provisions of this Section 14.2.4(f)(iii), and it shall not consent to or agree to the occurrence of any Series B Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Series B Preferred Stock, thereby enabling the holders of the Series B Preferred Stock to receive the benefits of this Section 14.2.4(f)(iii) and the other provisions of the Articles. Without limiting the generality of the foregoing, provision shall be made for adjustments in the Conversion Ratio which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 14.2.4(f)(i). The provisions of this Section 14.2.4(f)(iii) shall similarly apply to successive Series B Transactions.
(iv) In the event that the Corporation shall propose to effect any Series B Transaction which would result in an adjustment under Section 14.2.4(f)(iii), the Corporation shall cause to be mailed to the holders of record of Series B Preferred Stock at least 20 days prior to the record date for such Series B Transaction a notice stating the date on which such Series B Transaction is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such Series B Transaction. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such Series B Transaction.
(g) Other.
(i) The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the maximum number of shares of Common Stock issuable upon the conversion of all shares of Series B Preferred Stock then outstanding, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock, in addition to such other remedies as shall be available to the holders of such Series B Preferred Stock, the Corporation shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.
(ii) The Corporation shall pay any taxes that may be payable in respect of the issuance of shares of Common Stock upon conversion of shares of Series B Preferred Stock, but the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer of shares of Series B Preferred Stock or any transfer involved in the issuance of shares of Common Stock in a name other than that in which the shares of Series B Preferred Stock so converted are registered, and the Corporation shall not be required to transfer any such shares of Series B Preferred Stock or to issue or deliver any such shares of Common Stock unless and until the person(s) requesting such transfer or issuance shall have paid to the Corporation the amount of any such taxes, or shall have
established to the satisfaction of the Corporation that such taxes have been paid.
(iii) The Corporation will not, by amendment of the Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out of all the provisions of the Articles and in the taking of all such action as may be necessary or appropriate to protect the conversion rights of the holders of the Series B Preferred Stock against impairment.
(iv) Holders of Series B Preferred Stock shall be entitled to receive copies of all communications by the Corporation to its holders of Common Stock, concurrently with the distribution to such shareholders.
14.2.5 Voting Rights.
(a) Except as indicated in this Section 14.2.5, or except as otherwise from time to time required by applicable law, the holders of shares of Series B Preferred Stock will have no voting rights.
(b) If six quarterly dividends (whether or not consecutive) payable on shares of Series B Preferred Stock or on any series of Preferred Stock which ranks pari passu with the Series B Preferred Stock as to dividends (the "Series B Parity Stock") are in arrears, the number of Directors then constituting the Board of Directors of the Corporation will be increased by two, and the holders of the shares of Series B Preferred Stock, voting together as a class with the holders of shares of any other series of Series B Parity Stock entitled to such voting rights (any such other series, the "Series B Voting Preferred Stock"), will have the right to elect two additional Directors to serve on the Corporation's Board of Directors at any annual meeting of stockholders or a properly called special meeting of the holders of Series B Preferred Stock and such other Series B Voting Preferred Stock until all such dividends have been declared and paid or set aside for payment. The term of office of all Directors so elected will terminate with the termination of such voting rights.
(c) The approval of holders of two-thirds of the outstanding Series B Preferred Stock and all other series of Series B Voting Preferred Stock similarly affected, voting as a single class, is required in order to amend the Articles to affect materially and adversely the rights, preferences or voting power of the holder of shares of Series B Preferred Stock or the Series B Voting Preferred Stock. For purposes of the foregoing, the creation of a new class of Stock having rights, preferences or privileges senior to, on a parity with or junior to the rights, preferences or privileges of the Series B Preferred Stock shall not be treated as a material adverse change in the rights, preferences or privileges of the Series B Preferred Stock, and the holders of Series B Preferred Stock shall not have any right to vote on the creation of such new class of Stock.
(d) Except as provided above and as required by law, the holders of Series B Preferred Stock are not entitled to vote on any merger or consolidation involving the Corporation, on any share exchange or on a sale of all or substantially all of the assets of the Corporation.
14.2.6 Reacquired Shares. Shares of Series B Preferred Stock converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of Preferred Stock without designation as to series.
14.3 8.50% Series C Cumulative Redeemable Preferred Stock. The Board of Directors has, by resolution, duly divided and classified 2,300,000 shares of the Preferred Stock of the Corporation into a series designated 8.50% Series C Cumulative Redeemable Preferred Stock and has provided for the issuance of such series. Subject in all cases to the provisions of the Articles, including without limitation, Section 7.4 of Article VII and Article IX with respect to limitations on the transfer and ownership of Stock, the following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the 8.50% Series C Cumulative Redeemable Preferred Stock of the Corporation:
14.3.1 Designation and Number. A series of Preferred Stock, designated the "8.50% Series C Cumulative Redeemable Preferred Stock" (the "Series C Preferred Stock"), has been established. The number of authorized shares of the Series C Preferred Stock is 2,300,000.
14.3.2 Rank. The Series C Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Corporation's Series A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock and all classes or series of Common Stock of the Corporation, and to all equity securities issued by the Corporation ranking junior to such Series C Preferred Stock; (b) on a parity with the Corporation's Series D Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and all other equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Series C Preferred Stock; and (c) junior to all equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank senior to the Series C Preferred Stock. The term "equity securities" shall not include convertible debt securities.
14.3.3 Dividends.
(a) Holders of the then outstanding shares of Series C Preferred Stock shall be entitled to receive, when and as authorized by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential cash dividends at the rate of
8.50% of the $25.00 liquidation preference per annum (equivalent to a fixed annual amount of $2.125 per share). Such dividends shall be cumulative from the first date on which any Series C Preferred Stock is issued and shall be payable quarterly in arrears on or before March 15, June 15, September 15 and December 15 of each year or, if not a business day, the next succeeding business day (each, a "Series C Dividend Payment Date"). The first dividend, which will be paid on September 15, 1997, will be for less than a full quarter. Such dividend and any dividend payable on the Series C Preferred Stock for any partial dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Series C Dividend Payment Date falls or on such other date designated by the Board of Directors of the Corporation as the record date for the payment of dividends on the Series C Preferred Stock that is not more than 30 nor less than 10 days prior to such Series C Dividend Payment Date (each, a "Series C Dividend Record Date").
(b) No dividends on shares of Series C Preferred Stock shall be authorized by the Board of Directors of the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing, dividends on the Series C Preferred Stock shall accrue whether or not the terms and provisions set forth in Section 14.3.3(b) hereof at any time prohibit the current payment of dividends, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Accrued but unpaid dividends on the Series C Preferred Stock will accumulate as of the Series C Dividend Payment Date on which they first become payable.
(d) Except as provided in Section 14.3.3(e) below, no dividends will be declared or paid or set apart for payment on any Stock of the Corporation or any other series of Preferred Stock ranking, as to dividends, on a parity with or junior to the Series C Preferred Stock (other than a dividend in shares of the Corporation's Common Stock or in any other class of Stock ranking junior to the Series C Preferred Stock as to dividends and upon liquidation) for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Series C Preferred Stock for all past dividend periods and the then current dividend period.
(e) When dividends are not paid in full (and a sum sufficient for such full payment is not so set apart) upon the Series C Preferred Stock and the shares of any other series of Preferred Stock ranking on a parity as to dividends with the Series C Preferred Stock, all dividends declared upon the Series C Preferred Stock and any other series of Preferred Stock ranking on a parity as to dividends with the Series C Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Series C Preferred Stock and such other series
of Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series C Preferred Stock and such other series of Preferred Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Stock does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series C Preferred Stock which may be in arrears.
(f) Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series C Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods and the then current dividend period, no dividends (other than in shares of Common Stock or other shares of Stock ranking junior to the Series C Preferred Stock as to dividends and upon liquidation) shall be declared or paid or set aside for payment, nor shall any other distribution be declared or made, upon the Common Stock or any other Stock of the Corporation ranking junior to or on a parity with the Series C Preferred Stock as to dividends or upon liquidation, nor shall any shares of Common Stock, or any other shares of Stock of the Corporation ranking junior to or on a parity with the Series C Preferred Stock as to dividends 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 shares) by the Corporation (except by conversion into or exchange for other Stock of the Corporation ranking junior to the Series C Preferred Stock as to dividends and upon liquidation).
(g) Any dividend payment made on shares of the Series C Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. Holders of the Series C Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock in excess of full cumulative dividends on the Series C Preferred Stock as described above.
14.3.4 Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series C Preferred Stock then outstanding are entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders a liquidation preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of Common Stock or any other class or series of Stock of the Corporation that ranks junior to the Series C Preferred Stock as to liquidation rights.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Corporation are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series C Preferred Stock and the corresponding amounts payable on all shares of other classes or series of Stock of the Corporation ranking on a parity with the Series C Preferred Stock in the distribution of assets, then the holders of the Series C Preferred Stock and all other such classes or series of Stock 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 liquidating distributions to which they are entitled, the holders of Series C Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.
(d) Written notice of any such liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series C Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.
(e) The consolidation or merger of the Corporation with or into any other corporation, trust or entity or of any other corporation with or into the Corporation, or the sale, lease or conveyance of all or substantially all of the property or business of the Corporation, shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation.
14.3.5 Redemption.
(a) Right of Optional Redemption. The Series C Preferred Stock is not redeemable prior to June 20, 2002. However, in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes, shares of Series C Preferred Stock which have been converted into Excess Stock shall be subject to repurchase by the Corporation in accordance with Section 7.4.10 of Article VII. On and after June 20, 2002, the Corporation, at its option and upon not less than 30 nor more than 60 days' written notice, may redeem shares of the Series C Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon to the date fixed for redemption (except as provided in Section 14.3.5(c) below), without interest. If less than all of the outstanding Series C Preferred Stock is to be redeemed, the Series C Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the Corporation.
(b) Limitations on Redemption.
(i) The redemption price of the Series C Preferred Stock (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital stock of the Corporation, which may include other series of Preferred Stock, and from no other source. For purposes of the preceding sentence, "capital stock" means any equity securities (including Common Stock and Preferred Stock), shares, interest, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.
(ii) Unless full cumulative dividends on all shares of Series C Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, no shares of Series C Preferred Stock shall be redeemed unless all outstanding shares of Series C Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series C Preferred Stock (except by exchange for Stock of the Corporation ranking junior to the Series C Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares of Excess Stock in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes or the purchase or acquisition of shares of Series C Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series C Preferred Stock.
(c) Immediately prior to any redemption of Series C Preferred Stock, the Corporation shall pay, in cash, any accumulated and unpaid dividends through the redemption date, unless a redemption date falls after a Series C Dividend Record Date and prior to the corresponding Series C Dividend Payment Date, in which case each holder of Series C Preferred Stock at the close of business on such Series C Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Series C Dividend Payment Date notwithstanding the redemption of such shares before such Series C Dividend Payment Date. Except as provided above, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series C Preferred Stock which is redeemed.
(d) Procedures for Redemption.
(i) Notice of redemption will be (A) given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemption date, and (B) mailed by the Corporation, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series C Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records of the Corporation. No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series C Preferred Stock 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 Series C Preferred
Stock may be listed or admitted to trading, such notice shall state:
(A) the redemption date; (B) the redemption price; (C) the number of
shares of Series C Preferred Stock to be redeemed; (D) the place or
places where the Series C Preferred Stock is to be surrendered for
payment of the redemption price; and (E) that dividends on the shares
to be redeemed will cease to accrue on such redemption date. If less
than all of the Series C Preferred Stock held by any holder is to be
redeemed, the notice mailed to such holder shall also specify the
number of shares of
Series C Preferred Stock held by such holder to be redeemed.
(iii) If notice of redemption of any shares of Series C Preferred Stock has been given and if the funds necessary for such redemption have been set aside by the Corporation in trust for the benefit of the holders of any shares of Series C Preferred Stock so called for redemption, then from and after the redemption date dividends will cease to accrue on such shares of Series C Preferred Stock, such shares of Series C Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price. Holders of Series C Preferred Stock to be redeemed shall surrender such Series C Preferred Stock at the place designated in such notice and, upon surrender in accordance with said notice of the certificates for shares of Series C Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series C Preferred Stock shall be redeemed by the Corporation at the redemption price plus any accrued and unpaid dividends payable upon such redemption. In case less than all the shares of Series C Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series C Preferred Stock without cost to the holder thereof.
(iv) The deposit of funds with a bank or trust corporation for the purpose of redeeming Series C Preferred Stock shall be irrevocable except that:
(A) the Corporation shall be entitled to receive from such bank or trust corporation the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the Corporation and unclaimed by the holders of the Series C Preferred Stock entitled thereto at the expiration of two years from the applicable redemption dates shall be repaid, together with any interest or other earnings thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.
(e) The shares of Series C Preferred Stock are subject to the provisions of Section 7.4 of Article VII and Article IX of the Articles relating to Excess Stock. Excess Stock issued upon exchange of shares of Series C Preferred Stock pursuant to such provisions may be redeemed, in whole or in part, at any time when outstanding shares of Series C Preferred Stock are being redeemed, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on the shares of Series C Preferred Stock, which were exchanged for such Excess Stock, through the date of such exchange, without interest. If the Corporation elects to redeem Excess Stock pursuant to the redemption right set forth in the preceding sentence, such Excess Stock shall be redeemed in such proportion and in accordance with such procedures as shares of Series C Preferred Stock are being redeemed.
(f) Any shares of Series C Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Stock, without designation as to series until such shares are thereafter designated as part of a particular series by the Board of Directors.
14.3.6 Voting Rights.
(a) Holders of the Series C Preferred Stock will not have any voting rights, except as set forth below or as otherwise from time to time required by law.
(b) Whenever dividends on any shares of Series C Preferred Stock shall be in arrears for six or more quarterly periods (a "Series C Preferred Dividend Default"), the Board of Directors shall take such action as may be necessary to increase the number of Directors of the Corporation by two and the holders of such shares of Series C Preferred Stock (voting separately as a class with the holders of all other series of Preferred Stock ranking on a parity with the Series C Preferred Stock as to dividends or upon liquidation ("Series C Parity Preferred") upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of a total of two Directors of the Corporation (the "Series C Preferred Stock Directors") at a special meeting called by the holders of record of at least 20% of the Series C Preferred Stock or the holders of any other series of Series C Parity Preferred so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of stockholders) or at the next annual meeting of stockholders, and at each subsequent annual meeting until all dividends accumulated on such shares of Series C Preferred Stock for the past dividend periods and the dividend for the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment.
(c) If and when all accumulated dividends and the dividend for the then current dividend period on the Series C Preferred Stock shall have been paid in full or set aside for payment in full, the holders of shares of Series C Preferred Stock shall be divested of the voting rights set forth in Section 14.3.6(b) hereof (subject to revesting in the event of each and every Series C Preferred Dividend Default) and, if all accumulated dividends and the dividend for the current dividend period have been paid in full or set aside for payment in full on all other series of Series C Parity Preferred upon which like voting rights have been conferred and are exercisable, the term of office of each Series C Preferred Stock Director so elected shall terminate and the Board of Directors shall take such action as may be necessary to reduce the number of Directors by two. Any Series C Preferred Stock Director may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding shares of the Series C Preferred Stock when they have the voting rights set forth in Section 14.3.6(b) (voting separately as a class with all other series of Series C Parity Preferred upon which like voting rights have been conferred and are exercisable). So long as a Series C Preferred Dividend Default shall continue, any vacancy in the office of a Series C Preferred Stock Director may be filled by written consent of the Series C Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series C Preferred Stock when
they have the voting rights set forth in Section 14.3.6(b) (voting separately as a class with all other series of Series C Parity Preferred upon which like voting rights have been conferred and are exercisable). The Series C Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(d) So long as any shares of Series C Preferred Stock remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least two-thirds of the shares of the Series C Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of Stock ranking senior to the Series C Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized Stock of the Corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Articles, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series C Preferred Stock or the holders thereof; provided, however, that with respect to the occurrence of any event set forth in (ii) above, so long as the Series C Preferred Stock remains outstanding with the terms thereof materially unchanged or, if the Corporation is not the surviving entity in such transaction, is exchanged for a security of the surviving entity with terms that are materially the same as the Series C Preferred Stock, the occurrence of any such event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the holders of the Series C Preferred Stock; and, provided further, that any increase in the amount of the authorized Preferred Stock or the creation or issuance of any other series of Preferred Stock, or any increase in the amount of authorized shares of such series, in each case ranking on a parity with or junior to the Series C Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series C Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.
14.3.7 Conversion. The Series C Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except that the shares of Series C Preferred Stock will automatically be converted by the Corporation into shares of Excess Stock and transferred to a Trust in accordance with Section 7.4 of Article VII and Article IX of the Articles in the same manner that Common Stock is converted into Excess Stock and transferred to a Trust pursuant thereto, in order to ensure that the Company remains qualified as a REIT for federal income tax purposes.
14.4 8.00% Series D Cumulative Redeemable Preferred Stock. The Board of Directors has, by resolution, duly divided and classified 3,450,000 shares of the Preferred Stock
of the Corporation into a series designated 8.00% Series D Cumulative Redeemable Preferred Stock and has provided for the issuance of such series. Subject in all cases to the provisions of the Articles, including without limitation, Section 7.4 of Article VII and Article IX with respect to limitations on the transfer and ownership of Stock, the following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the 8.00% Series D Cumulative Redeemable Preferred Stock of the Corporation:
14.4.1 Designation and Number. A series of Preferred Stock, designated the "8.00% Series D Cumulative Redeemable Preferred Stock" (the "Series D Preferred Stock"), has been established. The number of authorized shares of the Series D Preferred Stock is 3,450,000.
14.4.2 Rank. The Series D Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Corporation's Series A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock, all classes or series of Common Stock of the Corporation, and to all equity securities issued by the Corporation ranking junior to such Series D Preferred Stock; (b) on a parity with the Corporation's Series C Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and all other equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Series D Preferred Stock; and (c) junior to all equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank senior to the Series D Preferred Stock. The term "equity securities" shall not include convertible debt securities.
14.4.3 Dividends.
(a) Holders of the then outstanding shares of Series D Preferred Stock shall be entitled to receive, when and as authorized by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential cash dividends at the rate of 8.00% of the $25.00 liquidation preference per annum (equivalent to a fixed annual amount of $2.00 per share). Such dividends shall be cumulative from the first date on which any Series D Preferred Stock is issued and shall be payable quarterly in arrears on or before March 15, June 15, September 15 and December 15 of each year or, if not a business day, the next succeeding business day (each, a "Series D Dividend Payment Date"). The first dividend, which will be paid on March 15, 1998, will be for less than a full quarter. Such dividend and any dividend payable on the Series D Preferred Stock for any partial dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Series D Dividend Payment Date falls or on such other date designated by the Board of Directors of the Corporation as the record date for the payment of dividends on the Series D Preferred Stock that is not more than 30 nor less than 10 days prior to such Series D Dividend Payment Date (each, a "Series D Dividend Record Date").
(b) No dividends on shares of Series D Preferred Stock shall be authorized by the Board of Directors of the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing, dividends on the Series D Preferred Stock shall accrue whether or not the terms and provisions set forth in Section 14.4.3(b) hereof at any time prohibit the current payment of dividends, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Accrued but unpaid dividends on the Series D Preferred Stock will accumulate as of the Series D Dividend Payment Date on which they first become payable.
(d) Except as provided in Section 14.4.3(e) below, no dividends will be declared or paid or set apart for payment on any Stock of the Corporation or any other series of Preferred Stock ranking, as to dividends, on a parity with or junior to the Series D Preferred Stock (other than a dividend in shares of the Corporation's Common Stock or in any other class of Stock ranking junior to the Series D Preferred Stock as to dividends and upon liquidation) for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Series D Preferred Stock for all past dividend periods and the then current dividend period.
(e) When dividends are not paid in full (and a sum sufficient for such full payment is not so set apart) upon the Series D Preferred Stock and the shares of any other series of Preferred Stock ranking on a parity as to dividends with the Series D Preferred Stock, all dividends declared upon the Series D Preferred Stock and any other series of Preferred Stock ranking on a parity as to dividends with the Series D Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Series D Preferred Stock and such other series of Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series D Preferred Stock and such other series of Preferred Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Stock does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series D Preferred Stock which may be in arrears.
(f) Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series D Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods and the then current dividend period, no dividends (other than in shares of Common Stock or other shares of Stock ranking junior to the Series D Preferred Stock as to
dividends and upon liquidation) shall be declared or paid or set aside for payment, nor shall any other distribution be declared or made, upon the Common Stock or any other Stock of the Corporation ranking junior to or on a parity with the Series D Preferred Stock as to dividends or upon liquidation, nor shall any shares of Common Stock, or any other shares of Stock of the Corporation ranking junior to or on a parity with the Series D Preferred Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation (except by conversion into or exchange for other Stock of the Corporation ranking junior to the Series D Preferred Stock as to dividends and upon liquidation).
(g) Any dividend payment made on shares of the Series D Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. Holders of the Series D Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock in excess of full cumulative dividends on the Series D Preferred Stock as described above.
14.4.4 Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series D Preferred Stock then outstanding are entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders a liquidation preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of Common Stock or any other class or series of Stock of the Corporation that ranks junior to the Series D Preferred Stock as to liquidation rights.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Corporation are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series D Preferred Stock and the corresponding amounts payable on all shares of other classes or series of Stock of the Corporation ranking on a parity with the Series D Preferred Stock in the distribution of assets, then the holders of the Series D Preferred Stock and all other such classes or series of Stock 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 liquidating distributions to which they are entitled, the holders of Series D Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.
(d) Written notice of any such liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series D Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.
(e) The consolidation or merger of the Corporation with or into any other
corporation, trust or entity or of any other corporation with or into the Corporation, or the sale, lease or conveyance of all or substantially all of the property or business of the Corporation, shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation.
14.4.5 Redemption.
(a) Right of Optional Redemption. The Series D Preferred Stock is not redeemable prior to December 15, 2002. However, in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes, shares of Series D Preferred Stock which have been converted into Excess Stock shall be subject to repurchase by the Corporation in accordance with Section 7.4.10 of Article VII. On and after December 15, 2002, the Corporation, at its option and upon not less than 30 nor more than 60 days' written notice, may redeem shares of the Series D Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon to the date fixed for redemption (except as provided in Section 14.4.5(c) below), without interest. If less than all of the outstanding Series D Preferred Stock is to be redeemed, the Series D Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the Corporation.
(b) Limitations on Redemption.
(i) The redemption price of the Series D Preferred Stock (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital stock of the Corporation, which may include other series of Preferred Stock, and from no other source. For purposes of the preceding sentence, "capital stock" means any equity securities (including Common Stock and Preferred Stock), shares, interest, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.
(ii) Unless full cumulative dividends on all shares of Series D Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, no shares of Series D Preferred Stock shall be redeemed unless all outstanding shares of Series D Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series D Preferred Stock, (except by exchange for Stock of the Corporation ranking junior to the Series D Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares of Excess Stock in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes or the purchase or acquisition of shares of Series D Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series D Preferred Stock.
(c) Immediately prior to any redemption of Series D Preferred Stock, the
Corporation shall pay, in cash, any accumulated and unpaid dividends through the redemption date, unless a redemption date falls after a Series D Dividend Record Date and prior to the corresponding Series D Dividend Payment Date, in which case each holder of Series D Preferred Stock at the close of business on such Series D Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Series D Dividend Payment Date notwithstanding the redemption of such shares before such Series D Dividend Payment Date. Except as provided above, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series D Preferred Stock which is redeemed.
(d) Procedures for Redemption.
(i) Notice of redemption will be (A) given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemption date, and (B) mailed by the Corporation, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series D Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records of the Corporation. No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series D Preferred Stock 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 Series D Preferred
Stock may be listed or admitted to trading, such notice shall state:
(A) the redemption date; (B) the redemption price; (C) the number of
shares of Series D Preferred Stock to be redeemed; (D) the place or
places where the Series D Preferred Stock is to be surrendered for
payment of the redemption price; and (E) that dividends on the shares
to be redeemed will cease to accrue on such redemption date. If less
than all of the Series D Preferred Stock held by any holder is to be
redeemed, the notice mailed to such holder shall also specify the
number of shares of Series D Preferred Stock held by such holder to be
redeemed.
(iii) If notice of redemption of any shares of Series D Preferred Stock has been given and if the funds necessary for such redemption have been set aside by the Corporation in trust for the benefit of the holders of any shares of Series D Preferred Stock so called for redemption, then from and after the redemption date dividends will cease to accrue on such shares of Series D Preferred Stock, such shares of Series D Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price. Holders of Series D Preferred Stock to be redeemed shall surrender such Series D Preferred Stock at the place designated in such notice and, upon surrender in accordance with said notice of the certificates for shares of Series D Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series D Preferred Stock shall be redeemed by the Corporation at the redemption price plus any accrued and unpaid dividends payable upon such redemption.
In case less than all the shares of Series D Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series D Preferred Stock without cost to the holder thereof.
(iv) The deposit of funds with a bank or trust corporation for the purpose of redeeming Series D Preferred Stock shall be irrevocable except that:
(A) the Corporation shall be entitled to receive from such bank or trust corporation the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the Corporation and unclaimed by the holders of the Series D Preferred Stock entitled thereto at the expiration of two years from the applicable redemption dates shall be repaid,together with any interest or other earnings thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.
(e) The shares of Series D Preferred Stock are subject to the provisions of Section 7.4 of Article VII and Article IX of the Articles relating to Excess Stock. Excess Stock issued upon exchange of shares of Series D Preferred Stock pursuant to such provisions may be redeemed, in whole or in part, at any time when outstanding shares of Series D Preferred Stock are being redeemed, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on the shares of Series D Preferred, which were exchanged for such Excess Stock, through the date of such exchange, without interest. If the Corporation elects to redeem Excess Stock pursuant to the redemption right set forth in the preceding sentence, such Excess Stock shall be redeemed in such proportion and in accordance with such procedures as shares of Series D Preferred Stock are being redeemed.
(f) Any shares of Series D Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Stock, without designation as to series until such shares are thereafter designated as part of a particular series by the Board of Directors.
14.4.6 Voting Rights.
(a) Holders of the Series D Preferred Stock will not have any voting rights, except as set forth below or as otherwise from time to time required by law.
(b) Whenever dividends on any shares of Series D Preferred Stock shall be in arrears for six or more quarterly periods (a "Series D Preferred Dividend Default"), the Board of Directors shall take such action as may be necessary to increase the number of Directors of the Corporation by two and the holders of such shares of Series D Preferred Stock (voting separately
as a class with the holders of all other series of Preferred Stock ranking on a parity with the Series D Preferred Stock as to dividends or upon liquidation ("Series D Parity Preferred") upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of a total of two Directors of the Corporation (the "Series D Preferred Stock Directors") at a special meeting called by the holders of record of at least 20% of the Series D Preferred Stock or the holders of any other series of Parity Preferred so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of stockholders) or at the next annual meeting of stockholders, and at each subsequent annual meeting until all dividends accumulated on such shares of Series D Preferred Stock for the past dividend periods and the dividend for the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment.
(c) If and when all accumulated dividends and the dividend for the then current dividend period on the Series D Preferred Stock shall have been paid in full or set aside for payment in full, the holders of shares of Series D Preferred Stock shall be divested of the voting rights set forth in Section 14.4.6(b) hereof (subject to revesting in the event of each and every Series D Preferred Dividend Default) and, if all accumulated dividends and the dividend for the current dividend period have been paid in full or set aside for payment in full on all other series of Series D Parity Preferred upon which like voting rights have been conferred and are exercisable, the term of office of each Series D Preferred Stock Director so elected shall terminate and the Board of Directors shall take such action as may be necessary to reduce the number of Directors by two. Any Series D Preferred Stock Director may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding shares of the Series D Preferred Stock when they have the voting rights set forth in Section 14.4.6(b) (voting separately as a class with all other series of Series D Parity Preferred upon which like voting rights have been conferred and are exercisable). So long as a Series D Preferred Dividend Default shall continue, any vacancy in the office of a Series D Preferred Stock Director may be filled by written consent of the Series D Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series D Preferred Stock when they have the voting rights set forth in Section 14.4.6(b) (voting separately as a class with all other series of Series D Parity Preferred upon which like voting rights have been conferred and are exercisable). The Series D Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(d) So long as any shares of Series D Preferred Stock remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least two-thirds of the shares of the Series D Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of Stock ranking senior to the Series D Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized Stock of the Corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Articles, whether by merger, consolidation or otherwise, so as to materially and adversely
affect any right, preference, privilege or voting power of the Series D Preferred Stock or the holders thereof; provided, however, that with respect to the occurrence of any event set forth in (ii) above, so long as the Series D Preferred Stock remains outstanding with the terms thereof materially unchanged or, if the Corporation is not the surviving entity in such transaction, is exchanged for a security of the surviving entity with terms that are materially the same as the Series D Preferred Stock, the occurrence of any such event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the holders of the Series D Preferred Stock; and, provided further, that any increase in the amount of the authorized Preferred Stock or the creation or issuance of any other series of Preferred Stock, or any increase in the amount of authorized shares of such series, in each case ranking on a parity with or junior to the Series D Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series D Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.
14.4.7 Conversion. The Series D Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except that the shares of Series D Preferred Stock will automatically be converted by the Corporation into shares of Excess Stock and transferred to a Trust in accordance with Section 7.4 of Article VII and Article IX of the Articles in the same manner that Common Stock is converted into Excess Stock and transferred to a Trust pursuant thereto, in order to ensure that the Company remains qualified as a REIT for federal income tax purposes.
14.5 Series E Junior Participating Cumulative Preferred Stock. The Board of Directors has duly divided and classified 1,000,000 shares of the Preferred Stock of the Corporation into a series designated Series E Junior Participating Cumulative Preferred Stock and has provided for the issuance of such series. Subject in all cases to the provisions of Section 7.4 of Article VII and Article IX of the Articles with respect to Excess Stock, the following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Series E Junior Cumulative Preferred Stock of the Corporation:
14.5.1 Designation and Amount. The designation of the Preferred Stock described in Section 14.5 hereof shall be "Series E Junior Participating Cumulative Preferred Stock," par value $.01 per share (hereinafter called "Series E Preferred Stock"), and the number of shares constituting such series shall be 1,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors and by the filing of articles of amendment pursuant to the provisions of the MGCL stating that such increase or reduction has been so authorized; provided, however, that no decrease shall reduce the number of shares of Series E Preferred
Stock to a number less than that of the shares then outstanding plus the number of shares of Series E Preferred Stock issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation.
14.5.2 Dividends and Distributions.
(a) (i) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar Stock) ranking prior and superior to the Series E Preferred Stock with respect to dividends, the holders of shares of Series E Preferred Stock, in preference to the holders of shares of Common Stock and of any other junior Stock, shall be entitled to receive, when, as and if authorized by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Series E Quarterly Dividend Payment Date"), commencing on the first Series E Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series E Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (x) $1.00 or (y) subject to the provisions for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the shares of Common Stock since the immediately preceding Series E Quarterly Dividend Payment Date, or, with respect to the first Series E Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series E Preferred Stock. The multiple of cash and non-cash dividends declared on the Common Stock to which holders of the Series E Preferred Stock are entitled, which shall be 1,000 initially but which shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Series E Dividend Multiple." In the event the Corporation shall at any time after March 9, 1998 (the "Series E Rights Declaration Date") (i) declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Series E Dividend Multiple thereafter applicable to the determination of the amount of dividends which holders of shares of Series E Preferred Stock shall be entitled to receive shall be the Series E Dividend Multiple applicable immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(ii) Notwithstanding anything else contained in this paragraph (a), the Corporation shall, out of funds legally available for that purpose, declare a dividend or distribution on the Series E Preferred Stock as provided in this paragraph
(a) immediately after it declares a dividend or distribution on the shares of Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the shares of Common Stock during the period between any Series E Quarterly Dividend Payment Date and the next subsequent Series E Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series E Preferred Stock shall nevertheless be payable on such subsequent Series E Quarterly Dividend Payment Date.
(b) Dividends shall begin to accrue and be cumulative on outstanding shares of Series E Preferred Stock from the Series E Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series E Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Series E Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Series E Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series E Preferred Stock entitled to receive a quarterly dividend and before such Series E Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Series E Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series E Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix in accordance with applicable law a record date for the determination of holders of shares of Series E Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law.
14.5.3 Voting Rights. In addition to any other voting rights required by law, the holders of shares of Series E Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series E Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. The number of votes which a holder of a share of Series E Preferred Stock is entitled to cast, which shall initially be 1,000 but which may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the event the Corporation shall at any time after the Series E Rights Declaration Date (i) declare or pay any dividend on shares of Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series E Preferred Stock shall be entitled shall be the Vote Multiple immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares of Series E Preferred Stock and the holders of shares of Common Stock and the holders of shares of any other Stock of this Corporation having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(c) (i) Whenever, at any time or times, dividends payable on any shares of Series E Preferred Stock shall be in arrears in an amount equal to at least two full quarter dividends (whether or not declared and whether or not consecutive), the holders of record of the outstanding shares of Series E Preferred Stock shall have the exclusive right, voting separately as a single class, to elect two Directors of the Corporation at a special meeting of stockholders of the Corporation or at the Corporation's next annual meeting of stockholders, and at each subsequent annual meeting of shareholders, as provided below. At elections for such Directors, each Series E Preferred Share shall entitle the holder thereof to 1,000 votes in such elections.
(ii) Upon the vesting of such right of the holders of shares of Series E Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding shares of Series E Preferred Stock as hereinafter set forth. A special meeting of the stockholders of the Corporation then entitled to vote shall be called by the Chairman of the Board of Directors or the President or the Secretary of the Corporation, if requested in writing by the holders of record of not less than 10% of the shares of Series E Preferred Stock then outstanding. At such special meeting, or, if no such special meeting shall have been called, then at the next annual meeting of stockholders of the Corporation, the holders of the shares of Series E Preferred Stock shall elect, voting as above provided, two Directors of the Corporation to fill the aforesaid vacancies created by the automatic increase in the number of members of the Board of Directors. At any and all such meetings for such election, the holders of a majority of the outstanding shares of Series E Preferred Stock shall be necessary to constitute a quorum for such election, whether present in person or proxy, and such two Directors shall be elected by the vote of at least a majority of the shares of Series E Preferred Stock held by such stockholders present or represented at the meeting. Any director elected by holders of shares of Series E Preferred Stock pursuant to this Section may be removed at any annual or special meeting, by vote of a majority of the shareholders voting as a class who elected such Director, with or without cause. In case any vacancy shall occur among the Directors elected by the holders of shares of Series E Preferred Stock pursuant to this Section, such vacancy may be filled by the remaining director so elected, or his successor then in office, and the director so elected to fill such vacancy shall serve until the next meeting of shareholders for the election of Directors. After the holders of shares of Series E Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be further increased or decreased except by vote of the holders of shares of Series E Preferred
Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series E Preferred Stock.
(iii) The right of the holders of shares of Series E Preferred Stock, voting separately as a class, to elect two members of the Board of Directors of the Corporation as aforesaid shall continue until, and only until, such time as all arrears in dividends (whether or not declared) on the Series E Preferred Stock shall have been paid or declared and set apart for payment, at which time such right shall terminate, except as herein or by law expressly provided subject to revesting in the event of each and every subsequent default of the character above-mentioned. Upon any termination of the right of the holders of the Series E Preferred Stock as a class to vote for Directors as herein provided, the term of office of all Directors then in office elected by the holders of shares of Series E Preferred Stock pursuant to this Section shall terminate immediately. Whenever the term of office of the Directors elected by the holders of shares of Series E Preferred Stock pursuant to this Section shall terminate and the special voting powers vested in the holders of the Series E Preferred Stock pursuant to this Section shall have expired, the maximum number of members of this Board of Directors of the Corporation shall be such number as may be provided for in the By-laws of the Corporation, irrespective of any increase made pursuant to the provisions of this Section.
(d) Except as otherwise required by applicable law or as set forth herein, holders of Series E Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of shares of Common Stock as set forth herein) for taking any corporate action.
14.5.4 Certain Restrictions.
(a) Whenever dividends or distributions payable on the Series E Preferred Stock as provided in Section 14.5.2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series E Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of Stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series E Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of Stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Preferred Stock, except dividends paid ratably on the Series E Preferred Stock and all such parity Stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) except as permitted in subsection 14.5.4(a)(iv) below, redeem, purchase or otherwise acquire for consideration shares of any Stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity Stock in exchange for shares of any Stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series E Preferred Stock; or
(iv)purchase or otherwise acquire for consideration any shares of Series E Preferred Stock, or any shares of any Stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of Stock of the Corporation unless the Corporation could, under subsection (a) of this Section 14.5.4, purchase or otherwise acquire such shares at such time and in such manner.
14.5.5 Reacquired Shares. Any shares of Series E Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
14.5.6 Liquidation, Dissolution or Winding Up. Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made (x) to the holders of shares of Stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series E Preferred Stock unless, prior thereto, the holders of Series E Preferred Stock shall have received an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (1) $1,000.00 per share or (2) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (y) to the holders of Stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Preferred Stock, except distributions made ratably on the Series E Preferred Stock and all other such parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time after the Series E Rights Declaration Date (i) declare or pay any dividend on shares of Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount per share to which holders of shares of Series E Preferred Stock were entitled immediately prior to such event under clause (x) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or into any other corporation or corporations, nor the sale or other transfer of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 14.5.6.
14.5.7 Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series E Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged, plus accrued and unpaid dividends, if any, payable with respect to the Series E Preferred Stock. In the event the Corporation shall at any time after the Series E Rights Declaration Date (i) declare or pay any dividend on shares of Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series E Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
14.5.8 Redemption. The shares of Series E Preferred Stock shall not be redeemable; provided, however, that the foregoing shall not limit the ability of the Corporation to purchase or otherwise deal in such shares to the extent otherwise permitted hereby and by law.
14.5.9 Ranking. Unless otherwise expressly provided in the Articles or
Articles Supplementary relating to any other series of Preferred Stock of the Corporation, the Series E Preferred Stock shall rank junior to every other series of the Corporation's Preferred Stock previously or hereafter authorized, as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up and shall rank senior to the Common Stock.
14.5.10 Amendment. The Articles may not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series E Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series E Preferred Stock, voting separately as a class.
14.5.11 Fractional Shares. Shares of Series E Preferred Stock may be issued in whole shares or in any fraction of a share that is one ten-thousandth (1/1,000th) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of Series E Preferred Stock. In lieu of fractional shares, the Corporation may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one ten-thousandth (1/1,000th) of a share or any integral multiple thereof.
14.6 9.00% Series F Cumulative Redeemable Preferred Stock. The Board of Directors has, by resolution, duly divided and classified 4,455,000 shares of the Preferred Stock of the Corporation into a series designated 9.00% Series F Cumulative Redeemable Preferred Stock and has provided for the issuance of such series. Subject in all cases to the provisions of the Articles, including, without limitation, Section 7.4 of Article VII and Article IX with respect to limitations on the transfer and ownership of Stock, the following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the 9.00% Series F Cumulative Redeemable Preferred Stock of the Corporation:
14.6.1 Designation and Number. A series of Preferred Stock, designated the "9.00% Series F Cumulative Redeemable Preferred Stock" (the "Series F Preferred Stock"), has been established. The number of authorized shares of the Series F Preferred Stock shall be 4,455,000.
14.6.2 Rank. The Series F Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Corporation's Series A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock, and all classes or series of Common Stock of the Corporation, and to all equity securities issued by the Corporation ranking junior to such Series F Preferred Stock; (b) on a parity with the Corporation's Series C Preferred Stock, Series D Preferred Stock, Series G Preferred Stock and all equity securities
issued by the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Series F Preferred Stock; and (c) junior to all equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank senior to the Series F Preferred Stock. The term "equity securities" shall not include convertible debt securities.
14.6.3 Dividends.
(a) Holders of the then outstanding shares of Series F Preferred Stock shall be entitled to receive, when and as authorized by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential cash dividends at the rate of 9.00% of the $25.00 liquidation preference per annum (equivalent to a fixed annual amount of $2.25 per share). Such dividends shall be cumulative from the first date on which any Series F Preferred Stock is issued and shall be payable quarterly in arrears on or before the fifteenth day of February, May, August and November or, if not a business day, the next succeeding business day (each, a "Series F Dividend Payment Date"). Any dividend payable on the Series F Preferred Stock for any partial dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Series F Dividend Payment Date falls or on such other date designated by the Board of Directors of the Corporation as the record date for the payment of dividends on the Series F Preferred Stock that is not more than 30 nor less than 10 days prior to such Series F Dividend Payment Date (each, a "Series F Dividend Record Date").
(b) No dividends on shares of Series F Preferred Stock shall be authorized by the Board of Directors of the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing, dividends on the Series F Preferred Stock shall accrue whether or not the terms and provisions set forth in Section 14.6.3(b) hereof at any time prohibit the current payment of dividends, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Accrued but unpaid dividends on the Series F Preferred Stock will accumulate as of the Series F Dividend Payment Date on which they first become payable.
(d) Except as provided in Section 14.6.3(e) below, no dividends will be declared or paid or set apart for payment on any Stock of the Corporation or any other series of Preferred Stock ranking, as to dividends, on a parity with or junior to the Series F Preferred Stock (other than a dividend in shares of the Corporation's Common Stock or in any other class of Stock ranking junior to the Series F Preferred Stock as to dividends and upon
liquidation) for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Series F Preferred Stock for all past dividend periods and the then current dividend period.
(e) When dividends are not paid in full (and a sum sufficient for such full payment is not so set apart) upon the Series F Preferred Stock and the shares of any other series of Preferred Stock ranking on a parity as to dividends with the Series F Preferred Stock, all dividends declared upon the Series F Preferred Stock and any other series of Preferred Stock ranking on a parity as to dividends with the Series F Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Series F Preferred Stock and such other series of Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series F Preferred Stock and such other series of Preferred Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Stock does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series F Preferred Stock which may be in arrears.
(f) Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series F Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods and the then current dividend period, no dividends (other than in shares of Common Stock or other shares of Stock ranking junior to the Series F Preferred Stock as to dividends and upon liquidation) shall be declared or paid or set aside for payment nor shall any other distribution be declared or made upon the Common Stock, or any other Stock of the Corporation ranking junior to or on a parity with the Series F Preferred Stock as to dividends or upon liquidation, nor shall any shares of Common Stock, or any other shares of Stock of the Corporation ranking junior to or on a parity with the Series F Preferred Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation (except by conversion into or exchange for other Stock of the Corporation ranking junior to the Series F Preferred Stock as to dividends and upon liquidation).
(g) Any dividend payment made on shares of the Series F Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. Holders of the Series F Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or Stock in excess of full cumulative dividends on the Series F Preferred Stock as described above.
14.6.4 Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series F Preferred Stock then outstanding are entitled to be paid out of the assets of the Corporation legally available for
distribution to its stockholders a liquidation preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of Common Stock or any other class or series of Stock of the Corporation that ranks junior to the Series F Preferred Stock as to liquidation rights.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Corporation are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series F Preferred Stock and the corresponding amounts payable on all shares of other classes or series of Stock of the Corporation ranking on a parity with the Series F Preferred Stock in the distribution of assets, then the holders of the Series F Preferred Stock and all other such classes or series of Stock 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 liquidating distributions to which they are entitled, the holders of Series F Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.
(d) Written notice of any such liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series F Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.
(e) The consolidation or merger of the Corporation with or into any other corporation, trust or entity or of any other corporation with or into the Corporation, or the sale, lease or conveyance of all or substantially all of the property or business of the Corporation, shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation.
14.6.5 Redemption.
(a) Right of Optional Redemption. The Series F Preferred Stock is not redeemable prior to February 15, 2001. However, in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes, shares of Series F Preferred Stock which have been converted into Excess Stock shall be subject to repurchase by the Corporation in accordance with Section 7.4.10 of Article VII. On and after February 15, 2001, the Corporation, at its option and upon not less than 30 nor more than 60 days' written notice, may redeem shares of the Series F Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon to the date fixed for redemption (except as provided in Section 14.6.5(c) below), without interest. If less than all of the outstanding Series F Preferred Stock is to be redeemed, the Series F Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method
determined by the Corporation.
(b) Limitations on Redemption.
(i) The redemption price of the Series F Preferred Stock (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital stock of the Corporation, which may include other series of Preferred Stock, and from no other source. For purposes of the preceding sentence, "capital stock" means any equity securities (including Common Stock and Preferred Stock), shares, interest, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.
(ii) Unless full cumulative dividends on all shares of Series F Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, no shares of Series F Preferred Stock shall be redeemed unless all outstanding shares of Series F Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series F Preferred Stock (except by exchange for Stock of the Corporation ranking junior to the Series F Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares of Excess Stock in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes or the purchase or acquisition of shares of Series F Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series F Preferred Stock.
(c) Rights to Dividends on Shares Called for Redemption. Immediately prior to any redemption of Series F Preferred Stock, the Corporation shall pay, in cash, any accumulated and unpaid dividends through the redemption date, unless a redemption date falls after a Series F Dividend Record Date and prior to the corresponding Series F Dividend Payment Date, in which case each holder of Series F Preferred Stock at the close of business on such Series F Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Series F Dividend Payment Date notwithstanding the redemption of such shares before such Series F Dividend Payment Date. Except as provided above, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series F Preferred Stock which is redeemed.
(d) Procedures for Redemption.
(i) Notice of redemption will be (A) given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemption date, and (B) mailed by the Corporation, postage prepaid, not
less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series F Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records of the Corporation. No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series F Preferred Stock 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 Series F Preferred may be listed or admitted to trading, such notice shall state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series F Preferred Stock to be redeemed; (D) the place or places where the Series F Preferred Stock is to be surrendered for payment of the redemption price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemption date. If less than all of the Series F Preferred Stock held by any holder is to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series F Preferred Stock held by such holder to be redeemed.
(iii) If notice of redemption of any shares of Series F Preferred Stock has been given and if the funds necessary for such redemption have been set aside by the Corporation in trust for the benefit of the holders of any shares of Series F Preferred Stock so called for redemption, then from and after the redemption date dividends will cease to accrue on such shares of Series F Preferred Stock, such shares of Series F Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price. Holders of Series F Preferred Stock to be redeemed shall surrender such Series F Preferred Stock at the place designated in such notice and, upon surrender in accordance with said notice of the certificates for shares of Series F Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series F Preferred Stock shall be redeemed by the Corporation at the redemption price plus any accrued and unpaid dividends payable upon such redemption. In case less than all the shares of Series F Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series F Preferred Stock without cost to the holder thereof.
(iv) The deposit of funds with a bank or trust corporation for the purpose of redeeming Series F Preferred Stock shall be irrevocable except that:
(A) the Corporation shall be entitled to receive from such bank or trust corporation the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the Corporation
and unclaimed by the holders of the Series F Preferred Stock entitled thereto at the expiration of two years from the applicable redemption dates shall be repaid, together with any interest or other earnings thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.
(e) The shares of Series F Preferred Stock are subject to the provisions of Section 7.4 of Article VII and Article IX of the Articles relating to Excess Stock. Excess Stock issued upon exchange of shares of Series F Preferred Stock pursuant to such provisions may be redeemed, in whole or in part, at any time when outstanding shares of Series F Preferred Stock are being redeemed, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on the shares of Series F Preferred Stock, which are exchanged for such Excess Stock, through the date of such exchange, without interest. If the Corporation elects to redeem Excess Stock pursuant to the redemption right set forth in the preceding sentence, such Excess Stock shall be redeemed in such proportion and in accordance with such procedures as shares of Series F Preferred Stock are being redeemed.
(f) Any shares of Series F Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Stock, without designation as to series until such shares are thereafter designated as part of a particular series by the Board of Directors.
14.6.6 Voting Rights.
(a) Holders of the Series F Preferred Stock will not have any voting rights, except as set forth below or as otherwise from time to time required by law.
(b) Whenever dividends on any shares of Series F Preferred Stock shall be in arrears for six or more quarterly periods (a "Series F Preferred Dividend Default"), the Board of Directors shall take such action as may be necessary to increase the number of Directors of the Corporation by two and the holders of such shares of Series F Preferred Stock (voting separately as a class with the holders of all other series of Preferred Stock ranking on a parity with the Series F Preferred Stock as to dividends or upon liquidation ("Series F Parity Preferred") upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of a total of two Directors of the Corporation (the "Series F Preferred Stock Directors") at a special meeting called by the holders of record of at least 10% of the Series F Parity Preferred or the holders of any other series of Series F Parity Preferred so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders) or at the next annual meeting of stockholders, and at each subsequent annual meeting until all dividends accumulated on such shares of Series F Preferred Stock for the past dividend periods and the dividends for the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment.
(c) If and when all accumulated dividends and the dividend for the then current dividend period on the Series F Preferred Stock shall have been paid in full or set aside for payment in full, the holders of shares of Series F Preferred Stock shall be divested of the voting rights set forth in Section 14.6.6(b) hereof (subject to revesting in the event of each and every Series F Preferred Dividend Default) and the term of office of each Series F Preferred Stock Director so elected shall terminate and the Board of Directors shall take such action as may be necessary to reduce the number of Directors by two. Any Series F Preferred Stock Director may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding shares of the Series F Preferred Stock when they have the voting rights set forth in Section 14.6.6(b) (voting separately as a class with all other series of Series F Parity Preferred upon which like voting rights have been conferred and are exercisable). So long as a Series F Preferred Dividend Default shall continue, any vacancy in the office of a Series F Preferred Stock Director may be filled by written consent of the Series F Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series F Preferred Stock when they have voting rights as set forth in Section 14.6.6(b) (voting separately as a class with all other series of Series F Parity Preferred upon which like voting rights have been conferred and are exercisable). The Series F Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(d) So long as any shares of Series F Preferred Stock remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least two thirds of the shares of the Series F Preferred Stock outstanding at the time given in person or by proxy, either in writing or at a meeting (voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of Stock ranking senior to the Series F Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized Stock of the Corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares, or (ii) amend, alter or repeal the provisions of the Articles, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series F Preferred Stock or the holders thereof; provided, however, that any increase in the amount of the authorized Preferred Stock or the creation or issuance of any other series of Preferred Stock, or any increase in the amount of authorized shares of such series, in each case ranking on a parity with or junior to the Series F Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series F Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.
14.6.7 Conversion. The Series F Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Corporation, except that the shares of Series F Preferred Stock will automatically be converted by the Corporation into shares of Excess Stock and transferred to a Trust in accordance with Section 7.4 of Article VII and Article IX of the Articles in the same manner that Common Stock is converted into Excess Stock and transferred to a Trust pursuant thereto, in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes.
14.7 8.96% Series G Cumulative Redeemable Preferred Stock. The Board of Directors has, by resolution, duly divided and classified 4,300,000 shares of the Preferred Stock of the Corporation into a series designated 8.96% Series G Cumulative Redeemable Preferred Stock and has provided for the issuance of such series. Subject in all cases to the provisions of the Articles, including, without limitation, Section 7.4 of Article VII and Article IX with respect to limitations on the transfer and ownership of Stock, the following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the 8.96% Series G Cumulative Redeemable Preferred Stock of the Corporation:
14.7.1 Designation and Number. A series of Preferred Stock, designated the "8.96% Series G Cumulative Redeemable Preferred Stock" (the "Series G Preferred Stock"), has been established. The number of authorized shares of the Series G Preferred Stock shall be 4,300,000.
14.7.2 Rank. The Series G Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Corporation's Series A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock, and all classes or series of Common Stock of the Corporation, and to all equity securities issued by the Corporation ranking junior to such Series G Preferred Stock; (b) on a parity with the Corporation's Series C Preferred Stock, Series D Preferred Stock, Series F Preferred Stock and all equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Series G Preferred Stock; and (c) junior to all equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank senior to the Series G Preferred Stock. The term "equity securities" shall not include convertible debt securities.
14.7.3 Dividends.
(a) Holders of the then outstanding shares of Series G Preferred Stock shall be entitled to receive, when and as authorized by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential cash dividends at the rate of 8.96% of the $25.00 liquidation preference per annum (equivalent to a fixed annual amount of $2.24 per share). Such dividends shall be cumulative from the first date on which any Series G Preferred Stock is issued and shall be payable quarterly in arrears on or before the fifteenth day of February, May, August and November or, if not a business day, the next
succeeding business day (each, a "Series G Dividend Payment Date"). Any dividend payable on the Series G Preferred Stock for any partial dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Series G Dividend Payment Date falls or on such other date designated by the Board of Directors of the Corporation as the record date for the payment of dividends on the Series G Preferred Stock that is not more than 30 nor less than 10 days prior to such Series G Dividend Payment Date (each, a "Series G Dividend Record Date").
(b) No dividends on shares of Series G Preferred Stock shall be authorized by the Board of Directors of the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing, dividends on the Series G Preferred Stock shall accrue whether or not the terms and provisions set forth in Section 14.7.3(b) hereof at any time prohibit the current payment of dividends, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Accrued but unpaid dividends on the Series G Preferred Stock will accumulate as of the Series G Dividend Payment Date on which they first become payable.
(d) Except as provided in Section 14.7.3(e) below, no dividends will be declared or paid or set apart for payment on any Stock of the Corporation or any other series of Preferred Stock ranking, as to dividends, on a parity with or junior to the Series G Preferred Stock (other than a dividend in shares of the Corporation's Common Stock or in any other class of Stock ranking junior to the Series G Preferred Stock as to dividends and upon liquidation) for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Series G Preferred Stock for all past dividend periods and the then current dividend period.
(e) When dividends are not paid in full (and a sum sufficient for such full payment is not so set apart) upon the Series G Preferred Stock and the shares of any other series of Preferred Stock ranking on a parity as to dividends with the Series G Preferred Stock, all dividends declared upon the Series G Preferred Stock and any other series of Preferred Stock ranking on a parity as to dividends with the Series G Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Series G Preferred Stock and such other series of Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series G Preferred Stock and such other series of Preferred Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series G Preferred Stock which may be in arrears.
(f) Except as provided in the immediately preceding
paragraph, unless full cumulative dividends on the Series G Preferred Stock
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for payment for all past
dividend periods and the then current dividend period, no dividends (other than
in shares of Common Stock or other shares of Stock ranking junior to the Series
G Preferred Stock as to dividends and upon liquidation) shall be declared or
paid or set aside for payment nor shall any other distribution be declared or
made upon the Common Stock, or any other Stock of the Corporation ranking
junior to or on a parity with the Series G Preferred Stock as to dividends or
upon liquidation, nor shall any shares of Common Stock, or any other shares of
Stock of the Corporation ranking junior to or on a parity with the Series G
Preferred Stock as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any monies be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Corporation (except by conversion into or exchange for other Stock of the
Corporation ranking junior to the Series G Preferred Stock as to dividends and
upon liquidation).
(g) Any dividend payment made on shares of the Series G
Preferred Stock shall first be credited against the earliest accrued but unpaid
dividend due with respect to such shares which remains payable. Holders of the
Series G Preferred Stock shall not be entitled to any dividend, whether payable
in cash, property or Stock, in excess of full cumulative dividends on the
Series G Preferred Stock as described above.
14.7.4 Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series G Preferred Stock then outstanding are entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders a liquidation preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of Common Stock or any other class or series of Stock of the Corporation that ranks junior to the Series G Preferred Stock as to liquidation rights.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Corporation are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series G Preferred Stock and the corresponding amounts payable on all shares of other classes or series of Stock of the Corporation ranking on a parity with the Series G Preferred Stock in the distribution of assets, then the holders of the Series G Preferred Stock and all other such classes or series of Stock 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 liquidating distributions to which
they are entitled, the holders of Series G Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.
(d) Written notice of any such liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series G Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.
(e) The consolidation or merger of the Corporation with or into any other corporation, trust or entity or of any other corporation with or into the Corporation, or the sale, lease or conveyance of all or substantially all of the property or business of the Corporation, shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation.
14.7.5 Redemption.
(a) Right of Optional Redemption. The Series G Preferred Stock is not redeemable prior to October 15, 2001. However, in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes, shares of Series G Preferred Stock which have been converted into Excess Stock shall be subject to repurchase by the Corporation in accordance with Section 7.4.10 of Article VII. On and after October 15, 2001, the Corporation, at its option and upon not less than 30 nor more than 60 days' written notice, may redeem shares of the Series G Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon to the date fixed for redemption (except as provided in Section 14.7.5(c) below), without interest. If less than all of the outstanding Series G Preferred Stock is to be redeemed, the Series G Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the Corporation.
(b) Limitations on Redemption.
(i)The redemption price of the Series G Preferred Stock (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital stock of the Corporation, which may include other series of Preferred Stock, and from no other source. For purposes of the preceding sentence, "capital stock" means any equity securities (including Common Stock and Preferred Stock), shares, interest, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.
(ii) Unless full cumulative dividends on all shares of Series G Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, no shares of Series G Preferred Stock shall be redeemed unless all outstanding shares of Series G Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series G Preferred Stock (except by exchange for Stock of the Corporation ranking junior to the Series G Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares of Excess Stock in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes or the purchase or acquisition of shares of Series G Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series G Preferred Stock.
(c) Rights to Dividends on Shares Called for Redemption. Immediately prior to any redemption of Series G Preferred Stock, the Corporation shall pay, in cash, any accumulated and unpaid dividends through the redemption date, unless a redemption date falls after a Series G Dividend Record Date and prior to the corresponding Series G Dividend Payment Date, in which case each holder of Series G Preferred Stock at the close of business on such Series G Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Series G Dividend Payment Date notwithstanding the redemption of such shares before such Series G Dividend Payment Date. Except as provided above, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series G Preferred Stock which is redeemed.
(d) Procedures for Redemption.
(i) Notice of redemption will be (A) given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemption date, and (B) mailed by the Corporation, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series G Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records of the Corporation. No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series G Preferred Stock 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 Series G Preferred may be listed or admitted to trading, such notice shall state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series G Preferred Stock to be redeemed; (D) the place or places where the Series G Preferred Stock is to be surrendered for payment of the redemption price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemption date. If less than all of the Series G Preferred Stock held by any holder is to be redeemed, the notice mailed to
such holder shall also specify the number of shares of Series G Preferred Stock held by such holder to be redeemed.
(iii) If notice of redemption of any shares of Series G Preferred Stock has been given and if the funds necessary for such redemption have been set aside by the Corporation in trust for the benefit of the holders of any shares of Series G Preferred Stock so called for redemption, then from and after the redemption date dividends will cease to accrue on such shares of Series G Preferred Stock, such shares of Series G Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price. Holders of Series G Preferred Stock to be redeemed shall surrender such Series G Preferred Stock at the place designated in such notice and, upon surrender in accordance with said notice of the certificates for shares of Series G Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series G Preferred Stock shall be redeemed by the Corporation at the redemption price plus any accrued and unpaid dividends payable upon such redemption. In case less than all the shares of Series G Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series G Preferred Stock without cost to the holder thereof.
(iv) The deposit of funds with a bank or trust corporation for the purpose of redeeming Series G Preferred Stock shall be irrevocable except that:
(A) the Corporation shall be entitled to receive from such bank or trust corporation the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the Corporation and unclaimed by the holders of the Series G Preferred Stock entitled thereto at the expiration of two years from the applicable redemption dates shall be repaid, together with any interest or other earnings thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.
(e) The shares of Series G Preferred Stock are subject to the provisions of Section 7.4 of Article VII and Article IX of the Articles relating to Excess Stock. Excess Stock issued upon exchange of shares of Series G Preferred Stock pursuant to such provisions may be redeemed, in whole or in part, at any time when outstanding shares of Series G Preferred Stock are being redeemed, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on the shares of Series G Preferred Stock, which are exchanged for such Excess Stock, through the date of such exchange, without interest. If the Corporation elects to redeem Excess Stock pursuant to the redemption right set forth in the
preceding sentence, such Excess Stock shall be redeemed in such proportion and in accordance with such procedures as shares of Series G Preferred Stock are being redeemed.
(f) Any shares of Series G Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Stock, without designation as to series until such shares are thereafter designated as part of a particular series by the Board of Directors.
14.7.6 Voting Rights.
(a) Holders of the Series G Preferred Stock will not have any voting rights, except as set forth below or as otherwise from time to time required by law.
(b) Whenever dividends on any shares of Series G Preferred Stock shall be in arrears for six or more quarterly periods (a "Series G Preferred Dividend Default"), the Board of Directors shall take such action as may be necessary to increase the number of Directors of the Corporation by two and the holders of such shares of Series G Preferred Stock (voting separately as a class with the holders of all other series of Preferred Stock ranking on a parity with the Series G Preferred Stock as to dividends or upon liquidation ("Series G Parity Preferred") upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of a total of two Directors of the Corporation (the "Series G Preferred Stock Directors") at a special meeting called by the holders of record of at least 10% of the Series G Parity Preferred or the holders of any other series of Series G Parity Preferred so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders) or at the next annual meeting of stockholders, and at each subsequent annual meeting until all dividends accumulated on such shares of Series G Preferred Stock for the past dividend periods and the dividends for the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment.
(c) If and when all accumulated dividends and the dividend for the then current dividend period on the Series G Preferred Stock shall have been paid in full or set aside for payment in full, the holders of shares of Series G Preferred Stock shall be divested of the voting rights set forth in Section 14.7.6(b) hereof (subject to revesting in the event of each and every Series G Preferred Dividend Default) and the term of office of each Series G Preferred Stock Director so elected shall terminate and the Board of Directors shall take such action as may be necessary to reduce the number of Directors by two. Any Series G Preferred Stock Director may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding shares of the Series G Preferred Stock when they have the voting rights set forth in Section 14.7.6(b) (voting separately as a class with all other series of Series G Parity Preferred upon which like voting rights have been conferred and are exercisable). So long as a Series G Preferred Dividend Default shall continue, any vacancy in the office of a Series G Preferred Stock Director may be filled by written consent of the Series G Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a
majority of the outstanding shares of Series G Preferred Stock when they have voting rights as set forth in Section 14.7.6(b) (voting separately as a class with all other series of Series G Parity Preferred upon which like voting rights have been conferred and are exercisable). The Series G Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(d) So long as any shares of Series G Preferred Stock remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least two thirds of the shares of the Series G Preferred Stock outstanding at the time given in person or by proxy, either in writing or at a meeting (voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of Stock ranking senior to the Series G Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized Stock of the Corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares, or (ii) amend, alter or repeal the provisions of the Articles, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series G Preferred Stock or the holders thereof; provided, however, that any increase in the amount of the authorized Preferred Stock or the creation or issuance of any other series of Preferred Stock, or any increase in the amount of authorized shares of such series, in each case ranking on a parity with or junior to the Series G Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series G Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.
14.7.7 Conversion. The Series G Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except that the shares of Series G Preferred Stock will automatically be converted by the Corporation into shares of Excess Stock and transferred to a Trust in accordance with Section 7.4 of Article VII and Article IX of the Articles in the same manner that Common Stock is converted into Excess Stock and transferred to a Trust pursuant thereto, in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes.
Exhibit 3(i).2
ARTICLES OF AMENDMENT
AMENDING THE CHARTER OF
AVALON BAY COMMUNITIES, INC.
Avalon Bay Communities, Inc., a Maryland corporation (the "Corporation"), certifies as follows:
FIRST: That the Corporation's Charter is hereby amended by:
(A) deleting Article I, Section 1.3 in its entirety and inserting the following in lieu thereof:
1.3 The total number of shares of Stock which the Corporation has authority to issue is two hundred ten million (210,000,000) shares, consisting of (i) fifty million (50,000,000) shares of Preferred Stock; (ii) one hundred forty million (140,000,000) shares of Common Stock; and (iii) twenty million (20,000,000) shares of excess stock, par value $.01 per share ("Excess Stock"). The aggregate par value of all the shares of all classes of Stock is $2,100,000.
(B) deleting Article II in its entirety and inserting the following in lieu thereof:
ARTICLE II
NAME
The name of the Corporation is:
"AvalonBay Communities, Inc."
(C) deleting the first two sentences of Article VII,
Section 7.1 in their entirety and inserting the following in lieu thereof:
7.1 AUTHORIZED STOCK. The total number of shares of Stock which the Corporation has authority to issue is two hundred ten million (210,000,000) shares, consisting of (i) fifty million (50,000,000) shares of Preferred Stock, par value $.01 per share; (ii) one hundred forty million (140,000,000) shares of Common Stock, par value $.01 per share; and (iii) twenty million (20,000,000) shares of Excess Stock, par value $.01 per share. The aggregate par value of all the shares of all classes of Stock is $2,100,000.
SECOND: The foregoing amendments to the Corporation's Charter were advised by the Board of Directors of the Corporation and were approved by the stockholders of the Corporation at a Special Meeting of Stockholders held on October 2, 1998.
[Remainder of Page Left Blank Intentionally]
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to the Charter of the Corporation to be executed in its name and on its behalf on this 2nd day of October 1998, by the President of the Corporation who acknowledges that these Articles of Amendment are the act of the Corporation and that to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Amendment are true in all material respects.
AVALON BAY COMMUNITIES, INC.
(seal) By: /s/ Charles H. Berman ---------------------------------- Charles H. Berman President |
ATTEST
By: /s/ Jeffrey B. Van Horn ------------------------------ Jeffrey B. Van Horn Secretary |
EXHIBIT 3(i).3
AVALONBAY COMMUNITIES, INC.
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF SHARES OF PREFERRED STOCK
AvalonBay Communities, Inc., a Maryland corporation (the "Corporation"), having its principal office in Alexandria, Virginia, hereby certifies to the State Department of Assessments and Taxation of the State of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of Directors of the Corporation by Section 7.2 of Article VII of its Articles of Amendment and Restatement of Articles of Incorporation, as heretofore amended (which, as hereafter restated or amended from time to time, are together with these Articles Supplementary herein called the "Articles"), the Board of Directors has, by resolution, duly divided and classified 4,600,000 shares of the Preferred Stock of the Corporation into a series designated 8.70% Series H Cumulative Redeemable Preferred Stock, par value $.01 per share, and has provided for the issuance of such series.
SECOND: Subject in all cases to the provisions of the Articles, including, without limitation, Section 7.4 of Article VII and Article IX with respect to limitations on the transfer and ownership of Stock, the following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the 8.70% Series H Cumulative Redeemable Preferred Stock of the Corporation:
(1) DESIGNATION AND NUMBER. A series of Preferred Stock, designated the "8.70% Series H Cumulative Redeemable Preferred Stock," par value $.01 per share (the "Series H Preferred Stock"), is hereby established. The number of authorized shares of Series H Preferred Stock is 4,600,000.
(2) RANK. The Series H Preferred Stock shall, with respect to dividend rights
and rights upon liquidation, dissolution or winding up of the Corporation, rank
(a) senior to the Corporation's Series E Preferred Stock and all classes or
series of Common Stock of the Corporation, and to all equity securities issued
by the Corporation ranking junior to such Series H Preferred Stock; (b) on a
parity with the Corporation's Series C Preferred Stock, Series D Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock and all other equity
securities issued by the Corporation the terms of which specifically provide
that such equity securities rank on a parity with the Series H Preferred Stock;
and (c) junior to all equity securities issued by the Corporation the terms of
which specifically provide that such equity securities rank senior to the Series
H Preferred Stock. The term "equity securities" shall not include convertible
debt securities.
(3) DIVIDENDS.
(a) Holders of the then outstanding shares of Series H Preferred Stock shall be entitled to receive, when and as authorized by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential cash dividends at the rate of 8.70% of the $25.00 liquidation preference per annum (equivalent to a fixed annual amount of $2.175 per share). Such dividends shall be cumulative from the first date on which any Series H Preferred Stock is issued and shall be payable quarterly in arrears on or before March 15, June 15, September 15 and December 15 of each year or, if not a business day, the next succeeding business day (each, a "Series H Dividend Payment Date"). The first dividend, which will be paid on December 15, 1998, will be for less than a full quarter. Such dividend and any dividend payable on the Series H Preferred Stock for any partial dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Series H Dividend Payment Date falls or on such other date designated by the Board of Directors of the Corporation as the record date for the payment of dividends on the Series H Preferred Stock that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a "Series H Dividend Record Date").
(b) No dividends on shares of Series H Preferred Stock shall be authorized by the Board of Directors of the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing, dividends on the Series H Preferred Stock shall accrue whether or not the terms and provisions set forth in Section 3(b) hereof at any time prohibit the current payment of dividends, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Accrued but unpaid dividends on the Series H Preferred Stock will accumulate as of the Series H Dividend Payment Date on which they first become payable.
(d) Except as provided in Section 3(e) below, no dividends will be declared or paid or set apart for payment on any Stock of the Corporation or any other series of Preferred Stock ranking, as to dividends, on a parity with or junior to the Series H Preferred Stock (other than a dividend in shares of the Corporation's Common Stock or in any other class of Stock ranking junior to the Series H Preferred Stock as to dividends and upon liquidation) for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Series H Preferred Stock for all past dividend periods and the then current dividend period.
(e) When dividends are not paid in full (and a sum sufficient for such full payment is not so set apart) upon the Series H Preferred Stock and the shares of any other series of Preferred Stock ranking on a parity as to dividends with the Series H Preferred Stock, all dividends declared upon the Series H Preferred Stock and any other series of Preferred Stock ranking on a parity as to dividends with the Series H Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Series H Preferred Stock and such other series of Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series H Preferred Stock and such other series of Preferred Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Stock does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series H Preferred Stock which may be in arrears.
(f) Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series H Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods and the then current dividend period, no dividends (other than in shares of Common Stock or other shares of Stock ranking junior to the Series H Preferred Stock as to dividends and upon liquidation) shall be declared or paid or set aside for payment, nor shall any other distribution be declared or made, upon the Common Stock or any other Stock of the Corporation ranking junior to or on a parity with the Series H Preferred Stock as to dividends or upon liquidation, nor shall any shares of Common Stock, or any other shares of Stock of the Corporation ranking junior to or on a parity with the Series H Preferred Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation (except by conversion into or exchange for other Stock of the Corporation ranking junior to the Series H Preferred Stock as to dividends and upon liquidation).
(g) Any dividend payment made on shares of the Series H Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. Holders of the Series H Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock in excess of full cumulative dividends on the Series H Preferred Stock as described above.
(4) LIQUIDATION PREFERENCE.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series H Preferred Stock then outstanding are entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders a liquidation preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of Common Stock or any other class or series of Stock of the Corporation that ranks junior to the Series H Preferred Stock as to liquidation rights.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Corporation are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series H Preferred Stock and the corresponding amounts payable on all shares of other classes or series of Stock of the Corporation ranking on a parity with the Series H Preferred Stock in the distribution of assets, then the holders of the Series H Preferred Stock and all other such classes or series of Stock 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 liquidating distributions to which they are entitled, the holders of Series H Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.
(d) Written notice of any such liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series H Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.
(e) The consolidation or merger of the Corporation with or into any other corporation, trust or entity or of any other corporation with or into the Corporation, or the sale, lease or conveyance of all or substantially all of the property or business of the Corporation, shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation.
(5) REDEMPTION.
(a) RIGHT OF OPTIONAL REDEMPTION. The Series H Preferred Stock is not redeemable prior to October 15, 2008. However, in order to ensure that the Corporation remains a qualified real estate investment trust ("REIT") for federal income tax purposes, shares of Series H Preferred Stock which have been converted into Excess Stock shall be subject to repurchase by the Corporation in accordance with Section 7.4.10 of Article VII of the Articles. On and after October 15, 2008, the Corporation, at its option and upon not less than 30 nor more than 60 days written notice, may redeem shares of the Series H Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon to the date fixed for redemption (except as provided in Section 5(c) below), without interest. If less than all of the outstanding Series H Preferred Stock is to be redeemed, the Series H Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the Corporation.
(b) LIMITATIONS ON REDEMPTION.
(i) The redemption price of the Series H Preferred Stock (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital stock of the Corporation, which may include other series of Preferred Stock, and from no other source. For purposes of the preceding sentence, "capital stock" means any equity securities (including Common Stock and Preferred Stock), shares, interest, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.
(ii) Unless full cumulative dividends on all shares of Series H Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, no shares of Series H Preferred Stock shall be redeemed unless all outstanding shares of Series H Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series H Preferred Stock (except by exchange for Stock of the Corporation ranking junior to the Series H Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares of Excess Stock in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes or the purchase or acquisition of shares of Series H Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series H Preferred Stock.
(c) RIGHTS TO DIVIDENDS ON SHARES CALLED FOR REDEMPTION. Immediately prior to any redemption of Series H Preferred Stock, the Corporation shall pay, in cash, any accumulated and unpaid dividends through the redemption date, unless a redemption date falls after a Series H Dividend Record Date and prior to the corresponding Series H Dividend Payment Date, in which case each holder of Series H Preferred Stock at the close of business on such Series H Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Series H Dividend Payment Date notwithstanding the redemption of such shares before such Series H Dividend Payment Date. Except as provided above, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series H Preferred Stock which is redeemed.
(d) PROCEDURES FOR REDEMPTION.
(i) Notice of redemption will be (A) given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemption date, and (B) mailed by the Corporation, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series H Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records of the Corporation.
No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series H Preferred Stock 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 Series H Preferred Stock may be listed or admitted to trading, such notice shall state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series H Preferred Stock to be redeemed; (D) the place or places where the Series H Preferred Stock is to be surrendered for payment of the redemption price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemption date. If less than all of the Series H Preferred Stock held by any holder is to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series H Preferred Stock held by such holder to be redeemed.
(iii) If notice of redemption of any shares of Series H Preferred Stock has been given and if the funds necessary for such redemption have been set aside by the Corporation in trust for the benefit of the holders of any shares of Series H Preferred Stock so called for redemption, then from and after the redemption date dividends will cease to accrue on such shares of Series H Preferred Stock, such shares of Series H Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price. Holders of Series H Preferred Stock to be redeemed shall surrender such Series H Preferred Stock at the place designated in such notice and, upon surrender in accordance with said notice of the certificates for shares of Series H Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series H Preferred Stock shall be redeemed by the Corporation at the redemption price plus any accrued and unpaid dividends payable upon such redemption. In case less than all the shares of Series H Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series H Preferred Stock without cost to the holder thereof.
(iv) The deposit of funds with a bank or trust corporation for the purpose of redeeming Series H Preferred Stock shall be irrevocable except that:
(A) the Corporation shall be entitled to receive from such bank or trust corporation the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the Corporation and unclaimed by the holders of the Series H Preferred Stock entitled thereto at the expiration of two years from the applicable redemption dates shall be repaid, together with any interest or other earnings thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so
repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings.
(e) The shares of Series H Preferred Stock are subject to the provisions of
Section 7.4 of Article VII and Article IX of the Articles relating to Excess
Stock. Excess Stock issued upon exchange of shares of Series H Preferred Stock
pursuant to such provisions may be redeemed, in whole or in part, at any time
when outstanding shares of Series H Preferred Stock are being redeemed, for cash
at a redemption price of $25.00 per share, plus all accrued and unpaid dividends
on the shares of Series H Preferred Stock, which are exchanged for such Excess
Stock, through the date of such exchange, without interest. If the Corporation
elects to redeem Excess Stock pursuant to the redemption right set forth in the
preceding sentence, such Excess Stock shall be redeemed in such proportion and
in accordance with such procedures as shares of Series H Preferred Stock are
being redeemed.
(f) Any shares of Series H Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Stock, without designation as to series until such shares are thereafter designated as part of a particular series by the Board of Directors.
(6) VOTING RIGHTS.
(a) Holders of the Series H Preferred Stock will not have any voting rights, except as set forth below or as otherwise from time to time required by law.
(b) Whenever dividends on any shares of Series H Preferred Stock shall be in arrears for six or more quarterly periods (a "Series H Preferred Dividend Default"), the Board of Directors shall take such action as may be necessary to increase the number of Directors of the Corporation by two and the holders of such shares of Series H Preferred Stock (voting separately as a class with the holders of all other series of Preferred Stock ranking on a parity with the Series H Preferred Stock as to dividends or upon liquidation ("Series H Parity Preferred") upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of a total of two directors of the Corporation (the "Series H Preferred Stock Directors") at a special meeting called by the holders of record of at least 20% of the Series H Preferred Stock or the holders of any other series of Series H Parity Preferred so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of stockholders) or at the next annual meeting of stockholders, and at each subsequent annual meeting until all dividends accumulated on such shares of Series H Preferred Stock for the past dividend periods and the dividend for the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment.
(c) If and when all accumulated dividends and the dividend for the then current dividend period on the Series H Preferred Stock shall have been paid in full or set aside for payment in full, the holders of shares of Series H Preferred Stock shall be divested of the voting rights set forth in Section 6(b) hereof (subject to revesting in the event of each and every Series H Preferred Dividend Default) and, if all accumulated dividends and the dividend
for the current dividend period have been paid in full or set aside for payment in full on all other series of Series H Parity Preferred upon which like voting rights have been conferred and are exercisable, the term of office of each Series H Preferred Stock Director so elected shall terminate and the Board of Directors shall take such action as may be necessary to reduce the number of Directors by two. Any Series H Preferred Stock Director may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding shares of the Series H Preferred Stock when they have the voting rights set forth in Section 6(b) (voting separately as a class with all other series of Series H Parity Preferred upon which like voting rights have been conferred and are exercisable). So long as a Series H Preferred Dividend Default shall continue, any vacancy in the office of a Series H Preferred Stock Director may be filled by written consent of the Series H Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series H Preferred Stock when they have the voting rights set forth in Section 6(b) hereof (voting separately as a class with all other series of Series H Parity Preferred upon which like voting rights have been conferred and are exercisable). The Series H Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(d) So long as any shares of Series H Preferred Stock remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least two-thirds of the shares of the Series H Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of Stock ranking senior to the Series H Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized Stock of the Corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Articles, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series H Preferred Stock or the holders thereof; provided, however, that with respect to the occurrence of any event set forth in (ii) above, so long as the Series H Preferred Stock remains outstanding with the terms thereof materially unchanged or, if the Corporation is not the surviving entity in such transaction, is exchanged for a security of the surviving entity with terms that are materially the same as the Series H Preferred Stock, the occurrence of any such event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the holders of the Series H Preferred Stock; and, provided, further, that any increase in the amount of the authorized Preferred Stock or the creation or issuance of any other series of Preferred Stock, or any increase in the amount of authorized shares of such series, in each case ranking on a parity with or junior to the Series H Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(e) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series H Preferred Stock shall have been redeemed or called for
redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.
(f) Except as otherwise required by law or provided in the Articles, the holders of Common Stock shall not be entitled to vote on any matter submitted to a vote of the holders of Series H Preferred Stock pursuant to Section 6 hereof.
(7) CONVERSION.The Series H Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except that the shares of Series H Preferred Stock will automatically be converted by the Corporation into shares of Excess Stock and transferred to a Trust in accordance with Section 7.4 of Article VII and Article IX of the Articles in the same manner that Common Stock is exchanged for Excess Stock and transferred to a Trust pursuant thereto, in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes.
THIRD: These Articles Supplementary shall be effective at the time the State Department of Assessments and Taxation of Maryland accepts these Articles Supplementary for record.
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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "AGREEMENT") made as of the 26th day of February, 2001 (the "EFFECTIVE DATE") by and between Timothy J. Naughton and AvalonBay Communities, Inc., a Maryland corporation (the "COMPANY").
WHEREAS, Executive has been performing services for the Company; and
WHEREAS, Executive and the Company desire to enter into an employment agreement, effective as of the date of execution of this Agreement.
NOW, THEREFORE, the parties hereto do hereby agree as follows.
1. TERM. The Company hereby agrees to employ Executive, and Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement for the period commencing on the Effective Date and terminating on February 25, 2004 (the "ORIGINAL TERM"), unless earlier terminated as provided in Section 7. The Original Term shall be extended automatically for additional one year periods measured from February 26, 2004 (each a "RENEWAL TERM"), unless notice that this Agreement will not be extended is given by either party to the other ninety (90) days prior to the expiration of the Original Term or any Renewal Term. Notwithstanding the foregoing, upon a Change in Control, the Employment Period shall be extended automatically to three years from the date of such Change in Control. (The period of Executive's employment hereunder within the Original Term and any Renewal Terms is herein referred to as the "EMPLOYMENT PERIOD.")
2. EMPLOYMENT DUTIES.
(a) During the Employment Period, Executive shall be employed
in the business of the Company and its affiliates. Executive shall serve as a
corporate officer of the Company with the title of CHIEF OPERATING OFFICER. In
the performance of his duties, Executive shall be subject to the direction of
the Board of Directors of the Company (the "Board"), including any committee of
the Board designated by the Board, if any, and the President and/or Chief
Executive Officer of the Company ("CEO", which term refers to the President
and/or Chief Executive Officer, each with authority acting alone to give
direction hereunder in the event that both titles are not held by the same
person) and shall not be required to take direction from or report to any other
person. Executive's duties, title and/or authority, as assigned by the Board or
CEO, shall include responsibility for overseeing the Company's overall (i)
development activities, (ii) construction activities, (iii) investment
activities, (iv) marketing activities, and (v) property operations activities
(in each case, to the extent the same relate to the multifamily rental
business), PROVIDED, HOWEVER, that it will not be a violation of this Section
2(a), or otherwise be a breach by the Company under any term of this Agreement,
if (a) the Company modifies Executive's duties so that they include only three
out of the aforementioned five functional areas, or (b) the Executive's duties
are modified from time to time as Executive and Company mutually reasonably
agree.
(b) Executive agrees to his employment as described in this
Section 2 and agrees to devote substantially all of his working time and efforts
to the performance of his duties under this Agreement; provided that nothing in
this Section 2(b) shall be interpreted to preclude Executive from (i)
participating with the prior written consent of the Board as an officer or
director of, or advisor to, any other entity or organization that is not a
customer or material service provider to the Company or a Competing Enterprise,
as defined in Section 8, so long as such participation does not interfere with
the performance of
Executive's duties hereunder, whether or not such entity or organization is
engaged in religious, charitable or other community or non-profit activities,
(ii) investing in any entity or organization which is not a customer or material
service provider to the Company or a Competing Enterprise, so long as such
investment does not interfere with the performance of Executive's duties
hereunder, or (iii) delivering lectures or fulfilling speaking engagements so
long as such lectures or engagements do not interfere with the performance of
Executive's duties hereunder.
(c) In performing his duties hereunder, Executive shall be available for reasonable travel as the needs of the business require. Executive shall be based in Alexandria, Virginia (or otherwise in the Washington Baltimore, DC-MD-VA-WV Consolidated Metropolitan Statistical Area as defined by the U.S. Census Bureau ("Metropolitan D.C.")).
(d) Breach by either party of any of his or its respective obligations under this Section 2 shall be deemed a material breach of that party's obligations hereunder.
3. COMPENSATION/BENEFITS. In consideration of Executive's services hereunder, the Company shall provide Executive the following:
(a) BASE SALARY. During the Employment Period, the Executive shall receive an annual rate of base salary ("BASE SALARY") in an amount not less than $350,000. Executive's Base Salary will be reviewed by the Company annually and may be adjusted upward (but not downward) at such time. Base Salary shall be payable in accordance with the Company's normal business practices, but in no event less frequently than monthly.
(b) BONUSES. Commencing at the close of each fiscal year during the Employment Period, the Company shall review the performance of the Company and of Executive during the prior fiscal year, and the Company may provide Executive with additional compensation in the form of a cash bonus ("CASH BONUS") and/or in the form of long term equity incentives such as stock options and restricted stock grants ("LT EQUITY BONUS") if the Board, or any compensation committee thereof, in its discretion, determines that the performance of the Company and Executive's contribution to the Company warrants such additional payment and the Company's anticipated financial performance of the present period permits such payment. Any Cash Bonuses hereunder shall be paid as a lump sum not later than 75 days after the end of the Company's preceding fiscal year.
(c) MEDICAL AND DISABILITY INSURANCE/PHYSICAL. During the Employment Period, the Company shall provide to Executive and Executive's immediate family a comprehensive policy of health insurance in accordance with the Company's general practice applicable to officers (including payment of all or a portion of the premiums due thereon) and shall provide to Executive a disability policy in accordance with the Company's general practice applicable to officers (including payment of all or a portion of the premiums due thereon). During the Employment Period, Executive shall be entitled to a comprehensive annual physical performed, at the expense of the Company (but not including any related travel expense), by the physician or medical group of Executive's choosing.
(d) SPLIT DOLLAR LIFE INSURANCE. During the Employment Period, the Company shall keep in force and pay the premiums on the split-dollar life insurance policy referenced in the Split Dollar Insurance Agreement between the Company and Executive, subject to reimbursement by Executive as provided in such Split Dollar Insurance Agreement. Executive agrees to submit to such medical examinations as may be required in order to maintain such policy of insurance.
(e) VACATIONS. Executive shall be entitled to reasonable paid vacations during the Employment Period in accordance with the then regular procedures of the Company governing officers.
(f) OFFICE/SECRETARY, ETC. During the Employment Period, Executive shall be entitled to secretarial services and a private office commensurate with his title and duties.
(g) ANNUAL ALLOWANCE. The Company will provide the Executive with an annual allowance of up to $5,000 per year (the "ALLOWANCE"). The Executive may draw on the Allowance for expenses incurred in his discretion for items such as country club membership, financial counseling or tax preparation. Payment of the Allowance shall be subject to substantiation of expenses in accordance with the Company's policies in effect from time to time for executive officers of the Company. Unused portions of the Allowance shall not be carried over from year to year. For purposes of this Section 3(g), a new year shall be deemed to commence on each January 1.
(h) AUTOMOBILE. The Company shall provide Executive with a monthly car allowance during the Employment Period in accordance with the Company's current practices but in no event less than Executive's current monthly car allowance.
(i) OTHER BENEFITS. During the Employment Period, the Company shall provide to Executive such other benefits, excluding severance benefits, but including the right to participate in such retirement or pension plans, as are made generally available to officers of the Company from time to time. Executive shall be given credit for purposes of eligibility and vesting of employee benefits and benefit accrual for service prior to the Effective Date with Avalon Properties, Inc. and its affiliates ("AVALON"), and Trammell Crow Residential ("TCR") under each benefit plan of the Company and its subsidiaries to the extent such service had been credited under employee benefit plans of Avalon or TCR, provided that no such crediting of service results in duplication of benefits.
(j) TOTAL COMPENSATION. The Company acknowledges that the Executive's Cash Bonus and LT Equity Bonus awarded to the Executive by the Board or Compensation Committee of the Board in its discretion from time-to-time, are a material part of total compensation for the Executive. The Company will endeavor to provide Executive with a reasonable Cash Bonus and/or reasonable LT Equity Bonus on an annual basis such that the Executive's total compensation, in light of the Company's performance and his performance in his role of COO, is reasonable under the circumstances and reasonable relative to the Cash Bonuses and LT Equity Bonuses awarded other officers of the Company. The Company shall not be in breach of this provision unless it can be demonstrated that the Company acted in bad faith in determining whether to award (or the size of an award of) a Cash Bonus or LT Equity Bonus, which determination of bad faith shall specifically be made with reference to the target awards set for other officers and the actual awards paid other officers.
4. EXPENSES/INDEMNIFICATION.
(a) During the Employment Period, the Company shall reimburse Executive for the reasonable business expenses incurred by Executive in the course of performing his duties for the Company hereunder, upon submission of invoices, vouchers or other appropriate documentation, as may be required in accordance with the policies in effect from time to time for executive employees of the Company.
(b) To the fullest extent permitted by law, the Company shall indemnify Executive with respect to any actions commenced against Executive in his capacity as an officer or director or former officer or director of the Company, or any affiliate thereof for which he may render service in such capacity, whether by or on behalf of the Company, its shareholders or third parties, and the Company shall advance to Executive on a timely basis an amount equal to the reasonable fees and expenses incurred in defending such actions, after receipt of an itemized request for such advance, and an undertaking from Executive to repay the amount of such advance, with interest at a reasonable rate from the date of the request, as determined by the Company, if it shall ultimately be determined that he is not entitled to be indemnified against such expenses. Notwithstanding the foregoing, the Company shall not indemnify
Executive with respect to any acts or omissions attributable, directly or indirectly, to Executive's gross negligence, willful misconduct or material breach of this Agreement. The Company agrees that it shall use reasonable best efforts to secure and maintain officers' and directors' liability insurance that shall include coverage with respect to Executive.
5. EMPLOYER'S AUTHORITY/POLICIES.
(a) GENERAL. Executive agrees to observe and comply with the rules and regulations of the Company as adopted by its Board respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time by the Board or the CEO.
(b) ETHICS POLICIES. Executive agrees to comply with and be bound by the Ethics Policies of the Company, as reflected in the attachment at ANNEX A hereto and made a part hereof. Executive agrees to comply with and be bound by the Company's insider trading policies and procedures that are generally applicable to employees and/or senior officers.
6. RECORDS/NONDISCLOSURE/COMPANY POLICIES.
(a) GENERAL. All records, manuals, financial statements and similar documents obtained, reviewed or compiled by Executive in the course of the performance by him of services for the Company, whether or not confidential information or trade secrets, shall be the exclusive property of the Company. Executive shall have no rights in such documents upon any termination of this Agreement.
(b) NONDISCLOSURE AGREEMENT. Without limitation of the Company's rights under Section 6(a), Executive agrees to abide by and be bound by the Nondisclosure Agreement of the Company executed by Executive and the Company as reflected in the attachment at ANNEX B and made a part hereof.
7. TERMINATION; SEVERANCE AND RELATED MATTERS.
(a) AT-WILL EMPLOYMENT. Executive's employment hereunder is "at will" and, therefore, may be terminated at any time, with or without Cause, at the option of the Company, subject only to the severance obligations under this Section 7. Upon any termination hereunder, the Employment Period shall expire.
(b) DEFINITIONS. For purposes of this Section 7, the following terms shall have the indicated definitions:
(1) CAUSE. "Cause" shall mean:
(i) Executive is convicted of or enters a plea of nolo contendere to an act which is defined as a felony under any federal, state or local law, not based upon a traffic violation, which conviction or plea has or can be expected to have, in the good faith opinion of the Board, a material adverse impact on the business or reputation of the Company;
(ii) any one or more acts of theft, larceny, embezzlement, fraud or material intentional misappropriation from or with respect to the Company;
(iii) a breach by Executive of his fiduciary duties under Maryland law as an officer; or material breach by Executive of any rule, regulation, policy or procedure, the Company (including, without limitation, as described in Section 5 hereof);
(iv) Executive's commission of any one or more acts of gross negligence or willful misconduct which in the good faith opinion of the Board has resulted in material harm to the business or reputation of the Company; or
(v) default by Executive in the performance of his material duties under this Agreement, without correction of such action within 15 days of written notice thereof.
Notwithstanding the foregoing, no termination of Executive's employment by the Company shall be treated as for Cause or be effective until and unless all of the steps described in subparagraphs (A) through (C) below have been complied with:
(A) Notice of intention to terminate for Cause has been given by the Company within 120 days after the Board learns of the act, failure or event (or latest in a series of acts, failures or events) constituting "Cause";
(B) The Board has voted (at a meeting of the Board duly called and held as to which termination of Executive is an agenda item) to terminate Executive for Cause after Executive has been given notice of the particular acts or circumstances which are the basis for the termination for Cause and has been afforded at least 20 days notice of the meeting and an opportunity to present his position in writing; and
(C) The Board has given a Notice of Termination to Executive within 20 days after such Board meeting.
The Company may suspend Executive with pay at any time during the period commencing with the giving of notice to Executive under clause (A) above until final Notice of Termination is given under clause (C) above. Upon the giving of notice as provided in clause (C) above, no further payments shall be due Executive except as provided in Section 7(c)(vii).
(2) CHANGE IN CONTROL. A "Change in Control" shall mean the occurrence of any one or more of the following events following the Effective Date:
(i) Any individual, entity or group (a "Person")
within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Act") (other than the
Company, any corporation, partnership, trust or other entity
controlled by the Company (a "Subsidiary"), or any trustee,
fiduciary or other person or entity holding securities under
any employee benefit plan or trust of the Company or any of
its Subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under
the Act) of such Person, shall become the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Act) of
securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
securities having the right to vote generally in an election
of the Company's Board of Directors ("Voting Securities"),
other than as a result of (A) an acquisition of securities
directly from the Company or any Subsidiary or (B) an
acquisition by any corporation pursuant to a reorganization,
consolidation or merger if, following such reorganization,
consolidation or merger the conditions described in clauses
(A), (B) and (C) of subparagraph (iii) of this Section 7(b)(2)
are satisfied; or
(ii) Individuals who, as of the Effective Date, constitute the Company's Board (the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided, however, that any individual becoming a director of the Company subsequent to the date hereof (excluding, for this purpose, (A) any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, and (B) any individual whose initial assumption of office is in connection with a reorganization, merger or consolidation, involving an unrelated entity and occurring during the Employment Period), whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the persons then comprising Incumbent Directors shall for purposes of this Agreement be considered an Incumbent Director; or
(iii) Consummation of a reorganization, merger or consolidation of the Company, unless, following such reorganization, merger or consolidation, (A) more than 50% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Voting Securities immediately prior to such reorganization, merger or consolidation, (B) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or the corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 30% or more of the outstanding Voting Securities), beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation;
(iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or
(v) The sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (A) more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the outstanding Voting Securities immediately prior to such sale, lease, exchange or other disposition, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 30% or more of the outstanding Voting Securities), beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board of Directors providing for such sale, lease, exchange or other disposition of assets of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred for purposes of this Agreement solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate voting power represented by the Voting Securities beneficially owned by any Person to 30% or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any Person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Stock or other Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction), then a "Change in Control" shall be deemed to have occurred for purposes of this Agreement.
(3) COMPLETE CHANGE IN CONTROL. A "Complete Change in Control" shall mean that a Change in Control has occurred, after modifying the definition of "Change in Control" by deleting clause (i) from Section 7(b)(2) of this Agreement.
(4) CONSTRUCTIVE TERMINATION WITHOUT CAUSE. "Constructive Termination Without Cause" shall mean a termination of Executive's employment initiated by Executive not later than 12 months following the occurrence (not including any time during which an arbitration proceeding referenced below is pending), without Executive's prior written consent, of one or more of the following events (or the latest to occur in a series of events), and effected after giving the Company not less than 10 working days' written notice of the specific act or acts relied upon and right to cure:
(i) a material adverse change in the functions, duties or responsibilities of Executive's position which is inconsistent with Section 2(a), except in connection with the termination of Executive's employment for Disability, Cause, as a result of Executive's death or by Executive other than for a Constructive Termination Without Cause;
(ii) any material breach by the Company of this Agreement;
(iii) any purported termination of Executive's employment for Cause by the Company which does not comply with the terms of Section 7(b)(1) of this Agreement;
(iv) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any successor or assign of the Company, to assume and agree to perform this Agreement, as contemplated in Section 10 of this Agreement;
(v) the failure by the Company to continue in effect any compensation plan in which Executive participates immediately prior to a Change in Control which is material to Executive's total compensation, unless comparable alternative arrangements (embodied in ongoing substitute or alternative plans) have been implemented with respect to such plans, or the failure by the Company to continue Executive's participation therein (or in such substitute or alternative plans) on a basis not materially less favorable, in terms of the amount of benefits provided and the level of Executive's participation relative to
other participants, as existed during the last completed fiscal year of the Company prior to the Change in Control;
(vi) the relocation of the Company's Alexandria offices to a new location outside of Metropolitan D.C. or the failure to locate Executive's own office at the Alexandria office (or at the office to which such office is relocated which is within Metropolitan D.C.) ("RELOCATION TERMINATION"); or
(vii) any voluntary termination of employment by the Executive for any reason during the 12-month period immediately following a Complete Change in Control of the Company if such Complete Change in Control occurs during the Employment Period.
Notwithstanding the foregoing, a Constructive Termination Without Cause shall not be treated as having occurred unless Executive has given a final Notice of Termination delivered after expiration of the Company's cure period. Executive or the Company may, at any time after the expiration of the Company's cure period and either prior to or up until three months after giving a final Notice of Termination, commence an arbitration proceeding to determine the question of whether, taking into account the actions complained of and any efforts made by the Company to cure such actions, a termination by Executive of his employment should be treated as a Constructive Termination Without Cause for purposes of this Agreement. If the Executive or the Company commences such a proceeding prior to delivery by Executive of a final Notice of Termination, the commencement of such a proceeding shall be without prejudice to either party and Executive's and the Company's rights and obligations under this Agreement shall continue unaffected unless and until the arbitrator has determined such question in the affirmative, or, if earlier, the date on which Executive or the Company has delivered a Notice of Termination in accordance with the provisions of this Agreement.
(5) AVERAGE COVERED TOTAL COMPENSATION. "Average Covered Total Compensation" shall mean the sum of Executive's Covered Total Compensation as calculated for the calendar year in which the Date of Termination occurs and for each of the two preceding calendar years, divided by three, PROVIDED, HOWEVER, that if the Date of Termination occurs before the second anniversary of the Effective Date, then "Average Covered Total Compensation" shall mean the sum of Executive's Covered Total Compensation as calculated for the calendar year in which the Date of Termination occurs and for the preceding calendar year, divided by two. "Average Covered Base And Cash Bonus Compensation," "Average Covered Cash Bonus Compensation" and "Average Covered LT Equity Compensation" shall have analogous meanings but with reference to Covered Base And Cash Bonus Compensation, Covered Cash Bonus Compensation and Covered LT Equity Compensation, respectively.
(6) COVERED COMPENSATION DEFINITIONS. "Covered Total Compensation," for any calendar year, shall mean an amount equal to the sum of (i) Executive's Base Salary for the calendar year (disregarding any decreases made effective during the Employment Period), (ii) the cash bonus actually earned by Executive with respect to such calendar year, and (iii) the value of all stock and other equity-based compensation awards made to Executive during such calendar year. In the event that the Company has or hereafter makes any special, mid-year or other non-routine grant of equity outside of the Company's recurring annual equity compensation programs, or in the event that the Company grants, outside of the current recurring annual equity compensation programs, any equity based compensation pursuant to any long-term plan under which equity grants may be made based on multi-year Company results, the value of any such mid-year, special, or long-term plan equity based compensation shall not be included in clause (iii) of the preceding sentence and therefore shall not be included in the calculation of Covered Compensation definitions,
and the value of such equity shall have no impact on any cash payments made under Section 7(c) of the Agreement.
"Covered Base And Cash Bonus Compensation" for any calendar year shall mean Covered Total Compensation for such year but without the inclusion of amounts attributable to clause (iii) of the definition of Covered Total Compensation.
"Covered Cash Bonus Compensation" for any calendar year shall mean Covered Total Compensation for such year but without the inclusion of amounts attributable to clauses (i) and (iii) of the definition of Covered Total Compensation.
"Covered LT Equity Compensation" for any calendar year shall mean Covered Total Compensation for such year but without the inclusion of clauses (i) and (ii) of the definition of Covered Total Compensation.
For purposes of applying the Covered Compensation definitions set forth above, the following rules shall apply:
(A) In valuing awards for purposes of clause
(iii) of the definition of Covered Total
Compensation, all such awards shall be treated as if
fully vested when granted, stock grants shall be
valued by reference to the fair market value on the
date of grant of the Company's common stock, par
value $.01 per share, and other equity-based
compensation awards shall be valued at the value
established in good faith by the Compensation
Committee of the Board. Reference is made to Section
7(c)(viii) for further clarification regarding this
matter.
(B) In determining the cash bonus actually paid with respect to a calendar year, if no cash bonus has been paid with respect to the calendar year in which the Date of Termination occurs, the cash bonus paid with respect to the immediately preceding calendar year shall be assumed to have been paid in each of the current and immediately preceding calendar years, and if no cash bonus has been paid by the Date of Termination with respect to the immediately preceding calendar year, the cash bonus paid with respect to the second preceding calendar year shall be assumed to have been paid in all three (or two, as applicable) of the calendar years taken into account in determining Average Covered Total Compensation (or any of the derivative definitions under Section 7(b)(5)).
(C) If (i) any cash bonus paid with respect to the current or immediately preceding calendar year was paid within three months of Executive's Date of Termination, (ii) such cash bonus is lower than the last cash bonus paid more than three months from the Date of Termination, and (iii) it is determined that the Board acted in bad faith in setting such cash bonus (which determination of bad faith shall specifically be made with reference to the target cash bonuses set for other officers and the actual cash bonuses paid other officers), then in such event any such cash bonus paid within three months of the Date of Termination shall be disregarded and the last cash bonus paid more than three months from the Date of Termination shall be substituted for each cash bonus so disregarded.
(D) In determining the amount of stock and
other equity-based compensation awards made during a
calendar year during the averaging period, rules
similar to those set forth in subparagraphs (B) and
(C) of this Section 7(b)(6) shall be followed except
that all awards made in connection with the Company's
initial public offering shall be disregarded.
(7) DISABILITY. "Disability" shall mean Executive has been determined to be disabled and to qualify for long-term disability benefits under the long-term disability insurance policy obtained pursuant to Section 3(d) of this Agreement.
(C) RIGHTS UPON TERMINATION.
(i) PAYMENT OF BENEFITS EARNED THROUGH DATE OF TERMINATION. Upon any termination of Executive's employment during the Employment Period, Executive, or his estate, shall in all events be paid (I) all accrued but unpaid Base Salary and (II) (except in the case of a termination by the Company for Cause or a voluntary termination by Executive which is not due to a Constructive Termination Without Cause, in either of which cases this clause (II) shall not apply) a pro rata portion of the Executive's Cash Bonus and LT Equity Bonus. For purposes of fulfilling the requirements of clause (II) of the prior sentence, the following shall apply:
(a) In all events, any stock options issued will be issued prior to Executive's Date of Termination so that such stock options are employee stock options. Such stock options shall have an exercise price equal to the closing price of the Company's stock on the date of grant of such options, and such options shall expire one year after the date of grant.
(b) The Company and Executive shall work in good faith to determine an appropriate Cash Bonus and LT Equity Bonus for the year in which the Date of Termination occurs. Such determination shall be based in good faith on an evaluation of Executive's and the Company's performance. If the Company and Executive cannot agree on appropriate amounts, then:
(A) The Company may defer the determination of the Cash Bonus and the restricted stock portion of the LT Equity Bonus until such bonuses in respect of such year are determined for other officers, and at such time the amounts to be used for determining Executive's pro rata bonuses shall be a percentage of his target Cash Bonus and a percentage of his target number of restricted shares with such percentages being equal to the average of the percentages that apply to the Cash Bonus and restricted shares, respectively, of other officers ranked Senior Vice President or higher; and
(B) The Company may grant to Executive a number of stock options based on the assumption that the percentage of the target number of options Executive would have received in respect of the year in which the Date of Termination occurs would equal the average of the percentage realization applied to options granted with respect to the prior three calendar years.
(c) Once the determination in the preceding paragraph is made, the pro rata portion of such amounts shall equal such amounts multiplied by a fraction, the numerator of which is the number of days from January 1 to the Date of Termination in the year of termination and the denominator of which is 365.
Executive shall also retain all such rights with respect to vested equity-based awards as are provided under the circumstances under the applicable grant or award agreement, and shall
be entitled to all other benefits which are provided under the circumstances in accordance with the provisions of the Company's generally applicable employee benefit plans, practices and policies, other than severance plans.
(ii) DEATH. In the event of Executive's death during the Employment Period, the Company shall, in addition to paying the amounts set forth in Section 7(c)(i), take whatever action is necessary to cause all of Executive's unvested equity-based awards to become fully vested as of the date of death and, in the case of equity-based awards which have an exercise schedule, to become fully exercisable and continue to be exercisable for such period as is provided in the case of vested and exercisable awards in the event of death under the terms of the applicable award agreements.
(iii) DISABILITY. In the event the Company elects to terminate Executive's employment during the Employment Period on account of Disability, the Company shall, in addition to paying the amounts set forth in Section 7(c)(i) and subject to Executive first entering into a separation agreement, including a general release of all claims, in a form reasonably acceptable to the Company ("SEPARATION AGREEMENT"), pay to Executive, in one lump sum, no later than the later of the effective date of said Separation Agreement or 31 days following the Date of Termination, an amount equal to one times Average Covered Total Compensation. The Company shall also, commencing upon the Date of Termination and subject to Executive entering into a Separation Agreement:
(A) Continue, without cost to Executive, benefits comparable to the medical benefits provided to Executive immediately prior to the Date of Termination under Section 3(c) for a period of 12 months following the Date of Termination or until such earlier date as Executive obtains comparable benefits through other employment;
(B) Continue to pay, or reimburse Executive, for all
premiums then due or thereafter payable on the whole-life
portion of the split-dollar insurance policy referenced under
Section 3(d) for so long as such payments are due; PROVIDED,
that the Company's obligations under this Section 7(c)(iii)(B)
are contingent on Executive's timely payment of the premiums
then due or thereafter payable on the term portion of said
split-dollar insurance policy; and
(C) Take whatever action is necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards and be entitled to exercise and continue to exercise all stock options and all other equity-based awards having an exercise schedule and to retain such grants and awards to the same extent as if they were vested upon termination of employment in accordance with their terms.
(D) If Executive obtains a disability policy on commercially reasonable terms with the same or similar coverage as provided by the Company prior to the Date of Termination then, until that date that is 12 months following the Date of Termination (or, if earlier, until Executive obtains comparable benefits through other employment), reimburse Executive for an amount equal to the difference between (i) the monthly premiums for such disability policy, less (ii) the amount paid by Executive in respect of a portion of the premiums on the disability policy provided by Company prior to the Date of Termination.
(iv) NON-RENEWAL BY THE COMPANY. In the event the
Company gives Executive a notice of non-renewal pursuant to
Section 1 above, and either (I) within one year after
expiration of the Employment Period the Executive voluntarily
terminates his employment ("POST-EXPIRATION RESIGNATION") or
(II) within two years after expiration of the Employment
Period the Executive's employment is terminated by the Company
without Cause or Constructively Terminated without Cause
("POST-EXPIRATION TERMINATION"), then, in either such case,
the Company shall, in addition to paying the amounts set forth
in Section 7(c)(i), and subject to Executive first entering
into a Separation Agreement, pay to Executive, for 12
consecutive months beginning with the first business day of
the calendar month following the Effective Date of said
Separation Agreement, a monthly amount equal to one-twelfth (
1/12) of the sum of one times his then applicable Base Salary
plus one times Average Covered Cash Bonus Compensation. The
Company shall also, commencing upon the Date of Termination
and subject to Executive entering into a Separation Agreement,
continue, without cost to Executive, benefits comparable to
the medical benefits provided to Executive immediately prior
to the Date of Termination under Section 3(c) for a period of
12 months following the Date of Termination or until such
earlier date as Executive obtains comparable benefits through
other employment. In addition, if Executive obtains a
disability policy on commercially reasonable terms with the
same or similar coverage as provided by the Company prior to
the Date of Termination then, until that date that is 12
months following the Date of Termination (or, if earlier,
until Executive obtains comparable benefits through other
employment), reimburse Executive for an amount equal to the
difference between (i) the monthly premiums for such
disability policy, less (ii) the amount paid by Executive in
respect of a portion of the premiums on the disability policy
provided by Company prior to the Date of Termination.
In addition to the above, in the case of a Post-Expiration Termination the Company additionally shall:
I. Take whatever action is necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards and be entitled to exercise and continue to exercise all stock options and all other equity-based awards having an exercise schedule and to retain such grants and awards to the same extent as if they were vested upon termination of employment in accordance with their terms; and
II. Continue to pay, or reimburse Executive for, all premiums then due or thereafter payable on the whole-life portion of the split-dollar insurance policy referenced under Section 3(d) for so long as such payments are due; PROVIDED, that the Company's obligations under this Section 7(c)(iv)(B)(II) are contingent on Executive's timely payment of the premiums then due or thereafter payable on the term portion of said split-dollar insurance policy;
(V) TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION WITHOUT CAUSE PRIOR TO CHANGE IN CONTROL OF COMPANY. In the event the Company or any successor to the Company terminates Executive's employment without Cause, or if Executive terminates his employment in a Constructive Termination without Cause, in either case prior to the effective time of any Change in Control of the Company or at any time after two years after a Change in Control of the Company, the Company shall, in addition to paying the amounts provided under Section 7(c)(i), and subject to Executive first entering
into a Separation Agreement, pay to Executive, in one lump sum
no later than the later of the Effective Date of said
Separation Agreement or 31 days following the Date of
Termination, an amount equal to the sum of (x) two times
Average Covered Base And Cash Bonus Compensation PLUS (y) one
times Average Covered LT Equity Compensation (such sum, the
"SECTION 7(c)(v) PAYMENT"); PROVIDED, HOWEVER, that in the
event that the Constructive Termination Without Cause is a
Relocation Termination, the payment shall be in an amount
equal to one times Average Covered Total Compensation. The
Company shall also, commencing upon the Date of Termination
and subject to the Executive entering into a Separation
Agreement:
(A) Continue, without cost to Executive, benefits comparable to the medical benefits provided to Executive immediately prior to the Date of Termination under Section 3(c) for a period of 24 months (12 months in the case of a Relocation Termination) following the Date of Termination or until such earlier date as Executive obtains comparable benefits through other employment;
(B) Continue to pay, or reimburse Executive, for
so long as such payments are due, all
premiums then due or payable on the
whole-life portion of the split-dollar
insurance policy referenced under Section
3(d); PROVIDED that the Company's
obligations under this Section 7(c)(v)(B)
are contingent on Executive's timely payment
of the premiums then due or thereafter
payable on the term portion of said
split-dollar insurance policy; and
(C) Take whatever action is necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards and be entitled to exercise and continue to exercise all stock options and all other equity-based awards having an exercise schedule and to retain such grants and awards to the same extent as if they were vested upon termination of employment in accordance with their terms.
(D) If Executive obtains a disability policy on
commercially reasonable terms with the same
or similar coverage as provided by the
Company prior to the Date of Termination
then, until that date that is 24 months (12
months in the case of a Relocation
Termination) following the Date of
Termination (or, if earlier, until Executive
obtains comparable benefits through other
employment), reimburse Executive for an
amount equal to the difference between (i)
the premium for such disability policy, less
(ii) the amount paid by Executive in respect
of a portion of the premiums on the
disability policy provided by Company prior
to the Date of Termination.
In the event that, within six months after the Notice of
Termination which gave rise to the termination of Executive's
employment under this Section 7(c)(v), a Change in Control of
the Company occurs, then (provided Executive previously signed
a Separation Agreement), Executive shall be entitled to
receive the payments and benefits under Section 7(c)(vi)
rather than this Section 7(c)(v). To effect this increase in
payments and benefits, within 31 days of the Change in Control
the Company shall pay to Executive, in one lump sum, an amount
equal to the difference between (A) three times Average
Covered Total Compensation (calculated as of the Date of
Termination) less (B) the Section 7(c)(v) Payment. No payment
in the nature of interest or for the time value of money shall
be paid by the Company. In addition, the benefits described in
Section 7(c)(v)(A) shall continue for 36 months following the
Date of Termination (or until such earlier date as Executive
obtains comparable benefits through other employment) rather
than 24 months.
(VI) TERMINATION WITHOUT CAUSE WITHIN TWO YEARS FOLLOWING A CHANGE IN CONTROL. In the event the Company or any successor to the Company terminates Executive's employment without Cause (or Executive's employment is Constructively Terminated without Cause) within two years following the effective time of a Change in Control of the Company, the Company shall, in addition to paying the amounts provided under Section 7(c)(i), and subject to the Executive first entering into a Separation Agreement, pay to the Executive, in one lump sum no later than the later of the effective date of said Separation Agreement or 31 days following the Date of Termination, an amount equal to three times Average Covered Total Compensation. The Company shall also, commencing upon the Date of Termination:
(A) Continue, without cost to Executive, benefits comparable to the medical benefits provided to Executive immediately prior to the Date of Termination under Section 3(c) for a period of 36 months following the Date of Termination or until such earlier date as Executive obtains comparable benefits through other employment;
(B) Continue to pay, or reimburse Executive,
for so long as such payments are due, all premiums
then due or payable on the whole-life portion of the
split-dollar insurance policy referenced under
Section 3(d); ); PROVIDED that the Company's
obligations under this Section 7(c)(vi)(B) are
contingent on Executive's timely payment of the
premiums then due or thereafter payable on the term
portion of said split-dollar insurance policy; and
(C) Take whatever action is necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards and be entitled to exercise and continue to exercise all stock options and all other equity-based awards having an exercise schedule and to retain such grants and awards to the same extent as if they were vested upon termination of employment in accordance with their terms.
(D) If Executive obtains a disability policy
on commercially reasonable terms with the same or
similar coverage as provided by the Company prior to
the Date of Termination then, until that date that is
36 months following the Date of Termination (or, if
earlier, until Executive obtains comparable benefits
through other employment), reimburse Executive for an
amount equal to the difference between (i) the
monthly premiums for such disability policy, less
(ii) the amount paid by Executive in respect of a
portion of the premiums on the disability policy
provided by Company prior to the Date of Termination.
(vii) TERMINATION FOR CAUSE; VOLUNTARY RESIGNATION. In the event Executive's employment terminates during the Employment Period other than in connection with a termination meeting the conditions of subparagraphs (ii), (iii), (iv), (v) or (vi) of this Section 7(c), Executive shall receive the amounts set forth in Section 7(c)(i) in full satisfaction of all of his entitlements from the Company. All equity-based awards not vested as of the Date of Termination shall terminate (unless otherwise provided in the applicable award agreement) and Executive shall have no further entitlements with respect thereto.
(viii) CLARIFICATION REGARDING TREATMENT OF OPTIONS AND RESTRICTED STOCK. The stock option and restricted stock agreements (the "EQUITY AWARD AGREEMENTS")
that Executive has or may receive may contain language regarding the effect of a termination of Executive's employment under certain circumstances.
(A) Notwithstanding such language in the Equity Award
Agreements, for so long as this Agreement is in effect, the
Company will be obligated, if the terms of this Agreement are
more favorable in this regard than the terms of the Equity
Award Agreements, to take the actions required under Sections
7(c)(ii), 7(c)(iii)(C), 7(c)(iv)(for a Post-Expiration
Termination), 7(c)(v)(C) and 7(c)(vi)(C) hereof upon the
happening of the circumstances described therein. Those
sections provide that in certain situations the Company will
cause the Executive to become vested as of the Date of
Termination in all or certain equity-based awards, and that
such equity-based awards will thereafter be subject to the
provisions of the applicable Equity Award Agreement as it
applies to vested awards upon a termination. For purposes of
clarification, although an option grant may VEST in accordance
with these above-referenced Sections, such option will
thereafter be EXERCISABLE only for so long as the related
option agreement provides, except that the Compensation
Committee of the Board of Directors may, in its sole
discretion, elect to extend the expiration date of such
option. For example, in general Executive's option agreements
granted prior to the date hereof provide that (in the absence
of an extension by the Compensation Committee) upon a
termination of employment for any reason other than death,
disability, retirement or cause, any vested options will only
be exercisable for three months from the date of termination
or, if earlier, the expiration date of the option.
(B) Notwithstanding the definition of "Cause" which may appear in the Equity Award Agreements, for so long as this Agreement is in effect (X) any "for Cause" termination must be in compliance with the terms of this Agreement, including the definition of "Cause" set forth herein, and (Y) only in the event of a "for Cause" termination that meets both the definition in this Agreement and the definition in the Equity Award Agreement will the disposition of options and restricted stock under such Equity Award Agreement be treated in the manner described in such Equity Award Agreement in the case of a termination "for Cause."
(C) For purposes of Section 7(b)(6)(A), the value of any option may be determined by the Compensation Committee of the Board at any time after its grant date by setting such value at the value determined by a nationally recognized accounting firm or employee benefits compensation firm, selected by such Committee, that calculates such value in accordance with a Black-Scholes formula or variations thereof using such parameters and procedures (including, without limitation, parameters and procedures used to measure the historical volatility of the Company's common stock as of the relevant grant date) as the Compensation Committee and/or such firm deems reasonably appropriate. In all events, if the parameters used for valuing any option for purposes of Section 7(b)(6)(A) are the same as the parameters used for valuing any other options for purposes of disclosure or inclusion in the Company's financial statements or financial statement footnotes, then such parameters shall be deemed reasonable.
(D) During the Employment Period any stock options issued to Executive shall provide that if Executive's employment is terminated in any manner which gives rise to an obligation under this Agreement (or any successor Agreement or other severance arrangement) to cause the acceleration of vesting of
stock options, then in such event such stock options shall not expire until one year after the Date of Termination (or, if earlier, the expiration of their ordinary term). The Company represents that the stock options awarded to Executive in February 2001 have a provision to the same effect. This covenant of the Company shall not apply to any stock options issued prior to 2001 or to any stock options issued after the expiration of the Employment Period.
(d) ADDITIONAL BENEFITS.
(i) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable (1) pursuant to the terms of Section 7 of this Agreement, (2) pursuant to or in connection with any compensatory or employee benefit plan, agreement or arrangement, including but not limited to any stock options, restricted or unrestricted stock grants issued to or for the benefit of Executive and forgiveness of any loans by the Company to Executive or (3) otherwise (collectively, "Severance Payments"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), and any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment from the Company (a "Partial Gross-Up Payment"), such that the net amount retained by Executive, before accrual or payment of any Federal, state or local income tax or employment tax, but after accrual or payment of the Excise Tax attributable to the Partial Gross-Up Payment, is equal to the Excise Tax on the Severance Payments.
(ii) Subject to the provisions of Section 7(d)(iii), all
determinations required to be made under this Section 7, including
whether a Partial Gross-Up Payment is required and the amount of such
Partial Gross-Up Payment, shall be made by Arthur Andersen LLP or such
other nationally recognized accounting firm as may at that time be the
Company's independent public accountants immediately prior to the
Change in Control (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive as soon as
practicable after the Date of Termination, if applicable. The initial
Partial Gross-Up Payment, if any, as determined pursuant to this
Section 7(d)(ii), shall be paid to Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive, the Company
shall furnish Executive with an opinion of counsel that failure to
report the Excise Tax on Executive's applicable federal income tax
return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Partial Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"). In the event that the
Company exhausts its remedies pursuant to Section 7(d)(iii) and
Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred, consistent with the calculations required to be made
hereunder, and any such Underpayment, and any interest and penalties
imposed on the Underpayment and required to be paid by Executive in
connection with the proceedings described in Section 7(d)(iii), and any
related legal and accounting expenses, shall be promptly paid by the
Company to or for the benefit of Executive.
(iii) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Partial Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Executive acquires actual knowledge of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:
(A) give the Company any information reasonably requested by the Company relating to such claim,
(B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company,
(C) cooperate with the Company in good faith in order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim; provided, however that the
Company shall bear and pay directly all costs and expenses
attributable to the failure to pay the Excise Tax (including
related additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold
Executive harmless, for any Excise Tax up to an amount not
exceeding the Partial Gross-Up Payment, including interest and
penalties with respect thereto, imposed as a result of such
representation, and payment of related legal and accounting
costs and expenses (the "Indemnification Limit"). Without
limitation on the foregoing provisions of this Section
7(d)(iii), the Company shall control all proceedings taken in
connection with such contest and, at its sole option may
pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner,
and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs Executive to pay such claim and sue for a
refund, the Company shall advance so much of the amount of
such payment as does not exceed the Excise Tax, and related
interest and penalties, to Executive on an interest-free basis
and shall indemnify and hold Executive harmless, from any
related legal and accounting costs and expenses, and from any
Excise Tax, including related interest or penalties imposed
with respect to such advance or with respect to any imputed
income with respect to such advance up to an amount not
exceeding the Indemnification Limit; and further provided that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues
with respect to which a Partial Gross-Up Payment would be
payable hereunder and Executive shall be entitled to settle or
contest, as the case
may be, any other issues raised by the Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt by Executive of an amount advanced
by the Company pursuant to Section 7(d)(iii), Executive becomes
entitled to receive any refund with respect to such claim, Executive
shall (subject to the Company's complying with the requirements of
Section 7(d)(iii)) promptly pay to the Company so much of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto) (the "Refund") as is equal to (A) if the Company
advanced or paid the entire amount required to be so advanced or paid
pursuant to Section 7(d)(iii) hereof (the "Required Section 7(d)
Advance"), the aggregate amount advanced or paid by the Company
pursuant to this Section 7(d) less the portion of such amount advanced
to Executive to reimburse him for related legal and accounting costs,
or (B) if the Company advanced or paid less than the Required Section
7(d) Advance, so much of the aggregate amount so advanced or paid by
the Company pursuant to this Section 7(d) as is equal to the
difference, if any, between (C) the amount refunded to Executive with
respect to such claim and (D) the sum of the portion of the Required
Section 7(d) Advance that was paid by Executive and not paid or
advanced by the Company plus Executive's related legal and accounting
fees, as applicable. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 7(d)(iii), a determination
is made that Executive shall not be entitled to any refund with respect
to such claim and the Company does not notify Executive in writing of
its intent to contest such denial of refund prior to the expiration of
30 days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Partial Gross-Up
Payment required to be paid.
(e) NOTICE OF TERMINATION. Notice of non-renewal of this Agreement pursuant to Section 1 hereof or of any termination of Executive's employment (other than by reason of death) shall be communicated by written notice (a "Notice of Termination") from one party hereto to the other party hereto in accordance with this Section 7 and Section 9.
(f) DATE OF TERMINATION. "Date of Termination," with respect to any
termination of Executive's employment during the Employment Period, shall mean
(i) if Executive's employment is terminated for Disability, 30 days after Notice
of Termination is given (provided that Executive shall not have returned to the
full-time performance of Executive's duties during such 30 day period), (ii) if
Executive's employment is terminated for Cause, the date on which a Notice of
Termination is given which complies with the requirements of Section 7(b)(1)
hereof, and (iii) if Executive's employment is terminated for any other reason,
the date specified in the Notice of Termination. In the case of a termination by
the Company other than for Cause, the Date of Termination shall not be less than
30 days after the Notice of Termination is given. In the case of a termination
by Executive, the Date of Termination shall not be less than 15 days from the
date such Notice of Termination is given. Notwithstanding the foregoing, in the
event that Executive gives a Notice of Termination to the Company, the Company
may unilaterally accelerate the Date of Termination and such acceleration shall
not result in the termination being treated as a termination without Cause. Upon
any termination of his employment, Executive will concurrently resign his
membership as a director and/or officer of the Company and all subsidiaries of
the Company, to the extent applicable.
(g) NO MITIGATION. The Company agrees that, if Executive's employment by the Company is terminated during the term of this Agreement, Executive is not required to seek other employment, or to attempt in any way to reduce any amounts payable to Executive by the Company pursuant to Section 7(d)(i) hereof. Further, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned by Executive as the result of employment by another employer,
by retirement benefits, or, except for amounts then due and payable in accordance with the terms of any promissory notes given by Executive in favor of the Company, by offset against any amount claimed to be owed by Executive to the Company or otherwise.
(h) NATURE OF PAYMENTS. The amounts due under this Section 7 are in the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty. Such amounts are in full satisfaction of all claims Executive may have in respect of his employment by the Company or its affiliates and are provided as the sole and exclusive benefits to be provided to Executive, his estate, or his beneficiaries in respect of his termination of employment from the Company or its affiliates.
8. NON-COMPETITION; NON-SOLICITATION; SPECIFIC ENFORCEMENT.
(a) NON-COMPETITION. Because Executive's services to the Company are special and because Executive has access to the Company's confidential information, Executive covenants and agrees that, during the Employment Period and, for a period of one year following the Date of Termination by the Company for Cause or Disability, or a termination by Executive (other than a Constructive Termination Without Cause) prior to a Change in Control, Executive shall not, without the prior written consent of the Board of Directors, become associated with, or engage in any "Restricted Activities" with respect to any "Competing Enterprise," as such terms are hereinafter defined, whether as an officer, employee, principal, partner, agent, consultant, independent contractor or shareholder. "Competing Enterprise," for purposes of this Agreement, shall mean any person, corporation, partnership, venture or other entity which is engaged in the business of managing, owning, leasing or joint venturing multifamily rental real estate within 30 miles of multifamily rental real estate owned or under management by the Company or its affiliates. "Restricted Activities," for purposes of this Agreement, shall mean executive, managerial, directorial, administrative, strategic, business development or supervisory responsibilities and activities relating to all aspects of multifamily rental real estate ownership, management, multifamily rental real estate franchising, and multifamily rental real estate joint-venturing.
(b) NON-SOLICITATION. For so long as the Executive remains employed by the Company (or any successor thereto) and for one year following termination of employment, regardless of reason, Executive shall not, without the prior written consent of the Company, except in the course of carrying out his duties hereunder, solicit or attempt to solicit for employment with or on behalf of any corporation, partnership, venture or other business entity, any employee of the Company or any of its affiliates or any person who was formerly employed by the Company or any of its affiliates within the preceding six months, unless such person's employment was terminated by the Company or any of such affiliates.
(c) SPECIFIC ENFORCEMENT. Executive and the Company agree that the restrictions, prohibitions and other provisions of this Section 8 are reasonable, fair and equitable in scope, terms, and duration, are necessary to protect the legitimate business interests of the Company and are a material inducement to the Company to enter into this Agreement. Should a decision be made by a court of competent jurisdiction that the character, duration or geographical scope of the provisions of this Section 8 is unreasonable, the parties intend and agree that this Agreement shall be construed by the court in such a manner as to impose all of those restrictions on Executive's conduct that are reasonable in light of the circumstances and as are necessary to assure to the Company the benefits of this Agreement. The Company and Executive further agree that the services to be rendered under this Agreement by Executive are special, unique and of extraordinary character, and that in the event of the breach by Executive of the terms and conditions of this Agreement or if Executive, without the prior consent of the Board of Directors, shall take any action in violation of this Section 8, the Company will suffer irreparable harm for which there is no adequate remedy at law. Accordingly, Executive hereby consents to the entry of a temporary restraining order or ex parte injunction, in addition to any other remedies available at law or in equity, to enforce the provisions hereof. Any proceeding or action seeking equitable relief for violation of this Section 8 must be commenced in the federal or state courts, in either case in Virginia. Executive and the Company
irrevocably and unconditionally submit to the jurisdiction of such courts and agree to take any and all future action necessary to submit to the jurisdiction of and venue in such courts.
9. NOTICE. Any notice required or permitted hereunder shall be in writing and shall be deemed sufficient when given by hand or by nationally recognized overnight courier or by Express, registered or certified mail, postage prepaid, return receipt requested, and addressed, if to the Company at 2900 Eisenhower Avenue, Suite 300, Alexandria, VA 22303, Attention: Chief Executive Officer (with a second copy, sent by the same means and to the same address, Attention: General Counsel), and if to Executive at the address set forth in the Company's records (or to such other address as may be provided by notice).
10. MISCELLANEOUS. This Agreement, together with Annex A and Annex B and the Split Dollar Insurance Agreement and any Equity Award Agreements now or hereafter in effect, constitutes the entire agreement between the parties concerning the subjects hereof and supersedes any and all prior agreements or understandings, including, without limitation, any plan or agreement providing benefits in the nature of severance, but excluding benefits provided under other Company plans or agreements, except to the extent this Agreement provides greater rights than are provided under such other plans or agreements. This Agreement may not be assigned by Executive without the prior written consent of the Company, and may be assigned by the Company and shall be binding upon, and inure to the benefit of, the Company's successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof.
11. AMENDMENT. This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective. No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by Executive or an authorized officer of the Company, as the case may be.
12. SEVERABILITY. The provisions of this Agreement are severable. The invalidity of any provision shall not affect the validity of any other provision, and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
13. RESOLUTION OF DISPUTES.
(a) PROCEDURES AND SCOPE OF ARBITRATION. Except for any controversy or
claim seeking equitable relief pursuant to Section 8 of this Agreement, all
controversies and claims arising under or in connection with this Agreement or
relating to the interpretation, breach or enforcement thereof and all other
disputes between the parties, shall be resolved by expedited, binding
arbitration, to be held in the District of Columbia metropolitan area in
accordance with the applicable rules of the American Arbitration Association
governing employment disputes (the "National Rules"). In any proceeding relating
to the amount owed to Executive in connection with his termination of
employment, it is the contemplation of the parties that the only remedy that the
arbitrator may award in such a proceeding is an amount equal to the termination
payments, if any, required to be provided under the applicable provisions of
Section 7(c) and, if applicable, Section 7(d) hereof, to the extent not
previously paid, plus the costs of arbitration and Executive's reasonable
attorneys fees and expenses as provided below. Any award made by such arbitrator
shall be
final, binding and conclusive on the parties for all purposes, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
(b) ATTORNEYS FEES.
(i) REIMBURSEMENT AFTER EXECUTIVE PREVAILS. Except as otherwise provided in this paragraph, each party shall pay the cost of his or its own legal fees and expenses incurred in connection with an arbitration proceeding. Provided an award is made in favor of Executive in such proceeding, all of his reasonable attorneys fees and expenses incurred in pursuing or defending such proceeding shall be promptly reimbursed to Executive by the Company within five days of the entry of the award. Any award of reasonable attorneys' fees shall take into account any offer of the Company, such that an award of attorneys' fees to the Executive may be limited or eliminated to the extent that the final decision in favor of the Executive does not represent a material increase in value over the offer that was made by the Company during the course of such proceeding. However, any elimination or limitation on attorneys' fees shall only apply to those attorneys' fees incurred after the offer by the Company.
(ii) REIMBURSEMENT IN ACTIONS TO STAY, ENJOIN OR COLLECT. In any case where the Company or any other person seeks to stay or enjoin the commencement or continuation of an arbitration proceeding, whether before or after an award has been made, or where Executive seeks recovery of amounts due after an award has been made, or where the Company brings any proceeding challenging or contesting the award, all of Executive's reasonable attorneys fees and expenses incurred in connection therewith shall be promptly reimbursed by the Company to Executive, within five days of presentation of an itemized request for reimbursement, regardless of whether Executive prevails, regardless of the forum in which such proceeding is brought, and regardless of whether a Change in Control has occurred.
(iii) REIMBURSEMENT AFTER A CHANGE IN CONTROL. Without limitation on the foregoing, solely in a proceeding commenced by the Company or by Executive after a Change in Control has occurred, the Company shall advance to Executive, within five days of presentation of an itemized request for reimbursement, all of Executive's legal fees and expenses incurred in connection therewith, regardless of the forum in which such proceeding was commenced, subject to delivery of an undertaking by Executive to reimburse the Company for such advance if he does not prevail in such proceeding (unless such fees are to be reimbursed regardless of whether Executive prevails as provided in clause (ii) above).
14. SURVIVORSHIP. The provisions of Sections 4(b), 6, 8 (to the extent described below) and 13 of this Agreement shall survive Executive's termination of employment. Other provisions of this Agreement shall survive any termination of Executive's employment to the extent necessary to the intended preservation of each party's respective rights and obligations. The provisions of Section 8(a) shall in no event apply if Executive's employment terminates for any reason after the expiration of the Employment Period (for clarification, this means that if Executive's employment terminates on or prior to the expiration of the Original Term or any later Renewal Term then the one year post-termination non-compete set forth in Section 8(a) will apply if the termination is for one of the reasons set forth in Section 8(a)). The provisions of Section 8(b) shall apply during the Employment Period, and shall also apply with respect to any termination of Executive's employment for any reason during the two year period following the expiration of the Employment Period (for clarification, this means that if Executive's employment terminates for any reason on or prior to the second anniversary of the expiration of the Original Term or any later Renewal Term, then the non-solicitation requirement of Section 8(b) shall apply to Executive for one year following
termination of employment).
15. BOARD ACTION. Where an action called for under this Agreement is required to be taken by the Board of Directors, such action shall be taken by the vote of not less than a majority of the members then in office and authorized to vote on the matter.
16. WITHHOLDING. All amounts required to be paid by the Company shall be subject to reduction in order to comply with applicable federal, state and local tax withholding requirements.
17. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.
18. GOVERNING LAW. This Agreement shall be construed and regulated in all respects under the laws of the State of Maryland.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written.
AVALONBAY COMMUNITIES, INC.
By: /s/ BRYCE BLAIR ------------------------------------ Bryce Blair Its: Chief Executive Officer /s/ TIMOTHY J. NAUGHTON ----------------------------------------- Timothy J. Naughton |
(a) | In all events, any stock options issued will be issued prior to Executives Date of Termination so that such stock options are employee stock options. Such stock options shall have an exercise price equal to the closing price of the Companys stock on the date of grant of such options, and such options shall expire one year after the date of grant. | ||
(b) | The Company and Executive shall work in good faith to determine an appropriate Cash Bonus and LT Equity Bonus for the year in which the Date of Termination occurs. Such determination shall be based in good faith on an evaluation of Executives and the Companys performance. If the Company and Executive cannot agree on appropriate amounts, then: |
(A) | The Company may defer the determination of the Cash Bonus and the restricted stock portion of the LT Equity Bonus until such bonuses in respect of such year are determined for other officers, and at such time the amounts to be used for determining Executives pro rata bonuses shall be a percentage of his target Cash Bonus and a percentage of his target number of restricted shares with such percentages being equal to the average of the percentages that apply to the Cash Bonus and restricted shares, respectively, of other officers ranked Senior Vice President or higher; and | ||
(B) | The Company may grant to Executive a number of stock options based on the assumption that the percentage of the target number of options Executive would have received in respect of the year in which the Date of Termination occurs would equal the average of the percentage realization applied to options granted with respect to the prior three calendar years. |
(c) | Once the determination in the preceding paragraph is made, the pro rata portion of such amounts shall equal such amounts multiplied by a fraction, the numerator of which is the number of days from January 1 to the Date of Termination in the year of termination and the denominator of which is 365. |
I. | Take whatever action is necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equitybased awards and be entitled to exercise and continue to exercise all stock options and all other equitybased awards having an exercise schedule and to retain such grants and awards to the same extent as if they were vested upon termination of employment in accordance with their terms; and | ||
II. | Continue to pay, or reimburse Executive for, all premiums then due or thereafter payable on the wholelife portion of the splitdollar insurance policy referenced under Section 3(d) for so long as such payments are due; provided , that the Companys obligations under this Section 7(c)(iv)(B)(II) are contingent on Executives timely payment of the premiums then due or thereafter payable on the term portion of said split-dollar insurance policy; |
AVALONBAY COMMUNITIES, INC. | ||||
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By:
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/s/ Bryce Blair | |||
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Its: |
Bryce Blair
Chief Executive Officer |
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/s/ Leo S. Horey | ||||
Leo S. Horey |
Exhibit 10.15
AVALONBAY COMMUNITIES, INC.
2900 EISENHOWER AVENUE, THIRD FLOOR
ALEXANDRIA, VA 22314
MARCH 24, 2000
Gilbert M. Meyer
26007 Torello Lane
Los Altos Hills, CA 94022
RE: RETIREMENT AGREEMENT
Dear Mr. Meyer:
This letter agreement (the "Agreement") confirms the terms that will govern your resignation, by reason of retirement, from your offices and employment with AvalonBay Communities, Inc. (the "Company," a term which for purposes of this Agreement includes its related or affiliated entities).
1. Retirement; Nomination as Director at 2000 Annual Meeting. You and the Company hereby confirm that you will retire (i) effective immediately following the next annual meeting of the shareholders of the Company if held in May 2000, or (ii) if such annual meeting is held after May 2000, effective as of May 10, 2000 (such date as may apply, the "Date of Retirement"). Accordingly, you hereby irrevocably tender your resignation, as of the Date of Retirement, as Executive Chairman of the Company and (except for your position as a Director of AvalonBay Communities, Inc.) from all positions and offices you hold with the Company or any of its affiliated entities. The Company hereby acknowledges your retirement and accepts your resignations effective as of the Date of Retirement.
Subject to the execution in good faith by the Company's Board of Directors of its fiduciary duties, the Company agrees that the Board (i) shall nominate you for re-election at the Company's 2000 annual meeting of stockholders as a Director of the Company and, (ii) following the 2000 annual meeting shall grant you the honorary title of "Founder". Following the Date of Retirement and upon your re-election as a Director, if applicable, in calendar year 2001 and thereafter for so long as you remain a Director, you will receive the same compensation as other outside non-employee Directors of the Company. You waive your right, if any, to receive compensation, whether in the form of stock grants, options awards or otherwise, as an outside non-employee Director during calendar year 2000.
The Company will make a public announcement on or promptly following the date hereof, in a mutually acceptable form, regarding your retirement in May 2000.
2. Compensation Through Date of Retirement.
(a) Through the Date of Retirement, you will continue to receive a base salary at a rate of $410,000 per year (subject to applicable withholding).
(b) On the Date of Retirement, you will be paid in lieu of a prorated cash bonus for calendar year 2000 the amount of $73,374.32 (subject to applicable withholding).
Gilbert M. Meyer
March 24, 2000
(c) As of the date of this letter, your accrued but unused vacation is 56 days. From and after the date hereof, you will no longer accrue additional vacation per bi-weekly pay period and/or be charged against such accrual for vacation days you reasonably use between the date of this letter and the Date of Retirement. You will be paid $62,904.11 (i.e., 56/365 ($410,000)) for all accrued but unused vacation days on the Date of Retirement (subject to applicable withholding).
(d) Through the Date of Retirement, you will receive the benefits for which you are eligible under the Company's other generally applicable employee benefit plans, practices and policies.
(e) By vote of the Compensation Committee on February 28, 2000, your cash bonus and equity awards in respect of service during 1999 are as follows: $243,200 cash bonus (which is fully vested and has been paid to you in accordance with the Company's practice for senior managers); 7,260 restricted shares of common stock; and 59,400 stock options with an exercise price equal to the market closing price on February 28, 2000. Such options and shares will vest in accordance with the customary terms provided therein, subject, in the case of options, to acceleration on the Date of Retirement as provided herein, and, in the case of restricted shares, subject to Section 4 hereinbelow.
3. Split Dollar Life Insurance/Term Life.
(a) In recognition of your services to the Company, the Company will continue to pay, for so long as such payments are due, all premiums then due and payable on, but only to the extent relating to, the whole-life portion of, the split dollar life insurance policy obtained for you pursuant to Section 3(d) of the Employment Agreement dated March 9, 1998, by and between you and the Bay Apartment Communities, Inc. (a predecessor name of the Company) (the "Employment Agreement"); provided that the Company's obligations to pay under this Section 3 are conditioned upon your payment of all premiums payable on, but only to the extent relating to, the term-life portion of, said split dollar life insurance policy. You agree to cooperate with the Company in verifying your continuing satisfaction of the foregoing condition. The Company agrees to promptly notify you and you agree to promptly notify the Company of any premium notice or other notice it or you receive from the insurer relating to the policy. In the event that the Company determines that its obligation to make payments under this Section 3 has ceased by reason of your non-payment of premiums relating to the term-life portion of said split dollar life insurance policy, the Company shall provide you with thirty (30) days advance written notice of its intent to terminate payments hereunder. Such notice shall identify specifically your non-payment of the term life premium that is the basis on which the Company asserts its right to cease payments and shall provide you with a
Gilbert M. Meyer
March 24, 2000
reasonable opportunity to cure.
(b) As an additional retirement benefit, the Company has agreed to provide you with the following death benefit, which shall provide assurances to you that the fees payable to you under the Consulting Agreement in respect of your services during the three year period following the date hereof will accrue to you or your estate in the event of your death during such period:
(i) In the event that you die during the three year period following the Date of Retirement, the Company will pay in accordance with Sections 14(j) below, on the date or dates when such payments would otherwise have been due, the remaining cash consulting Fees due to you under the Consulting Agreement.
(ii) You agree to use reasonable best efforts to cause a
life insurance company to tender to you an offer of a
term life insurance policy with reasonable commercial
rates that will provide a death benefit approximately
equal to the cash consulting Fees still due you under
the Consulting Agreement. You will advise the Company
of the premiums due therefor prior to entering into
such life insurance policy, and the Company will
advise you as to whether the Company intends to
reimburse you for the premiums therefor in accordance
with the next clause (iii). To satisfy this clause
(ii), you may procure two policies, one of which may
lapse after one year.
(iii) If the Company reimburses you for the premiums therefore, you will enter into such policy, whereupon, during the term of such policy, the Company's obligations under clause (i) shall not apply. You shall have the right to designate, and from time to time change, the beneficiary(ies) under such policy.
(iv) If the Consulting Period is terminated by the Company for Cause (as set forth in the Consulting Agreement), the Company's obligations in this Section 3(b) shall not apply after the date of such termination.
(v) By way of clarification, you and the Company agree that in no event shall you or your estate or other beneficiaries be paid in the aggregate, by virtue of the Company's obligations hereunder, or under the Consulting Agreement, or by virtue of the term life insurance policy that may be procured as contemplated hereby, an
Gilbert M. Meyer
March 24, 2000
(c) As an additional retirement benefit, the Company further has agreed that, in the event you die before all common stock deliverable to you as Additional Fees under the Consulting Agreement has been delivered, the Company shall deliver such installment or installments of common stock in accordance with Section 14(j) below, on the date or dates when such deliveries would otherwise have been due under Section 1(b) of the Consulting Agreement.
4. Restricted Stock, Deferred Stock Awards and Founder's Stock.
(a) You and the Company agree and acknowledge that the Company's 1994 Stock Incentive Plan, as amended (the "Stock Incentive Plan") provides that all remaining shares of the restricted common stock of the Company that you were granted as Restricted Stock Awards are to continue to vest from and after the Date of Retirement in accordance with the terms of each such grant. For clarification, Exhibit A hereto describes all such Restricted Stock. Notwithstanding the foregoing, for good and valuable consideration, you hereby waive your right to and forfeit, as of the Date of Retirement, all then remaining unvested Restricted Stock. To the extent the Company has not already done so with respect to previously vested Restricted Stock, the Company shall (or shall cause the Company's transfer agent to) (i) promptly deliver to you certificates representing such stock with no restrictive legends, and such stock shall be freely transferable by you subject to applicable securities laws and the Company's insider trading policy, which shall apply to you in your capacity as a Director; and (ii) remove all restrictive legends on shares previously issued to you. In the event that you hold or were given certificates regarding such restricted shares, the Company's obligation in the preceding sentence is subject to: (A) delivery by you to the Company or its agent of such certificate; or (B) your delivery to the Company or its agent of a loss affidavit. You acknowledge that the Company has advised you to consult an attorney regarding your continuing obligations under Section 16 of the Securities Exchange Act of 1934, as amended, as well as other federal and state securities (including insider trading) laws. You agree that you shall continue to be bound by the Company's insider trading policy for so long as you are a Director.
(b) The Company acknowledges that as of the date hereof, you have 24,977 Deferred Stock Awards, which number will continue to grow as a result of the reinvestment of "phantom" dividends in accordance with the Company's current practice and shall be adjusted equitably to reflect stock splits, stock dividends or similar changes
Gilbert M. Meyer
March 24, 2000
affecting the common stock of the Company prior to your conversion of such Deferred Stock as provided hereinbelow. The Company agrees that you may convert some or all of your Deferred Stock Awards into common stock of the Company at any time after May 10, 2000 upon ten (10) business days written notice (with stock certificates promptly delivered to you). Your right to convert the Deferred Stock Awards remains subject to all applicable securities laws. Promptly upon your ceasing to serve as a Director, any remaining Deferred Stock Awards promptly shall be converted into common stock of the Company and paid to you. Your right to have the Deferred Stock Awards convert into common stock and be paid to you will in no way depend on your service under the Consulting Agreement or any defaults by you thereunder.
(c) The Company shall (or shall cause the Company's transfer agent to) remove all restrictive legends from your founder's shares (i.e., stock you held in Bay Apartment Communities, Inc. at the time of its initial public offering). In the event that you hold or were given certificates regarding such founder's shares, the Company's obligation in the preceding sentence is subject to: (i) delivery by you to the Company or its agent of such certificate; or (ii) your delivery to the Company or its agent of a loss affidavit.
5. Stock Options.
(a) You and the Company agree and acknowledge that the Stock Incentive Plan provides that by reason of your retirement, all options to purchase shares of the Company's common stock that you were granted shall automatically vest as of the Date of Retirement. For clarification, Exhibit B hereto lists all such options and their respective exercise prices. The Company acknowledges that, assuming that you continue to serve as a Director immediately following your retirement, the exercise periods with respect to your various options are unaffected by your retirement. Accordingly, (i) you have until the earlier of (A) the expiration of three (3) months following the termination of your membership on the Company's board of directors (or six (6) months from your death if you die while a director) or (B) the expiration of the original term of such option (i.e., ten years after its grant date), in which to exercise those options granted to you prior to 1999; and (ii) you have until the earlier of (A) the expiration of twelve months following the termination of your membership on the Company's board of directors (or six (6) months from your death if you die while a director) or (B) the expiration of the original term of such option (i.e., ten years after its grant date) in which to exercise those options granted to you in or after 1999.
(b) Notwithstanding the foregoing, the Board of Directors, or the Compensation Committee of the Board of Directors of the Company, has taken such action as is necessary so that with respect to options granted on January 24, 1997, January 30, 1998, and February 28, 2000 you will have until January 24, 2007,
Gilbert M. Meyer
March 24, 2000
January 30, 2008 and February 28, 2010, respectively in which to exercise such
options (collectively, the "Extended Options") subject to the following
provisions. In the event that you wilfully and materially breach the terms of
the Consulting Agreement or the Mutual Release and Separation Agreement each
dated as of March 24, 2000, by and between you and the Company (respectively,
the "Consulting Agreement" and the "Separation Agreement"), (a "Material
Breach") at any time after the date hereof and within thirty-six (36) months of
the Date of Retirement, in addition to the Company's rights to obtain equitable
relief or damages for such breach, the Company may suspend thirty-three percent
(33%) of the original amount of each tranche of the Extended Options (or, with
respect to a tranche of Extended Options for which less than thirty-three
percent (33%) of the original amount is outstanding at that time, all such
tranche of Extended Options) ("Suspended Options"). The Company shall suspend
your right to exercise the Suspended Options by (i) filing a request for
arbitration within a reasonable time after any Senior Manager (i.e., any
individual holding the title of Senior Vice President or higher) learns of the
Material Breach, which request specifically states that the Company is
suspending your right to exercise, or (ii) in the event the Company reasonably
determines that your asserted Material Breach is curable, by sending you a
written notice describing the Material Breach and the steps you must take to
cure such Material Breach. In the event that the Company asks you to cure a
Material Breach and you fail to cure such breach to the Company's satisfaction
within five (5) business days following delivery to you of written notice from
the Company, the Company then may commence an arbitration proceeding, in which
case your right to exercise the Suspended Options will remain suspended. In the
event that an arbitrator determines that you have not committed a Material
Breach, the arbitrator may award you damages directly caused by the suspension
of your right to exercise the Suspended Options. In the event that an
arbitrator determines that you have committed a Material Breach, the exercise
period of the Suspended Options shall terminate immediately, without prejudice
to the Company's right to obtain equitable relief or damages for such Material
Breach; provided that an award of additional damages (if any) shall take into
account termination of the Suspended Options. Nothing contained herein
otherwise shall be deemed to limit the Company's right to obtain equitable
relief or damages for a Material Breach that occurs before or after thirty-six
(36) months after the date you execute this Agreement.
In the event of your death, your options shall be exercisable by your legal representative or legatee in accordance with their terms.
6. Loan Forgiveness. The Company will forgive, on the Date of Retirement, the amount you owe in consideration of loans the Company made to you in connection with the grant of restricted stock prior to the date hereof (i.e., approximately $72,500). On or promptly following the Date of Retirement, the promissory notes representing the
Gilbert M. Meyer
March 24, 2000
approximately said indebtedness shall be returned to you marked "Paid in Full." You understand and acknowledge that the Company will not make any further loans to you with respect to restricted stock awarded to you in calendar year 2000.
7. Expense Reimbursement. You shall continue to be entitled to reimbursement of reasonable business expenses incurred through the Date of Retirement in accordance with Section 4(a) of the Employment Agreement. As a Director, you will be entitled to reimbursement of reasonable business expenses in accordance with the Company's customary practices, from and after the Date of Retirement.
8. Status of Other Benefits. Except as expressly provided hereinabove, your eligibility to participate in any of the Company's employee benefit plans or programs ceases on or after the Date of Retirement in accordance with the terms and conditions of each of those benefit plans and programs and your rights to benefits under any of the employee benefit plans or programs, if any, are governed by the terms and conditions of each of those employee benefit plans and programs; provided, that nothing in this Section 8 shall be construed to affect you or your dependents' rights thereafter to receive continuation coverage to the extent authorized by and consistent with 29 U.S.C. Section 1161, et. seq. (commonly known as "COBRA") and applicable group health and dental plan terms, entirely at your or their own cost (as determined for COBRA premium purposes). Notwithstanding any shorter period that may be provided under COBRA, the Company will make its group health and dental plans (or reasonably comparable health and dental insurance) available to you and your qualified dependents for three years following the Date of Retirement, such coverage to be entirely at your or their own cost (as determined for COBRA premium purposes).
9. Return of Property. In accordance with Section 4 of the
Nondisclosure Agreement, dated as of March 9, 1998, by and between you and Bay
Apartment Communities, Inc. (a predecessor name to the Company), and
incorporated in the Employment Agreement as Annex B ("Nondisclosure
Agreement"), you agree that, on or promptly following the Date of Retirement,
you will promptly return to the Company (a) all records, correspondence, notes,
financial statements, computer printouts and other documents and recorded
material of every nature (including copies thereof) that may be in your
possession or control dealing with Confidential Information (as defined in
Section 8 of the Nondisclosure Agreement), provided, however, that you may keep
your laptop computer and personal home computer, but at the Company's request,
you will allow the Company to delete all Company records therefrom and to
discontinue computer access to the Company's computer files. Additionally, you
may keep materials you properly possess in your capacity as a Director, and may
download and keep your calendar and rolodex (except to the extent that the
Company reasonably and specifically notifies you that any such information
constitutes Confidential Information, in which case the specifically cited
information may not be downloaded).
Gilbert M. Meyer
March 24, 2000
10. Non-Compete Section 8(a) of the Employment Agreement is hereby amended and restated and incorporated herein as of the Effective Date as follows:
For so long as Executive remains a Director of the Company, Executive shall not, without the prior written consent of the Board of Directors, become associated with, or engage in any "Restricted Activities" with respect to any "Competing Enterprise," as such terms are hereinafter defined, whether as an officer, employee, principal, partner, agent, consultant, independent contractor or shareholder. "Competing Enterprise," for purposes of this Agreement, shall mean any person, corporation, partnership, venture or other entity which (a) is a publicly traded real estate investment trust, or (b) is engaged in the business of managing, owning, leasing or joint venturing residential real estate within 30 miles of residential real estate owned or under management by the Company or its affiliates. "Restricted Activities," for purposes of this Agreement, shall mean executive, managerial, directorial, administrative, strategic, business development or supervisory responsibilities and activities relating to all aspects of residential real estate ownership, management, residential real estate franchising, and residential real estate joint-venturing.
(a) The Executive's interest in and performance of
services for Greenbriar Homes Communities, Inc. and
its affiliates (collectively, "Greenbriar"), shall
not be deemed to be an association with or engaging
in Restricted Activities with respect to any
Competing Enterprise within the meaning of this
Section 8(a) of the Employment Agreement, but only to
the extent that his association with or involvement
with Greenbriar relates to the single family,
for-sale home business.
(b) The Executive's investment of personal funds in apartment buildings, developments or complexes and the Executive's investment of personal funds in partnerships that invest in apartment buildings, developments or complexes shall not be deemed to be an association with or engaging in Restricted Activities with respect to any Competing Enterprise within the meaning of this Section 8(a) of the Employment Agreement, but only to the extent that (i) such personal investments of equity capital do not exceed $20,000,000 in the aggregate (inclusive of such investments already made) for all such investments (which value is determined at cost as of the date of the Executive's initial
Gilbert M. Meyer
March 24, 2000
(c) In addition the Executive may request consent from the Board to engage in any activity that he believes is not competitive with the Company's then current business or prospective business, and the Board will not unreasonably withhold its consent if the Board concludes in good faith that such activity is not in competition with the Company's then current business or prospective business.
(d) The provisions regarding non-competition above in no way shall limit the Executive's fiduciary and common law obligations to the Company in his role as a Director of the Company.
11. Exclusivity. This Agreement sets forth all the consideration to which you are entitled by reason of your retirement and resulting termination of your employment, and you agree that you shall not be entitled to or eligible for any payments or benefits under any other Company severance, bonus, retention or incentive policy, arrangement or plan.
12. Tax Matters. All payments and other consideration provided to you pursuant to this Agreement shall be subject to any deductions, withholding or tax reporting that the Company reasonably determines to be required for tax purposes; provided, that nothing contained in this Section 12 affects your independent obligation and primary responsibility, which obligation and responsibility you hereby affirm, to determine and make proper judgments regarding the payment of taxes under applicable law. In the case of non-cash compensation (i.e., vesting of restricted stock, loan forgiveness, etc.) you hereby authorize the Company to offset amounts required to be withheld against any other cash compensation or fees then payable by the Company to you, including Fees under the Consulting Agreement.
13. Sale of Equity Interests. On or prior to the Date of Retirement, you will sell to Bryce Blair or another designee of the Company all of your interests in AvalonBay Services I, Inc. and AvalonBay Services II, Inc. pursuant to documents substantially similar in terms to those used when you purchased such shares from Charles Berman. The price therefor will be the fair price as determined by you and the Company, which price you acknowledge has not changed significantly since you purchased said shares from Charles Berman.
Gilbert M. Meyer
March 24, 2000
14. Notices, Acknowledgments and Other Terms
(a) This Agreement shall become effective on the Effective Date of the Separation Agreement (as defined in Section 7(d) thereof) (the "Effective Date").
(b) You are advised to consult with an attorney and tax advisor before signing this Agreement. You acknowledge that you have consulted with an attorney of your choice.
(c) By signing this Agreement, you acknowledge that you are doing so voluntarily and knowingly, fully intending to be bound by this Agreement. You also acknowledge that you are not relying on any representations by any representative of the Company concerning the meaning of any aspect of this Agreement.
(d) In the event of any dispute, this Agreement will be
construed as a whole, will be interpreted in accordance with its fair meaning,
and will not be construed strictly for or against either you or the Company.
Section headings and parenthetical explanations of section references are for
convenience only and shall not be used to interpret the meaning of any
provision or term of this Agreement.
(e) Any notices required to be given under this Agreement shall be provided in writing and delivered by hand or certified mail, and shall be deemed to have been duly given when received at the following addresses, unless and to the extent that notice of change of address has been duly given hereunder
If to you at:
Mr. Gilbert M. Meyer
26007 Torello Lane
Los Altos Hills, CA 94022
with a copy to:
Ethan Lipsig, Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, CA 90071-2371
If to the Company, to it at:
AvalonBay Communities, Inc.
Gilbert M. Meyer
March 24, 2000
Attention: Chief Executive Officer
with a copy to:
AvalonBay Communities, Inc.
2900 Eisenhower Avenue, Third Floor
Alexandria, VA 22314
Attention: General Counsel
and a copy to:
Joseph A. Piacquad, Esq, Goodwin, Procter & Hoar LLP Exchange Place Boston, MA 02109-2881 |
(f) The law of the State of Maryland will govern any dispute about this Agreement, including any interpretation or enforcement of this Agreement.
(g) In the event that any provision or portion of a provision of this Agreement shall be determined to be illegal, invalid or unenforceable, the remainder of this Agreement shall be enforced to the fullest extent possible and the illegal, invalid or unenforceable provision or portion of a provision will be amended by a court of competent jurisdiction, or otherwise thereafter shall be interpreted, to reflect as nearly as possible without being illegal, invalid or unenforceable the parties' intent if possible. If such amendment or interpretation is not possible, the illegal, invalid or unenforceable provision or portion of a provision will be severed from the remainder of this Agreement and the remainder of this Agreement shall be enforced to the fullest extent possible as if such illegal, invalid or unenforceable provision or portion of a provision was not included.
(h) This Agreement may be modified only by a written agreement signed by you and an authorized representative of the Company.
(i) This Agreement, the Separation Agreement and the Consulting Agreement and Sections 4(b), 6, 7(d), 8(a) (as amended by Section 10 of the Retirement Agreement), 8(b) (as clarified hereinbelow), 8(c) and 13(a) (as amended by Section 5 of the Separation Agreement), and Annex B of the Employment Agreement which are incorporated herein, constitute the entire agreement between the parties with respect to the subject matter hereof and, except as expressly provided therein, supersede all prior
Gilbert M. Meyer
March 24, 2000
agreements between the parties with respect to any related subject matter. Without limiting your fiduciary duties as a Director, it is hereby acknowledged that the contractual one year non-solicitation clause in Section 8(b) of the Employment Agreement expires one year after the May 10, 2000, Date of Retirement.
(j) Subject in all events to applicable law, in the event of your death any payments or other consideration then due and payable or deliverable to you by the Company under this Agreement will be paid or delivered to your designated beneficiary, or, if you are not survived by such designated beneficiary, or you fail to effectively designate a beneficiary, to your estate. The Company acknowledges that you have designated The Meyer 1997 Irrevocable Trust, dated February 10, 1997, Jo Ann Conner, or her successor, Trustee, as the beneficiary. You may designate a beneficiary or change such designation from time-to-time in accordance with the notice provisions of this Agreement. The Company will reasonably cooperate with you to modify this provision to the extent reasonably necessary so as to give effect to the purpose of this provision in a manner that complies with applicable laws.
(k) This Agreement shall be binding upon each of the parties and upon their respective heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of each party and to their heirs, administrators, representatives, executors, successors, and assigns.
If you agree to these terms, please sign and date below and return this Agreement to the Company's Chief Executive Officer. This Agreement may be executed in counterparts and/or by facsimile transmission, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.
Sincerely,
AvalonBay Communities, Inc.
By: /s/ RICHARD L. MICHAUX ---------------------- Richard L. Michaux Its: Chief Executive Officer |
Gilbert M. Meyer
March 24, 2000
Accepted and Agreed to:
/s/ GILBERT M. MEYER - ------------------------ Gilbert M. Meyer Dated: March 24, 2000 ---------------- |
Gilbert M. Meyer
March 24, 2000
EXHIBIT A
RESTRICTED STOCK GRANTS
-------------------------------------- Issue Date Total Shares -------------------------------------- 1/24/97 20,000 -------------------------------------- 1/30/98 10,000 -------------------------------------- 2/17/99 6,200 -------------------------------------- 2/28/00 7,260 -------------------------------------- TOTAL: 43,460 -------------------------------------- |
Gilbert M. Meyer
March 24, 2000
EXHIBIT B
STOCK OPTIONS
- ---------------------------------------------------------------------------------------------------------- ISSUE DATE SHARES STRIKE $ EXERCISED OUTSTANDING - ---------------------------------------------------------------------------------------------------------- 3/10/94 100,000 $20.0000 -- 100,000 - ---------------------------------------------------------------------------------------------------------- 3/31/95 60,000 $18.3750 -- 60,000 - ---------------------------------------------------------------------------------------------------------- 1/26/96 40,000 $23.3750 -- 40,000 - ---------------------------------------------------------------------------------------------------------- 1/24/97 100,000 $36.6250 -- 100,000 - ---------------------------------------------------------------------------------------------------------- 1/30/98 100,000 $37.9375 -- 100,000 - ---------------------------------------------------------------------------------------------------------- 2/17/99 62,000 $32.0000 -- 62,000 - ---------------------------------------------------------------------------------------------------------- 2/28/00 59,400 $33.7500 -- 59,400 - ---------------------------------------------------------------------------------------------------------- TOTAL: 521,400 N/A -- 521,400 - ---------------------------------------------------------------------------------------------------------- |
EXHIBIT 10.17
AVALON PROPERTIES, INC.
1993 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Avalon Properties, Inc. 1993 Stock Option and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable the officers, employees and Directors of Avalon Properties, Inc. (the "Company") and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company's welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"ACT" means the Securities Exchange Act of 1934, as amended.
"AWARD" or "AWARDS," except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options and Non-Qualified Stock Options.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means and shall be limited to a vote of the Board of Directors resolving that the participant should be dismissed as a result of (i) any material breach by the participant of any agreement to which the participant and the Company are parties, (ii) any act (other than retirement) or omission to act by the participant which may have a material and adverse effect on the business of the Company or any Subsidiary or on the participant's ability to perform services for the Company or any Subsidiary, including, without limitation, the participant being convicted of any crime (other than ordinary traffic violations), or (iii) any material misconduct or neglect of duties by the participant in connection with the business or affairs of the Company or any Subsidiary.
"CHANGE OF CONTROL" is defined in Section 10.
"CODE" means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
"COMMITTEE" means the Board or any Committee of the Board referred to in Section 2.
"DISABILITY" means disability as set forth in Section 22(e)(3) of the Code.
"DISINTERESTED PERSON" means a Non-Employee Director who qualifies as such under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor definition under the Act.
"EFFECTIVE DATE" means the date on which the Plan is approved by shareholders as set forth in Section 12.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the related rules, regulations and interpretations.
"FAIR MARKET VALUE" on any given date means the last reported sale price at which Stock is traded on such date or, if no Stock is traded on such date, the most recent date on which Stock was traded, as reflected on the New York Stock Exchange or, if applicable, any other national stock exchange on which the Stock is traded. Notwithstanding the foregoing, the Fair Market Value on the first day of the Company's initial public offering shall mean the initial public offering price.
"INCENTIVE STOCK OPTION" means any Stock Option designated and qualified as an "incentive stock option" as defined in Section 422 of the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not also an employee of the Company or any Subsidiary.
"NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an Incentive Stock Option.
"OPTION" or "STOCK OPTION" means any option to purchase shares of Stock granted pursuant to Section 5.
"STOCK" means the Common Stock, $.01 par value per share, of the Company, subject to adjustments pursuant to Section 3.
"SUBSIDIARY" means any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities, beginning with the Company if each of the corporations or entities (other than the last corporation or entity in the unbroken chain) owns stock or other interests possessing 50% or more of the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS AND DETERMINE AWARDS
(a) COMMITTEE. Prior to the date of the closing of the Company's initial public offering, the Plan shall be administered by the Board. On and after the date of the closing
of the Company's initial public offering, the Plan shall be administered by all of the Non-Employee Director members of the Compensation Committee of the Board, or any other committee of not less than two Non-Employee Directors performing similar functions, as appointed by the Board from time to time. Each member of the Committee shall be a Disinterested Person on and after the date of the closing of the Company's initial public offering.
(b) POWERS OF COMMITTEE. The Committee shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:
(i) to select the officers and other employees of the Company and its Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any, of Incentive Stock Options or Non-Qualified Stock Options granted to any one or more participants;
(iii) to determine the number of shares to be covered by any Award;
(iv) to determine and modify the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and participants, and to approve the form of written instruments evidencing the Awards;
(v) to accelerate the exercisability or vesting of all or any portion of any Option;
(vi) subject to the provisions of Section 5(a)(iii), to extend the period in which Stock Options may be exercised; and
(vii) to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all persons, including the Company and Plan participants.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) SHARES ISSUABLE. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 10% of the shares of Stock sold in the Company's initial public offering. For purposes of this limitation, the shares of Stock
underlying any Awards which are forfeited, cancelled, reacquired by the Company, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan so long as the participants to whom such Awards had been previously granted received no benefits of ownership of the underlying shares of Stock to which the Award related. Subject to such overall limitation, shares may be issued up to such maximum number pursuant to any type or types of Award, including Incentive Stock Options. Shares issued under the Plan may be authorized but unissued shares or shares reacquired by the Company.
(b) STOCK DIVIDENDS, MERGERS, ETC. In the event of a stock dividend, stock split or similar change in capitalization affecting the Stock, the Committee shall make appropriate adjustments in (i) the number and kind of shares of stock or securities on which Awards may thereafter be granted, (ii) the number and kind of shares remaining subject to outstanding Awards, and (iii) the option or purchase price in respect of such shares. In the event of any merger, consolidation, dissolution or liquidation of the Company, the Committee in its sole discretion may, as to any outstanding Awards, make such substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan and in the number and purchase price (if any) of shares subject to such Awards as it may determine and as may be permitted by the terms of such transaction, or amend or terminate such Awards upon such terms and conditions as it shall provide (which, in the case of the termination of the vested portion of any Award, shall require payment or other consideration which the Committee deems equitable in the circumstances).
(c) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in substitution for stock and stock based awards held by employees of another corporation who concurrently become employees of the Company or a Subsidiary as the result of a merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers and other employees of the Company and its Subsidiaries who are responsible for or contribute to the management, growth or profitability of the Company and its Subsidiaries and who are selected from time to time by the Committee, in its sole discretion. Non-Employee Directors are also eligible to participate in the Plan but only to the extent provided in Section 5(c) below.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after November 11, 2003.
(a) STOCK OPTIONS GRANTED TO EMPLOYEES. The Committee in its discretion may grant Stock Options to employees of the Company or any Subsidiary. Stock Options granted to employees pursuant to this Section 5(a) shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(i) EXERCISE PRICE. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5(a) shall be determined by the Committee at the time of grant but shall be not less than 100% of Fair Market Value on the date of grant. If an employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation and an Incentive Stock Option is granted to such employee, the option price shall be not less than 110% of Fair Market Value on the grant date.
(ii) GRANT OF OPTIONS IN LIEU OF CASH BONUS. Upon the request of an employee and with the consent of the Committee, such employee may elect to receive a Stock Option each calendar year in lieu of cash bonus to which he may become entitled during the following year pursuant to any other plan of the Company, but only if such employee makes an irrevocable election to waive receipt of all or a portion of such cash bonus. Such election shall be made no later than 15 days preceding January 1 of the calendar year in which the cash bonus would otherwise be paid. A Stock Option shall be granted to each employee who made such an irrevocable election on the date the waived cash bonus would otherwise be paid; provided, however, that with respect to an employee who is subject to Section 16 of the Act, if such grant date is not at least six months and one day from the date of the election, the grant shall be delayed until the date which is six months and one day from the date of the election (or the next following business day, if such date is not a business day). The exercise price per share shall be the Fair Market Value of the Stock on the date the Stock Option is granted. The number of shares subject to the Stock Option shall be determined by dividing the amount of the waived cash bonus by the Fair Market Value of the Stock on the date the Stock Option is granted. The Stock Option shall be granted for whole number of shares so determined; the value of any fractional share shall be paid in cash. An employee may revoke his election under this Section 5(a)(ii) on a prospective basis at any time; provided, however, that with respect to an employee who is subject to Section 16 of the Act, such revocation shall only be effective six months and one day following the date of such revocation.
(iii) OPTION TERM. The term of each Stock Option shall be fixed by the Committee, but except as provided in Sections 5(a)(vii) and (viii) no Incentive Stock Option shall be exercisable more than ten years after the date the option is granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation and an Incentive Stock Option is granted to such employee, the term of such option shall be no more than five years from the date of grant.
(iv) EXERCISABILITY; RIGHTS OF A SHAREHOLDER. Stock Options shall become vested and exercisable at such time or times, whether or not in installments, as shall be determined by the Committee at or after the grant date; provided, however, that Stock Options in lieu of cash bonus shall be exercisable immediately. The Committee may at any time accelerate the exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a shareholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.
(v) METHOD OF EXERCISE. Stock Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to restrictions under any Company plan and that have been held by the optionee for at least six months, if permitted by the Committee in its discretion. Such surrendered shares shall be valued at Fair Market Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. Payment instruments will be received subject to collection.
The delivery of certificates representing shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the Optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by
the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Stock Option or applicable provisions of laws.
(vi) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution and all Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee.
(vii) TERMINATION BY DEATH. If any optionee's employment by the Company and its Subsidiaries terminates by reason of death, the Stock Option may thereafter be exercised, to the extent exercisable at the date of death, by the legal representative or legatee of the optionee, for a period of six months (or such longer period as the Committee shall specify at any time) from the date of death.
(viii) TERMINATION BY REASON OF DISABILITY.
(A) Any Stock Option held by an optionee whose employment by the Company and its Subsidiaries has terminated by reason of Disability may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of twelve months (or such longer period as the Committee shall specify at any time) from the date of such termination of employment.
(B) The Committee shall have sole authority and discretion to determine whether a participant's employment has been terminated by reason of Disability.
(C) Except as otherwise provided by the Committee at the time of grant, the death of an optionee during a period provided in this Section 5(a)(viii) for the exercise of a Non-Qualified Stock Option shall extend such period for six months from the date of death.
(ix) TERMINATION FOR CAUSE. If any optionee's employment by the Company and its Subsidiaries has been terminated for Cause, any Stock Option held by such optionee shall terminate and be of no further force and effect after 30 days from the date of termination of employment or at the expiration of the stated term of the Option, if earlier.
(x) OTHER TERMINATION. Unless otherwise determined by the Committee, if an optionee's employment by the Company and its Subsidiaries terminates for any reason other than death, Disability, or for Cause, any Stock Option held by such optionee may thereafter be exercised, to the extent it was exercisable on the date of termination of employment, for three months (or such longer period as the Committee shall specify at any time) from the date of termination of employment or until the expiration of the stated term of the Option, if earlier.
(xi) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent required for "incentive stock option" treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its Subsidiaries become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000.
(xii) FORM OF SETTLEMENT. Shares of Stock issued upon exercise of a Stock Option shall be free of all restrictions under the Plan, except as otherwise provided in this Plan.
(b) RELOAD OPTIONS. At the discretion of the Committee, Options granted under Section 5(a) may include a so-called "reload" feature pursuant to which an optionee exercising an option by the delivery of a number of shares of Stock in accordance with Section 5(a)(v)(B) hereof would automatically be granted an additional Option (with an exercise price equal to the Fair Market Value of the Stock on the date the additional Option is granted and with the same expiration date as the original Option being exercised, and with such other terms as the Committee may provide) to purchase that number of shares of Stock equal to the number delivered to exercise the original Option.
(c) STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS.
(i) AUTOMATIC GRANT OF OPTIONS. Each Non-Employee Director who becomes a Director of the Company on or before the date 30 days after the closing of the Company's initial public offering shall automatically be granted a Non-Qualified Stock Option to purchase 5,000 shares of Stock on such date at a price per share equal to the greater of the Fair Market Value on the date of grant or $20.50. Each Non-Employee Director who is serving as Director of the Company on the fifth business day after each annual meeting of stockholders, beginning with the 1994 annual meeting, shall automatically be granted on such day a Non-Qualified Stock Option to acquire 3,000 shares of Stock. Except as provided in the preceding sentence, the exercise price per share for the Stock covered by a Stock Option granted hereunder shall be equal to the Fair Market Value of the Stock on the date the Stock Option is granted.
(ii) GRANT OF OPTIONS IN LIEU OF DIRECTOR'S FEES. Each Non-Employee Director shall receive a Non-Qualified Stock Option each calendar year in lieu of cash director's fees he would otherwise receive for such year, but only if the Non-Employee Director makes an irrevocable election to waive receipt of all or a portion of such cash director's fees. Such election shall be made during the 30-day period immediately preceding January 1 of a calendar year and shall be effective six months and one day following the date of such election. A Non-Qualified Stock Option shall be granted to each Non-Employee Director who made such an irrevocable election on each July 15 and January 15 (or the next following business day, if such date is not a business day) with respect to the waived amount of director's fees earned for the six-month period ending June 30 and December 31,
respectively. The exercise price per share shall be the Fair Market Value of the Stock on the date the Stock Option is granted. The number of shares subject to the Stock Option shall be determined by dividing the amount of the waived directors' fees for the applicable six-month period by the Fair Market Value of the Stock on the date the Stock Option is granted. The Stock Option shall be granted for whole number of shares so determined; the value of any fractional share shall be paid in cash. A Non-Employee Director may revoke his election under this Section 5(c)(ii) at any time; provided, however, that such revocation shall only be effective six months and one day following the date of such revocation.
(iii) EXERCISE; TERMINATION; NON-TRANSFERABILITY.
(A) Except as provided in Section 10, no Option granted under Section 5(c)(i) may be exercised before the first anniversary of the date upon which it was granted; provided, however, that any Option so granted shall become exercisable upon the termination of service of the Non-Employee Director because of Disability or death. All Options granted under Section 5(c)(ii) shall be immediately exercisable. No Option issued under this Section 5(c) shall be exercisable after the expiration of ten years from the date upon which such Option is granted.
(B) The rights of a Non-Employee Director in an Option granted under Section 5(c) shall terminate six months after such Director ceases to be a Director of the Company or the specified expiration date, if earlier; provided, however, that if the Non-Employee Director ceases to be a Director for Cause, the rights shall terminate immediately on the date on which he ceases to be a Director.
(C) No Stock Option granted under this Section 5(c) shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and such Options shall be exercisable, during the optionee's lifetime only by the optionee. Any Option granted to a Non-Employee Director and outstanding on the date of his death may be exercised by the legal representative or legatee of the optionee for a period of six months from the date of death or until the expiration of the stated term of the option, if earlier.
(D) Options granted under this Section 5(c) may be exercised only by written notice to the Company specifying the number of shares to be purchased. Payment of the full purchase price of the shares to be purchased may be made by one or more of the methods specified in Section 5(a)(v). An optionee shall have the rights of a shareholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.
(iv) LIMITED TO NON-EMPLOYEE DIRECTORS. The provisions of this
Section 5(c) shall apply only to Options granted or to be granted to
Non-Employee
Directors, and shall not be deemed to modify, limit or otherwise apply
to any other provision of this Plan or to any Option issued under this
Plan to a participant who is not a Non-Employee Director of the
Company. To the extent inconsistent with the provisions of any other
Section of this Plan, the provisions of this Section 5(c) shall govern
the rights and obligations of the Company and Non-Employee Directors
respecting Options granted or to be granted to Non-Employee Directors.
The provisions of this Section 5(c) which affect the price, date of
exercisability, option period or amount of shares under an option shall
not be amended more than once in any six-month period, other than to
comport with changes in the Code or ERISA.
SECTION 6. TAX WITHHOLDING
(a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of any Federal, state, or local taxes of any kind required by law to be withheld with respect to such income. The Company and its Subsidiaries 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.
(b) PAYMENT IN SHARES. A participant may elect to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Stock owned by the participant with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due. With respect to any participant who is subject to Section 16 of the Act, the following additional restrictions shall apply:
(A) the election to satisfy tax withholding obligations relating to an Award in the manner permitted by this Section 6(b) shall be made either (1) during the period beginning on the third business day following the date of release of quarterly or annual summary statements of revenues of the Company and ending on the twelfth business day following such date, or (2) at least six months prior to the date as of which the receipt of such an Award first becomes a taxable event for Federal income tax purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or disapproval of the Committee; and
(D) the Stock withheld to satisfy tax withholding, if granted at the discretion of the Committee, must pertain to an Award which has been held by the participant for at least six months from the date of grant of the Award.
Notwithstanding the foregoing, the first sentence of Section 6(b)(A) shall not be applicable until the Company has been subject to the reporting requirements of the Act for at least a year prior to the election and has filed all reports and statements required to be filed pursuant to that Section for that year.
SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee's right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing.
SECTION 8. AMENDMENTS AND TERMINATION
The Board may at any time amend or discontinue the Plan and the Committee may at any time amend or cancel any outstanding Award (or provide substitute Awards at the same or reduced exercise or purchase price or with no exercise or purchase price, but such price, if any, must satisfy the requirements which would apply to the substitute or amended Award if it were then initially granted under this Plan) for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder's consent. To the extent required by the Code to ensure that Options granted hereunder qualify as Incentive Stock Options and to the extent required by the Act to ensure that Awards and Options granted under the Plan are exempt under Rule 16b-3 promulgated under the Act, Plan amendments shall be subject to approval by the Company's stockholders.
SECTION 9. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised and any payments in cash, Stock or other consideration not received by a participant, a participant shall have no rights greater than those of a general creditor of the Company unless the Committee shall otherwise expressly determine in connection with any Award or Awards.
SECTION 10. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 10:
(a) Each Stock Option shall automatically become fully exercisable notwithstanding any provision to the contrary herein.
(b) "CHANGE OF CONTROL" shall mean the occurrence of any one of the following events:
(i) any "PERSON," as such term is used in Sections 13(d) and 14(d) of the Act (other than the Company, any of its Subsidiaries, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan of the Company or any of its Subsidiaries), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 30% or more of either (A) the combined voting power of the Company's then outstanding securities having the right to vote in an election of the Company's Board of Directors ("Voting Securities") or (B) the then outstanding shares of Stock of the Company (in either such case other than as a result of acquisition of securities directly from the Company); or
(ii) persons who, as of the date of the closing of the Company's initial public offering, constitute the Company's Board of Directors (the "Incumbent Directors") cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the Closing of the Company's initial public offering whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors shall, for purposes of this Plan, be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company or any Subsidiary where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate 30% of the voting stock of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Stock or other Voting Securities outstanding, increases (x) the proportionate number of shares of Stock beneficially owned by any person to 30% or more of the shares of Stock then outstanding or (y) the proportionate voting power represented by the Voting Securities beneficially owned by any person to 30% or more of the combined voting power of all then
outstanding Voting Securities; PROVIDED, HOWEVER, that if any person referred to in clause (x) or (y) of this sentence shall thereafter become the beneficial owner of any additional shares of Stock or other Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction), then a "CHANGE OF CONTROL" shall be deemed to have occurred for purposes of the foregoing clause (i).
SECTION 11. GENERAL PROVISIONS
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee may require each person acquiring shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange requirements have been satisfied. The Committee may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.
(b) DELIVERY OF STOCK CERTIFICATES. Delivery of stock certificates to participants under this Plan shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have delivered such certificates in the United States mail, addressed to the participant, at the participant's last known address on file with the Company.
(c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, 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 and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.
SECTION 12. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon approval by the holders of a majority of the shares of capital stock of the Company present or represented and entitled to vote at a meeting of stockholders. Subject to such approval by the stockholders, and to the requirement that no Stock may be issued hereunder prior to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of the Plan by the Board.
SECTION 13. GOVERNING LAW
This Plan shall be governed by Maryland law except to the extent such law is preempted by federal law.
EXHIBIT 10.18
AVALON PROPERTIES, INC.
1995 ANNUAL INCENTIVE PLAN
1. PURPOSE. The purpose of the Avalon Properties, Inc. (the "Company") Annual Incentive Plan (the "Plan ") is to enhance the Company's ability to attract, motivate, reward, and retain key employees, to strengthen their commitment to the success of the Company and to align their interests with those of the Company's shareholders by providing additional compensation to designated key employees of the Company based on the achievement of performance objectives. To this end, the Plan provides a means of rewarding participants based on the performance of the Company.
2. DEFINITIONS.
"Award" means a Threshold Award, Target Award or Maximum Award, any of which may not be a Code Section 163(m) Award, paid pursuant to this Plan.
"Award Agreement" means the agreement entered into between the Company and a participant, setting forth the terms and conditions applicable to an award granted to the participant.
"Code" means the Internal Revenue Code of 1986, and any successor statute, and the regulations promulgated thereunder, as it or they may be amended from time to time.
"Code Section 162(m) Aware" means an Award intended to satisfy the requirements of Code Section 162(m) and designated as such in the Award Agreement.
"Covered Employee" means a Covered Employee within the meaning of Cede
Section 162(m)(3).
"FFO" means ______________.
"Maximum Award" means the amount payable for achieving [150%] of the Performance Goals for the Performance Period.
"Performance Criteria" means one or more of the following criteria selected by, and as further defined by, the Committee each Year to measure achievement of Performance Goals for a Year:
1. A. [FFO Growth];
B. [Stock Price]; and
C. [FFO Multiple].
2. Any other criteria related to performance of the Company, individual performance or any other category of performance selected by the Committee.
"Performance Goals" are the performance objectives applicable to each Performance Period with respect to Performance Criteria established by the Committee for the Company for the purpose of determining whether, and the extent to which, awards under the Plan will be made for that Performance Period.
"Performance Period" means each three-year period commencing on January 1 in any Year under the Plan and ending on December 31 in the third succeeding Year.
"Target Award" means the amount payable for achieving 100% of the Performance Goals for the Performance Period.
"Threshold Award" means the amount payable for achieving [50%] of the Performance Goals for the Performance Period.
"Year" means the Company's fiscal year.
3. ADMINISTRATION. The Plan shall be administered by the Compensation Committee (the "Committee") of the Company's Board of Directors (the "Board").
The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated. Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations and to establish non-uniform and selective Performance Criteria, Performance Goals, the weightings thereof, and Threshold, Target and Maximum Awards. Whenever the Plan refers to a determination being made by the Committee, it shall be deemed to mean a determination by the Committee in its sole discretion.
It is the intent of the Company that this Plan and Code Section 162(m) Awards hereunder satisfy and be interpreted in a manner that satisfy, in the case of participants who are or may be Covered Employees, the applicable requirements of Code Section 162(m), including the administration requirement of Code Section 162(m)(4)(C), so that the Company's tax deduction for remuneration in respect of such an award for services performed by such Covered Employees is not disallowed in whole or in part by the operation of such Code section. If any provision of this Plan would otherwise frustrate or conflict with the intent expressed in this Article, that provision, to the extent possible, shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, [such provision shall be deemed void as applicable to Covered Employees with respect to whom such conflict exists.] Nothing herein shall be interpreted so as to preclude a participant who is or may be a Covered Employee from receiving an award that is not a Code Section 162(m) Award.
The Committee shall have the discretion, subject to the limitations
described in Article 4 below relating to Code 162(m) Awards, to (a) determine
the Plan participants; (b) determine who will be treated as a Covered Employee;
(c) determine Performance Criteria and Performance Goals for each Performance
Period within the time period required by Code Section 162(m); (d) establish an
Award Schedule; (e) establish performance thresholds for payment of any awards;
(f) determine whether and to what extent the Performance Goals have been met or
exceeded; (g) make discretionary awards as may be appropriate in order to assure
the proper motivation and retention of personnel and attainment of business
goals; (h) to make adjustments to Performance Criteria, Performance Goals and
thresholds; and (i) determine the aggregate number of shares of the
Company's common stock, par value $.01 per share ( "Common Stock") available for distribution as awards for each Performance Period. Subject to the provisions of the Plan, the Committee shall be authorized to interpret the Plan, the make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determination necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems desirable to carry the Plan into effect. Any action taken or determination made by the Committee shall be conclusive on all parties.
4. CODE SECTION 162(m) AWARDS. A participant who is or may be a Covered
Employee may receive a Code Section 162(m) Aware and/or an award that is not a
Code Section 162(m) Award. The Committee will determine who is to be treated as
a Covered Employee, determine who is eligible to be granted Code Section 162(m)
Awards and establish the Target Awards and Award Schedules for Code Section
162(m) Awards. Such determinations will be made in a timely manner, as required
by Code Section 162(m). Each award shall be evidenced by an Award Agreement
setting forth the Award Schedule and such other terms and conditions applicable
to the award, as determined by the Committee, not inconsistent with the terms of
the Plan. Notwithstanding anything else in this Plan to the contrary, the
aggregate maximum amount payable under the Plan to a Covered Employee with
respect to a Performance Period shall be [________]. In the event of any
conflict between an Award Agreement and the Plan, the terms of the Plan shall
govern.
5. ALL AWARDS. Performance Criteria and Performance Goals will be
established by the Committee for each Performance Period, which, in the case of
Performance Criteria and Performance Goals for Covered Persons, will be
established within the time period required by Code Section 162(m). The
Committee also shall determine the extent to which each Performance Criteria
shall be weighted in determining awards. The Committee will establish an Award
Schedule for each award to each participant setting forth the Threshold, Target
and Maximum Awards for such participant payable at specified levels of
performance, based on the Performance Goal for each of the Performance Criteria
and the weighting established for such criteria. The Committee may vary the
Performance Criteria, performance Goals and weightings from participant to
participant, award to award and from Performance Period to Performance Period.
Notwithstanding the foregoing, the Performance Criteria with respect to a Code
Section 162(m) Award shall be limited to the Performance Criteria set forth in
Article 2.g.1.
6. ELIGIBLE PERSONS. Any key employee of the Company who the Committee
determines, in its discretion, is responsible for producing profits for the
Company or otherwise has a significant effect on the operations of the Company
shall be eligible to participate in the Plan. Committee members are not eligible
to participate in the Plan. No employee shall have a right (a) to be selected
under the Plan, or (b) having once been selected, to (i) be selected again or
(ii) continue as an employee.
7. AMOUNT AVAILABLE FOR AWARDS. The amount available for awards (the "Bonus Pool") for each Performance Period shall be determined by the Committee. The Bonus Pool created in respect of any fiscal year shall be allocated among Plan participants in the manner established by the Committee prior to the beginning of such fiscal year; provided, however, that the Committee in its sole discretion may reduce at any time, including during or following the fiscal year, the amount of the bonus payable to any or all participants in respect of such fiscal year.
8. DETERMINATION OF AWARDS. The Committee shall select the participants and determine which participants, if any, are to be treated as Covered Employees and which awards, if
any, are to be Code Section 162(m) Awards. Except in the case of Code Section
162(m) Awards, the Committee shall determine the actual award to each
participant for each Performance Period, taking into consideration, as it deems
appropriate, the performance for such Performance Period of the Company in
relation to the Performance Goals theretofore established by the Committee, and
the performance of the respective participants during such Performance Period.
The fact that an employee is selected as a participant for any Performance
Period shall not mean that such employee necessarily will receive an award for
that Performance Period. Except in the case of Code Section 162(m) Awards,
notwithstanding any other provisions of the Plan to the contrary, the Committee
may make discretionary awards as it sees fit under the Plan.
A Code Section 162(m) Award payable to any Covered Employee may range
from zero (0) to [one hundred and fifty (150)] percent of the Covered Employee's
Target Award, depending upon whether, or the extent to which, the Performance
Goals with respect to such Code Section 162(m) Award have been achieved. Actual
Code Section 162(m) Awards will be derived from the Award Schedule based on the
level of performance achieved. All such determinations regarding the achievement
of Performance Goals and the determination of actual Code Section 162(m) Awards
will be made by the Committee; [provided, however, that with respect to a Code
Section 162(m) Award, the Committee may, in its sole discretion, decrease, but
not increase, the amount of the Award that otherwise would be payable].
9. DISTRIBUTION OF AWARDS. Awards under the Plan for a particular Performance Period shall be paid in shares of Common Stock as soon as practicable after the end of that Performance Period. To the extent that the Company's tax deduction for remuneration in respect of the payment of an Award to a Covered Employee would be disallowed under Code Section 162(m) by reason of the fact that such Covered Employee's applicable employee remuneration, as defined in Code Section 162(m)(4), either exceeds or, if such Award were paid, would exceed the $1,000,000 limitation in Code Section 162(m)(1), the Committee may, in its sole discretion, defer the payment of such Award, but only to the extent that, and for so long as, the Company's tax deduction in respect of the payment thereof would be so disallowed; provided that the Committee may, nevertheless, accelerate the payment of previously deferred Awards if it determines that the amount of the tax deduction that would be disallowed is not significant. Deferred Awards will be deemed credited with interest at a rate determined by the Committee from time to time.
10. TERMINATION OF EMPLOYMENT. A participant must be actively employed by the Company on the date his or her award is determined by the Committee (the "Payment Date") in order to be entitled to payment of any award for that Performance Period. [In the event active employment of a participant shall be terminated before the Payment Date for any reason other than discharge for cause or voluntary resignation, such participant may receive such portion of his or her award for the Year as may be determined by the Committee.] A participant discharged for cause shall not be entitled to receive any award for the Performance Period. A participant who voluntarily resigns prior to the Payment Date shall not be entitled to receive any award for the Performance Period unless otherwise determined by the Committee.
11. MISCELLANEOUS.
a. NONASSIGNABILITY. No award will be assignable or transferable without the written consent of the Committee in its sole discretion, except by will or by the laws of descent and distribution.
b. WITHHOLDING TAXES. Whenever payments under the Plan are to be made, the Company will withhold therefrom an amount sufficient to satisfy any applicable governmental withholding tax requirements related thereto.
c. AMENDMENT OR TERMINATION OF THE PLAN. The Board of
Directors of the Company may at any time amend, suspend or discontinue
the Plan, in whole or in part. The Committee may at any time alter or
amend any or all Award Agreements under the Plan to the extent
permitted by law. No such action may, however, without approval of the
stockholders of the Company, be effective with respect to any Code
Section 162(m) Award to any Covered Employee if such approval is
required by Code Section 162(m)(4)(C).
d. OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan will be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
e. PAYMENTS TO OTHER PERSONS. If payments are legally required to be made to any person other than the person to whom any amount is available under the Plan, payments will be made accordingly. Any such payment will be a complete discharge of the liability of the Company.
f. LIMITS OF LIABILITY.
1. Any liability of the Company to any participant with respect to an award shall be based solely upon contractual obligations created by the Plan and the Award Agreement.
2. Neither the Company, nor any member of its Board of Directors or the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken or not taken in good faith under the Plan.
g. RIGHTS OF EMPLOYEES.
1. Status as an employee eligible to receive an award under the Plan shall not be construed as a commitment that any award will be made under this Plan to such employee or to other such employees generally.
2. Nothing contained in this Plan or in any Award Agreement (or in any other documents related to this Plan or to any Award Agreement) shall confer upon any employee or participant any right to continue in the employ or other service of the Company or constitute any contract or limit in any way the right of the Company to change such person's compensation or other benefits or to terminate the employment or other service of such person with or without cause.
h. SECTION HEADINGS. The section headings contained herein are for the purposes of convenience only, and in the event of any conflict, the text of the Plan, rather than the section headings, will control.
i. INVALIDITY. If any term or provision contained herein will to any extent be invalid or unenforceable, such term or provision will be reformed so that it is valid, and such invalidity or unenforceability will not affect any other provision or part thereof.
j. APPLICABLE LAW. The Plan, the Award Agreements and all actions taken hereunder or thereunder shall be governed by, and construed in accordance with, the laws of the State of California without regard to the conflict of law principles thereof.
k. EFFECTIVE DATE. The Plan shall be effective as of ___________, 1995.
l. SHAREHOLDER APPROVAL. The adoption of this Plan is subject to the approval of the shareholders of the Company.
EXHIBIT 10.19
AVALONBAY COMMUNITIES, INC.
SECRETARY'S CERTIFICATE
AMENDMENTS TO
THE AVALONBAY COMMUNITIES, INC.
1994 STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED ON APRIL 13, 1998
On May 6, 1999, at a duly called and held meeting of the Compensation Committee of the Board of Directors of AvalonBay Communities, Inc. (the "Company") and at a duly called and held meeting of the full Board of Directors of the Company, such Committee and the Board adopted the following amendments to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended and restated on April 13, 1998 (the "Plan"):
1. The definition of "Retirement" set forth in Section 1 of the Plan refers to the "retirement policy" of the Company. To clarify its retirement policy for the purposes of the Plan, the Company adopted the following retirement policy for purposes of interpreting the operation of the Plan after May 6, 1999:
"Retirement" means (i) the employee's termination of employment with the Company and its Subsidiaries, other than for Cause, after attainment of age 55, but only if upon such termination of employment the employee has been employed in the aggregate for a period of at least 120 contiguous months by the Company, by any company of which the Company is the successor by name change or reincorporation, by Avalon Properties, Inc. or by Trammell Crow Residential, or any affiliate of any of the foregoing; and (ii) with respect to any employee of the Company who as of May 5, 1999 has attained the age of 50 or more and who, upon retirement, has served in the capacity of senior vice president or a more senior position for at least one year (including service with Avalon Properties), "retirement" means the employee's termination of employment with the Company and its Subsidiaries other than for Cause."
2. A new Section 5(a)(vii)(C) to the Plan was adopted, such section reading in its entirety as follows:
"Any Stock Option held by an optionee whose employment by the Company and its Subsidiaries is terminated by reason of Retirement (but not if such termination qualifies as a retirement only under clause (ii) of the definition of Retirement) shall be automatically vested as of the date of termination of such employee's Retirement notwithstanding that the provisions of the related stock option agreement provide for forfeiture of the unvested portion of the award upon termination."
3. The following sentence was added at the end of Section
6(a) (Nature of Restricted Stock Awards), such sentence
reading in its entirety as follows:
"In the event of termination of an employee by reason of Retirement (but not if such termination qualifies as a retirement only under clause (ii) of the definition of Retirement), then in such event any Restricted Stock Awards held by such employee on the date of termination shall continue to vest in accordance with
their terms following such termination, notwithstanding that the provisions of the Restricted Stock Award agreement provide for forfeiture of the unvested portion of the award upon termination."
4. The following sentence was added at the end of Section
7(a) (Nature of Deferred Stock Award), such sentence
reading in its entirety as follows:
"In the event of termination of an employee by reason of Retirement (but not if such termination qualifies as a retirement only under clause (ii) of the definition of Retirement), then in such event any Deferred Stock Awards held by such employee on the date of termination shall continue to vest in accordance with their terms following such termination, notwithstanding that the provisions of the Deferred Stock Award agreement provide for forfeiture of the unvested portion of the award upon termination."
IN WITNESS WHEREOF, the undersigned has signed this certificate as of May 6, 1999.
AVALONBAY COMMUNITIES, INC.
/s/ Edward M. Schulman Name: Edward M. Schulman Title: Secretary |
RESOLVED:
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Paragraph Section 3(b) of the Companys 1994 Stock
Incentive Plan, as amended and restated on December 8,
2004, as subsequently amended on February 9, 2006, is
hereby amended by adding the following sentences at the
end of the first sentence thereof:
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The Committee shall also make equitable or proportionate
adjustments in the number of shares subject to
outstanding Awards and the exercise price and/or the
terms of outstanding Awards to take into account cash
dividends declared and paid other than in the ordinary
course or any other extraordinary corporate event, other
than those contemplated by Section 3(c) hereof, to the
extent determined to be necessary by the Committee to
avoid distortion in the value of the Awards.
Notwithstanding anything to the contrary set forth in
this Section 3(b), no adjustment shall be required
pursuant to this Section 3(b) if the Committee determines
that such action could cause an Award to fail to satisfy
the conditions of any applicable exception from the
requirements of Section 409A of the Code or otherwise
could subject a participant to the additional tax imposed
under Section 409A of the Code in respect of an
outstanding Award or would constitute a modification,
extension or renewal of an Incentive Stock Option within
the meaning of Section 424(b) of the Code.
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RESOLVED:
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Section 7(a) of the Companys 1994 Stock Incentive Plan,
as amended and restated on December 8, 2004, as
subsequently amended on February 9, 2006, is hereby
amended by adding the following sentences at the end
thereof:
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Participants may not elect to accelerate or postpone the deferral period. Any payment of shares of Stock under a Deferred Stock Award subject to Section 409A of the Code to a participant on account of the participants separation of service may not be made before the date that is six months after the date of separation from service if the participant is a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code. |
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AVALONBAY COMMUNITIES, INC. | |||
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/s/ Edward M. Schulman | |||
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Name: Edward M. Schulman | |||
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Title: Secretary |
Exhibit 10.26
AVALONBAY COMMUNITIES, INC.
SUMMARY OF PRINCIPAL TERMS OF OFFICER SEVERANCE PROGRAM
The Company's Officer Severance Program is designed to provide severance protection to officers whose employment is terminated in connection with a change in control of the Company and who do not have severance protection under an employment agreement with the Company. The principal features of the program are described below. This is just a summary and is qualified in its entirety by reference to the complete text of the Officer Severance Program, which is available to all officers.
---------------------------------------- -------------------------------------------------------------------- FEATURE SUMMARY OF PROVISION ---------------------------------------- -------------------------------------------------------------------- 1. Officers covered by program All Vice Presidents. Officers with more senior positions who are not covered by severance arrangements under an agreement with the Company that provides greater severance benefits are also covered by the program. ---------------------------------------- -------------------------------------------------------------------- 2. Circumstances under which This is a "double trigger" program -- i.e., there must be a change severance protection provided in control AND the officer's employment must be terminated or constructively terminated without cause by the Company. Officers will NOT receive severance benefits in connection with the following terminations: a voluntary resignation by the officer under circumstances which do not constitute a "constructive termination" by the Company; a termination by the Company for cause; a termination of the officer's employment on account of death or disability. ---------------------------------------- -------------------------------------------------------------------- 3. Definition of "change in control" "Change in Control" is defined in the same way as in the Company's stock option plan. ---------------------------------------- -------------------------------------------------------------------- 4. Period of time in which severance Severance benefits are provided if the officer is terminated or benefit protection is provided. constructively terminated during the two years following a change in control or during the six months prior to a change in control. ---------------------------------------- -------------------------------------------------------------------- 5. Amount of cash severance An amount of cash equal to one times the sum of (i) base salary plus (ii) the average cash bonus paid during the prior two years. (The multiplier is reduced to one-half in the case of a constructive termination due to a requirement that the officer relocate to a different metropolitan area). The officer will also receive all accrued base salary and incentive cash compensation through the date of termination. ---------------------------------------- -------------------------------------------------------------------- 6. Treatment of equity-based awards Accelerated vesting of all unvested options and restricted stock grants. Options will thereafter be exercisable for the period of time provided in the applicable option agreement. ---------------------------------------- -------------------------------------------------------------------- 7. Welfare benefits (health, dental, Continuation of all benefits for 18 months with COBRA eligibility life, etc.) thereafter. The Company will not be obligated to continue contributing the whole life portion of the premiums on split dollar life insurance policies. ---------------------------------------- -------------------------------------------------------------------- 8. Gross-up for excise tax In the event that the officer is subject to the "golden ("golden parachute tax"). parachute tax" rules, the severance benefits will be capped at the Internal Revenue Code Section 280(G) maximum if the officer is, on a net after tax basis, better off by so capping the severance benefits. ---------------------------------------- -------------------------------------------------------------------- 9. Effect of subsequent employment Cash severance will not be reduced as result of compensation on severance that the officer receives from a subsequent employer. However, the ---------------------------------------- -------------------------------------------------------------------- |
---------------------------------------- -------------------------------------------------------------------- benefits. welfare (i.e., insurance) benefits will be reduced to the extent that the officer obtains comparable benefits from a subsequent employer. ---------------------------------------- -------------------------------------------------------------------- 10. Enforcement of agreement The Company will reimburse the officer for all reasonable legal fees and expenses incurred in enforcing the agreement. There is a compulsory arbitration clause. ---------------------------------------- -------------------------------------------------------------------- 11. Constructive termination The following constitute a "constructive termination" by the Company such that the officer can resign during the 24 months following a change in control (or during the 6 months prior to a change in control) and receive the severance benefits under the program: - a material adverse change in functions, duties or responsibilities - involuntary relocation of the officer's offices to a location outside of the metropolitan area where the employee is principally employed prior to the change in control or anticipated change in control (note: a termination on account of a relocation receives a one-half cash lump sum rather than a 1x cash lump sum) - Reduction or elimination of any material compensation program unless comparable or substitute benefits are provided - Acquiring company fails to honor any compensation arrangement ---------------------------------------- -------------------------------------------------------------------- 12. Release As a condition to receiving the severance benefits, an officer will be required to sign a release of all claims and a one-year non-solicitation agreement. ---------------------------------------- -------------------------------------------------------------------- 13. Other terms The text of the formal program contains a number of important defined terms and other provisions. ---------------------------------------- -------------------------------------------------------------------- |
AVALONBAY COMMUNITIES, INC.
OFFICER SEVERANCE PLAN
1. PURPOSE. AvalonBay Communities, Inc. (the "COMPANY") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. The Board of Directors of the Company (the "BOARD") recognizes, however, that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in Section 2 hereof) exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Therefore, the Board has determined that the AvalonBay Communities, Inc. Officer Severance Plan (the "PLAN") should be adopted to reinforce and encourage the continued attention and dedication of the Covered Employees (as defined below) to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control. The term "Covered Employee" means any officer of the Company holding the position of Vice President or higher (it being noted that any officer receiving severance payments under any other agreement or arrangement with the Company shall be subject to the limitation on benefits hereunder set forth in the last sentence of Section 4 hereof) (each, a "COVERED EMPLOYEE"). Nothing in this Plan shall be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Covered Employee and the Company or any of its subsidiaries or affiliates (together with the Company, the "EMPLOYERS"), the Covered Employee shall not have any right to be retained in the employ of the Employers.
2. CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control" shall mean the occurrence of any one of the following events:
(a) Any individual, entity or group (a "PERSON") within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "ACT") (other than the Company, any corporation, partnership, trust or other entity controlled by the Company (a "SUBSIDIARY"), or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its Subsidiaries), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such Person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act) of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities having the right to vote generally in an election of the Company's Board of Directors ("VOTING SECURITIES"), other than as a result of (i) an acquisition of securities directly from the Company or any Subsidiary or (ii) an acquisition by any corporation pursuant to a reorganization, consolidation or merger if, following such reorganization, consolidation or merger the conditions described in clauses (i), (ii) and (iii) of subparagraph (c) of this Section 2 are satisfied; or
(b) Individuals who, as of the Effective Date, constitute the Company's Board of Directors (the "INCUMBENT DIRECTORS") cease for any reason to constitute at least a majority of the Board, provided, however, that any individual becoming a director of the Company subsequent to the date hereof (excluding, for this purpose, (i) any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, and (ii) any individual whose initial assumption of office is in connection with a reorganization, merger or consolidation, involving an unrelated entity and occurring after the date hereof), whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the persons then comprising Incumbent Directors shall for purposes of this Plan be considered an Incumbent Director; or
(c) Consummation of a reorganization, merger or consolidation of the Company, unless, following such reorganization, merger or consolidation, (i) more than 50% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Voting Securities immediately prior to such reorganization, merger or consolidation, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or the corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 30% or more of the outstanding Voting Securities), beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation;
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or
(e) The sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (i) more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the outstanding Voting Securities immediately prior to such sale, lease, exchange or other disposition, (ii) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 30% or more of the outstanding Voting Securities), beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board of Directors providing for such sale, lease, exchange or other disposition of assets of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred for purposes of this Plan solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate voting power represented by the Voting Securities beneficially owned by any Person to 30% or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any Person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Stock or other Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction), then a "Change in Control" shall be deemed to have occurred for purposes of this Plan.
3. TERMINATING EVENT. A "Terminating Event" shall mean the termination of employment of a Covered Employee in connection with any of the events provided in this Section 3 occurring within twenty-four (24) months following a Change in Control. In addition, notwithstanding the foregoing, in the event of the termination of employment of a Covered Employee in connection with any of the events provided in this Section 3 within six (6) months prior to the occurrence of a Change in Control (based on an event, such as a Notice of Termination, that occurred within such six (6) month period prior to a Change in Control), such termination shall,
upon the occurrence of a Change in Control, be deemed a Terminating Event under
this Plan. To give effect to the prior sentence, references in Sections
3(b)(ii), (iii) and (iv) to circumstances existing "immediately prior to a
Change in Control" will be interpreted to mean, in a case where the six month
look-back of the prior sentence is being applied, to circumstances existing
immediately prior to the change in circumstances.
(a) termination by the Employers of the employment of the Covered Employee with the Employers for any reason other than (i) for Cause or (ii) as a result of the death or disability (as determined under the Employers' then existing long-term disability coverage) of such Covered Employee. "Cause" shall mean, and shall be limited to, the occurrence of any one or more of the following events:
(i) the Covered Employee is convicted of or enters a plea of nolo contendere to an act which is defined as a felony under any federal, state or local law, not based upon a traffic violation, which conviction or plea has or can be expected to have, in the good faith opinion of the Board of Directors or the CEO, a material adverse impact on the business or reputation of the Company; or
(ii) any one or more acts of theft, larceny, embezzlement, fraud or material intentional misappropriation from or with respect to the Company; or
(iii) a breach by the Covered Employee of his fiduciary duties under Maryland law as an officer, or a material breach by the Covered Employee of any rule, regulation, policy or procedure of the Company that is generally announced or distributed to, and applies to, all employees of the Company or a subset of employees that includes the Covered Employee (including, without limitation, in all events the Company's ethics, sexual harassment and insider trading policies); or
(iv) the Covered Employee's commission of any one or more acts of gross negligence or willful misconduct which in the good faith opinion of the Board of Directors or the CEO has resulted in material harm to the business or reputation of the Company; or
(v) the deliberate or willful failure by the Covered Employee (other than by reason of the Covered Employee's physical or mental illness, incapacity or disability) to substantially perform the Covered Employee's duties with the Employers and the continuation of such failure for a period of fifteen (15) days after written notice thereof.
A Terminating Event shall not be deemed to have occurred pursuant to this Section 3(a) solely as a result of the Covered Employee being an employee of any direct or indirect successor to the business or assets of any of the Employers, rather than continuing as an employee of the Employers following a Change in Control. For purposes of clauses (iv) and (v) of this Section 3(a), no act, or failure to act, on the Covered Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Covered Employee without reasonable belief that the Covered Employee's act, or failure to act, was in the best interest of the Employers; or
(b) termination by the Covered Employee of the Covered Employee's employment with the Employers for Good Reason. "Good Reason" shall mean the occurrence of any of the following events:
(i) a material adverse change in the functions, duties or responsibilities of the Covered Employee's position (other than a termination of employment for Cause) which would reduce the level, importance or scope of such position (a change in the person and/or department to whom the Covered Employee is required to report, or a change in the personnel that report to the Covered Employee, shall not by itself constitute a material adverse change in the Covered Employee's position); or
(ii) the relocation of the office at which the Covered Employee is principally located immediately prior to the Change in Control (the "Original Office") to a new location outside of the metropolitan area of the Original Office or the failure to locate the Covered Employee's own office at the Original Office (or at the office to which such office is relocated which is within the metropolitan area of the Original Office); or
(iii) either (X) the failure by the Company to continue in effect any compensation plan or program in which the Covered Employee participates immediately prior to a Change in Control which is material to the Covered Employee's total compensation, unless comparable alternative arrangements (embodied in ongoing substitute or alternative plans or programs) have been implemented with respect to such plans or programs, or (Y) the failure by the Company to continue the Covered Employee's participation therein following a Change in Control (or in such substitute or alternative plans or programs) on a basis not materially less favorable, in terms of the amount of benefits provided and the level of the Covered Employee's participation relative to other participants, as existed during the last completed fiscal year of the Company prior to the Change in Control (the occurrence of either failure in clause (X) or (Y), a "CIC COMPENSATION FAILURE"); PROVIDED, HOWEVER, that in no event shall a CIC Compensation Failure have occurred if:
(A) the value of the Covered Employee's total annual compensation following a Change in Control, including, but not limited to, cash compensation (including salary and bonus), stock grants (valued using stock price less consideration paid), stock options (valued using the Black-Scholes method or a variation thereof, as determined by the Board of Directors or a compensation consultant engaged by the Board of Directors) and benefits (valued using an actuarial or similar valuation method), is at least 90% of the Covered Employee's total annual compensation in the last fiscal year prior to the Change in Control; or
(B) (I) the Covered Employee's total annual cash compensation (including salary and bonus) following a Change in Control is at least 90% of what it was in the year prior to the Change in Control, with such reasonable adjustments thereto as are necessary to give effect to performance based bonuses (with respect to which the performance criteria may reasonably be modified) and the level of performance achieved with respect thereto;
(II) the total value of the Covered Employee's annual stock grants (valued using stock price less consideration paid) following a Change in Control are at least 90% of what they were in the year prior to the Change in Control, with such reasonable adjustments thereto as are necessary to give effect to (x) performance based bonuses (with respect to which the performance criteria may reasonably be modified) and the level of performance achieved with respect thereto, and (y) to changes in the price of the Company's or the successor's stock due to market fluctuations;
(III) the Covered Employee's total annual stock option grants (measured either by (a) total value, as determined as described in the preceding paragraph (A), or (b) total "leverage potential" (i.e., the number of options granted multiplied by the exercise price, after giving effect to changes in the price of the Company's or the successor's stock due to market fluctuations)) are at least 90% of what they were in the year prior to the Change in Control, with such reasonable adjustments thereto as are necessary to give effect to performance based bonuses (with respect to
which the performance criteria may reasonably be modified) and the level of performance achieved with respect thereto; and
(IV) there is not a material reduction in the Covered Employee's benefits as compared to the last fiscal year prior to the Change in Control; or
(iv) the failure by the Employers to obtain an effective agreement from any successor to assume and agree to perform this Plan.
4. SPECIAL TERMINATION BENEFITS. In the event a Terminating Event occurs with respect to a Covered Employee,
(a) the Employers shall pay to the Covered Employee an amount equal to all accrued but unpaid annual base salary and all earned but unpaid cash incentive compensation earned through such Covered Employee's Date of Termination. Said amount shall be paid in one lump sum payment no later than thirty-one (31) days following the Date of Termination (as such term is defined in Section 8(b)); and
(b) if and only if such Terminating Event is not described in
Section 3(b)(ii), the Employers shall pay to the Covered Employee an
amount equal to the sum of the following:
(i) one times the amount of the current annual base salary of the Covered Employee, determined prior to any reductions for pre-tax contributions to a cash or deferred arrangement or a cafeteria plan; and
(ii) one times the amount of the average annual cash
bonus earned by the Covered Employee with respect to the two
(2) calendar years immediately prior to the Change in Control
determined prior to any reductions for pre-tax contributions
to a cash or deferred arrangement or a cafeteria plan
(provided, however, that if the Covered Employee's tenure with
the Company is such that prior to the Terminating Event the
Covered Employee has earned an annual bonus only with respect
to the calendar year immediately prior to the Change in
Control, then such annual bonus shall be deemed to have been
earned with respect to the two (2) calendar years immediately
prior to the Change in Control; and, provided further,
however, that if the Covered Employee's tenure with the
Company is such that prior to the Terminating Event the
Covered Employee has not earned an annual bonus, then the
Covered Employee's target annual bonus immediately prior to
the Change in Control shall be deemed to have been earned with
respect to the two (2) calendar years immediately prior to the
Change in Control).
Said amount shall be paid in one lump sum payment no later than thirty-one (31) days following the Date of Termination; and
(c) if and only if such Terminating Event is described in
Section 3(b)(ii), the Employers shall pay to the Covered Employee an
amount equal to the sum of the following:
(i) one-half times (0.5) the amount of the current annual base salary of the Covered Employee, determined prior to any reductions for pre-tax contributions to a cash or deferred arrangement or a cafeteria plan; and
(ii) one-half times (0.5) times the amount of the
average annual cash bonus earned by the Covered Employee with
respect to the two (2) calendar years immediately prior to the
Change in Control determined prior to any reductions for
pre-tax contributions to a cash or deferred arrangement or a
cafeteria plan, with procedures similar to those described in
Section 4(b)(ii) to determine such average.
Said amount shall be paid in one lump sum payment no later than thirty-one (31) days following the Date of Termination (as such term is defined in Section 8(b)); and
(d) the Employers shall continue to provide health, dental and life insurance (or contribute a portion of the cost thereof) to the Covered Employee, on the same terms and conditions as though the Covered Employee had remained an active employee, for eighteen (18) months after the Terminating Event or until such earlier date as the Covered Employee obtains comparable benefits through other employment or payment to the Covered Employee of a present value equivalent of the costs of such benefits to the Company (provided, however, that this clause (d) shall in no event obligate the Company to continue to fund the premiums on any split dollar life insurance policy pursuant to arrangements that were in effect while the Covered Employee was employed); and
(e) the Employers shall take whatever action is necessary (i)
to cause the Covered Employee to become vested as of the Date of
Termination in all stock options, restricted stock grants, and all
other equity-based awards and (ii) to be entitled (A) to exercise and
continue to exercise all stock options and all other equity-based
awards having an exercise schedule and (B) to retain such grants and
awards, but in each case under clauses (A) and (B) such right to
exercise and retain shall last only for so long as, and shall apply
only to the same extent as, if such options, grants and awards had
vested prior to termination of employment and their treatment following
such termination were determined in accordance with the terms of the
applicable stock option agreement, grant agreement or other equity
award agreement and the incentive plans governing such agreements.
Reference in this regard is made to the clarification set forth in
Section 5; and
(f) the Employers shall provide COBRA benefits to the Covered Employee following the end of the period referred to in Section 4(d) above, such benefits to be determined as though the Covered Employee's employment had terminated at the end of such period; and
(g) notwithstanding the foregoing, if the Terminating Event occurs before the Change in Control, the special termination benefits required by this Section 4 shall be paid, or commence, as the case may be, no later than thirty-one (31) days after the consummation of the Change in Control.
Notwithstanding the foregoing, the special termination benefits required by Sections 4(b) or 4(c) shall be reduced by any amount paid or payable to the Covered Employee by the Employers under the terms of any employment agreement or other plan or arrangement providing for compensation upon such Covered Employee's termination of employment (other than payment of accrued vacation benefits and payments under any deferred compensation plan). Other benefits under this Plan shall also be reduced or eliminated to the extent provided to the Covered Employee under other agreements or arrangements. Therefore, a Covered Employee with an employment agreement or arrangement that provides greater severance benefits than those provided in this Officer Severance Program will receive no payments or benefits under this Officer Severance Program.
5. CLARIFICATION REGARDING TREATMENT OF OPTIONS AND RESTRICTED STOCK. The stock option and restricted stock agreements (the "EQUITY AWARD AGREEMENTS") that the Covered Employee has or may receive may contain language regarding the effect of a termination of the Covered Employee's employment under certain circumstances. Notwithstanding such language in the Equity Award Agreements, for so long as this Plan is in effect, the Company will be obligated, if the terms of this Plan are more favorable in this regard than the terms of the Equity Award Agreements, to take the actions required under Section 4(e) hereof upon the happening of a Terminating Event. That section provides that the Company will cause the Covered Employee to become vested as of the Date of Termination in all equity-based awards, and that such equity-based awards will thereafter be subject to the provisions of the applicable Equity Award Agreement as it applies to vested awards upon a termination. For purposes of clarification, although an option grant may vest under termination circumstances described above, such option will thereafter be exercisable only for so long as the related option agreement provides, except that the Compensation Committee of the Board of Directors may, in its sole discretion, elect to extend the expiration date of such option. For example, in general the Covered Employees' option agreements provide that (in the absence of an extension by the Compensation Committee) upon a termination of employment for any reason other than death,
disability, retirement or cause, any vested options will only be exercisable for three months from the date of termination or, if earlier, the expiration date of the option.
6. ADDITIONAL BENEFITS.
(a) Anything in this Plan to the contrary notwithstanding, in the event that any compensation, payment or distribution by the Employers to or for the benefit of a Covered Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, (the "SEVERANCE PAYMENTS"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "CODE"), the following provisions shall apply to such Covered Employee:
(i) If the Severance Payments, reduced by the sum of
(1) the Excise Tax and (2) the total of the Federal, state,
and local income and employment taxes payable by the Covered
Employee on the amount of the Severance Payments which are in
excess of the Threshold Amount, are greater than or equal to
the Threshold Amount, the Covered Employee shall be entitled
to the full benefits payable under this Plan.
(ii) If the Threshold Amount is less than (x) the Severance Payments, but greater than (y) the Severance Payments reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes on the amount of the Severance Payments which are in excess of the Threshold Amount, then the benefits payable under this Plan shall be reduced (but not below zero) to the extent necessary so that the maximum Severance Payments shall not exceed the Threshold Amount. To the extent that there is more than one method of reducing the payments to bring them within the Threshold Amount, the Covered Employee shall determine which method shall be followed; provided that if the Covered Employee fails to make such determination within 45 days after the Employers have sent the Covered Employee written notice of the need for such reduction, the Employers may determine the amount of such reduction in its sole discretion.
For the purposes of this Section 6, "Threshold Amount" shall mean three
times the Covered Employee's "base amount" within the meaning of
Section 280G(b)(3) of the Code and the regulations promulgated
thereunder less one dollar ($1.00); and "Excise Tax" shall mean the
excise tax imposed by Section 4999 of the Code, or any interest or
penalties incurred by the Covered Employee with respect to such excise
tax.
(b) The determination as to which of the alternative provisions of Section 6(a) shall apply to the Covered Employee shall be made by such nationally recognized accounting firm as may at that time be the Company's independent public accountants immediately prior to the Change in Control (the "ACCOUNTING FIRM"), which shall provide detailed supporting calculations both to the Employers and the Covered Employee within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Employers or the Covered Employee. For purposes of determining which of the alternative provisions of Section 6(a) shall apply, the Covered Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of the Covered Employee's residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Any determination by the Accounting Firm shall be binding upon the Employers and the Covered Employee.
7. WITHHOLDING. All payments made by the Employers under this Plan shall be net of any tax or other amounts required to be withheld by the Employers under applicable law.
8. NOTICE AND DATE OF TERMINATION; ETC.
(a) NOTICE OF TERMINATION. Any purported termination by the Employer of a Covered Employee's employment (other than by reason of death) within 24 months following a Change in Control shall be communicated by written Notice of Termination from the Employers to the Covered Employee in accordance with this Section 8. For purposes of this Plan, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Plan relied upon and the Date of Termination. Further, a Notice of Termination for Cause is required to include a written explanation as to the basis for such termination.
(b) DATE OF TERMINATION. "Date of Termination," with respect to any purported termination of a Covered Employee's employment by the Employers within twenty-four (24) months after a Change in Control, shall mean the date specified in the Notice of Termination which, in the case of a termination by the Employers other than a termination for Cause (which may be effective immediately), shall not be less than 30 days after the Notice of Termination is given. Notwithstanding Section 3(a) of this Plan, in the event that a Covered Employee gives a Notice of Termination to the Employers, the Employers may unilaterally accelerate the date of termination of such Covered Employee and such acceleration shall not constitute an independent Terminating Event for purposes of Section 3(a) of this Plan or a violation of the preceding sentence (I.E., the Covered Employee will be entitled to severance payments and benefits hereunder only if such Covered Employee's Notice of Termination was with respect to a termination for Good Reason).
(c) NO MITIGATION. The Covered Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Covered Employee by the Employers under this Plan. Further, the amount of any payment provided for in this Plan shall not be reduced by any compensation earned by the Covered Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Covered Employee to the Employers, or otherwise.
9. OF DISPUTES; PROCEDURES AND SCOPE OF ARBITRATION.
(a) All controversies and claims arising under or in connection with this Plan or relating to the interpretation, breach or enforcement thereof and all other disputes between a Covered Employee and the Company, shall be resolved by expedited, binding arbitration, to be held in California or Virginia, as selected by the Covered Employee, in accordance with the applicable rules of the American Arbitration Association governing employment disputes. In any proceeding relating to the amount owed to a Covered Employee in connection with his termination of employment, it is the contemplation under this Plan that the only remedy that the arbitrator may award in such a proceeding is an amount equal to the termination payments and benefits required to be provided under the applicable provisions of Section 4 and, if applicable, Section 6 hereof, to the extent not previously paid, plus the costs of arbitration and the Covered Employee's reasonable attorneys fees and expenses as provided below. Any award made by such arbitrator shall be final, binding and conclusive on the Company and the Covered Employee for all purposes, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
(b) Except as otherwise provided in this paragraph, each party shall pay the cost of his or its own legal fees and expenses incurred in connection with an arbitration proceeding. Provided an award is made in favor of the Covered Employee in such proceeding, all of his reasonable attorneys fees and expenses incurred in pursuing or defending such proceeding shall be promptly reimbursed to the Covered Employee by the Company within five days of the entry of the award. Any award of reasonable attorneys' fees shall take into account any offer of the Company, such that an award of attorneys' fees to the Covered Employee may be limited or eliminated to the extent that the final decision in favor of the Covered Employee does not represent a material increase in value over the offer that was made by the Company during the course of such proceeding. However, any elimination or limitation on attorneys' fees shall only apply to those attorneys' fees incurred after the offer by the Company.
(c) In any case where the Company or any other person seeks to stay or enjoin the commencement or continuation of an arbitration proceeding, whether before or after an award has been made, or where a Covered Employee seeks recovery of amounts due after an award has been made, or where the Company brings any proceeding challenging or contesting the award, all of a Covered Employee's reasonable attorneys fees and expenses incurred in connection therewith shall be promptly reimbursed by the Company to the Covered Employee, within five days of presentation of an itemized request for reimbursement, regardless of whether the Covered Employee prevails and regardless of the forum in which such proceeding is brought.
10. BENEFITS AND BURDENS. This Plan shall inure to the benefit of and be binding upon the Employers and the Covered Employees, their respective successors, executors, administrators, heirs and permitted assigns. In the event of a Covered Employee's death after a Terminating Event but prior to the completion by the Employers of all payments due him under this Plan, the Employers shall continue such payments to the Covered Employee's beneficiary designated in writing to the Employers prior to his death (or to his estate, if the Covered Employee fails to make such designation).
11. ENFORCEABILITY. If any portion or provision of this Plan shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Plan, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Plan shall be valid and enforceable to the fullest extent permitted by law.
12. WAIVER. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Plan, or the waiver by any party of any breach of this Plan, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
13. NOTICES. Any notices, requests, demands, and other communications provided for by this Plan shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to a
Covered Employee at the last address the Covered Employee has filed in writing with the Employers, or to the Employers at their main office, attention of the Board of Directors.
14. EFFECT ON OTHER PLANS. Nothing in this Plan shall be construed to limit the rights of the Covered Employees under the Employers' benefit plans, programs or policies.
15. NATURE OF PAYMENTS; REQUIREMENT FOR RELEASE, CONFIDENTIALITY AND NON-SOLICITATION AGREEMENT. The amounts due pursuant to this Plan, except for payment of accrued base salary through the Date of Termination, are in the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty. The Company may require, as a condition to making the payments and providing the benefits required hereby, that a Covered Employee execute and deliver to the Company a Release and a Non-Solicitation Agreement (as such terms are defined below), and may also require that the Covered Employee acknowledge in writing that he or she is resigning as an officer from the Company and as a director and officer of any subsidiary of the Company for which the Covered Employee serves in such capacity, before any amounts or benefits under this Plan are paid or provided. A "RELEASE" shall mean a written release of all employment-related claims by Covered Employee of the Company in a form and manner reasonably satisfactory to the Company. Such Release shall in all events preserve Covered Employee's continuing rights under this Plan except with respect to any amount paid prior to or simultaneously with the execution of such Release, in which event Covered Employee shall acknowledge receipt of such amount and (if such is the case) that such amount was properly calculated and is in full satisfaction of the Company's obligation to pay such amount. "NON-SOLICITATION AGREEMENT" means an agreement of Covered Employee with the Company that Covered Employee shall not, without the prior written consent of the Company for a period of one year following the Covered Employee's date of termination, solicit or attempt to solicit for employment with or on behalf of any corporation, partnership, venture or other business entity, any employee of the Company or any of its affiliates or any person who was formerly employed by the Company or any of its affiliates within the preceding six months, unless such person's employment was terminated by the Company or any of such affiliates.
16. AMENDMENT OR TERMINATION OF PLAN. The Company may, upon one year's advance written notice to the Covered Employees, amend or terminate this Plan at any time or from time to time; PROVIDED, HOWEVER, that, with respect to any such notice given on or prior to March 29, 2002, the amendment or termination set forth in such notice shall not, without the written consent of a Covered Employee, in any material adverse way affect the rights of such Covered Employee; and PROVIDED, FURTHER, that during the 24 months following a Change in Control no such amendment or termination shall have a material adverse effect on the rights of a Covered Employee with respect to such Change in Control.
17. GOVERNING LAW. This Plan shall be construed under and be governed in all respects by the laws of the State of Maryland.
18. OBLIGATIONS OF SUCCESSORS. In addition to any obligations imposed by law upon any successor to the Employers, the Employers will use their best efforts to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employers to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Employers would be required to perform if no such succession had taken place.
Adopted by the Compensation Committee of the Board of Directors: as of September 9, 1999
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Income before gain on sale of communities and
cumulative effect of change in accounting principle
|
$ | 179,840 | $ | 112,149 | $ | 72,777 | $ | 80,401 | $ | 80,002 | ||||||||||
|
||||||||||||||||||||
(Plus):
|
||||||||||||||||||||
Minority interest in consolidated partnerships
|
573 | 1,481 | 150 | 950 | 865 | |||||||||||||||
Amortization of capitalized interest (1)
|
7,503 | 5,957 | 5,114 | 4,429 | 3,605 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Earnings before fixed charges
|
$ | 187,916 | $ | 119,587 | $ | 78,041 | $ | 85,780 | $ | 84,472 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
(Plus) Fixed charges:
|
||||||||||||||||||||
Portion of rents representative
of the interest factor
|
$ | 518 | $ | 354 | $ | 323 | $ | 503 | $ | 527 | ||||||||||
Interest expense
|
111,046 | 127,099 | 131,103 | 130,178 | 114,282 | |||||||||||||||
Interest capitalized
|
46,388 | 25,284 | 20,566 | 24,709 | 29,937 | |||||||||||||||
Preferred dividend
|
8,700 | 8,700 | 8,700 | 10,744 | 17,896 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Total fixed charges (2)
|
$ | 166,652 | $ | 161,437 | $ | 160,692 | $ | 166,134 | $ | 162,642 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
(Less):
|
||||||||||||||||||||
Interest capitalized
|
46,388 | 25,284 | 20,566 | 24,709 | 29,937 | |||||||||||||||
Preferred dividend
|
8,700 | 8,700 | 8,700 | 10,744 | 17,896 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Earnings (3)
|
$ | 299,480 | $ | 247,040 | $ | 209,467 | $ | 216,461 | $ | 199,281 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Ratio (3 divided by 2)
|
1.80 | 1.53 | 1.30 | 1.30 | 1.23 | |||||||||||||||
|
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Income before gain on sale of communities and
extraordinary item
|
$ | 179,840 | $ | 112,149 | $ | 72,777 | $ | 80,401 | $ | 80,002 | ||||||||||
|
||||||||||||||||||||
(Plus):
|
||||||||||||||||||||
Minority interest in consolidated partnerships
|
573 | 1,481 | 150 | 950 | 865 | |||||||||||||||
Amortization of capitalized interest (1)
|
7,503 | 5,957 | 5,114 | 4,429 | 3,605 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Earnings before fixed charges
|
$ | 187,916 | $ | 119,587 | $ | 78,041 | $ | 85,780 | $ | 84,472 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
(Plus) Fixed charges:
|
||||||||||||||||||||
Portion of rents representative
of the interest factor
|
$ | 518 | $ | 354 | $ | 323 | $ | 503 | $ | 527 | ||||||||||
Interest expense
|
111,046 | 127,099 | 131,103 | 130,178 | 114,282 | |||||||||||||||
Interest capitalized
|
46,388 | 25,284 | 20,566 | 24,709 | 29,937 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Total fixed charges (2)
|
$ | 157,952 | $ | 152,737 | $ | 151,992 | $ | 155,390 | $ | 144,746 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
(Less):
|
||||||||||||||||||||
Interest capitalized
|
46,388 | 25,284 | 20,566 | 24,709 | 29,937 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Earnings (3)
|
$ | 299,480 | $ | 247,040 | $ | 209,467 | $ | 216,461 | $ | 199,281 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Ratio (3 divided by 2)
|
1.90 | 1.62 | 1.38 | 1.39 | 1.38 | |||||||||||||||
|
(1) | Represents an estimate of capitalized interest costs based on the Companys established depreciation policy and an analysis of interest costs capitalized since 1998 (the year in which AvalonBay was formed). |
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Form S-3 | Form S-8 | |
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No. 333-87063
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No. 333-16837 | |
No. 333-15407
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No. 333-56089 | |
No. 333-62855
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No. 333-115290 | |
No. 333-87219
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No.333-134935 | |
No. 333-103755
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No. 333-107413
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No. 333-132435
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No.333-135243
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No.333-139839
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1. | I have reviewed this annual report on Form 10-K of AvalonBay Communities, Inc.; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a 15(e) and 15d 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants Board of Directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date:
February 28, 2007
|
||||
|
||||
|
/s/ Bryce Blair
|
|||
|
Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of AvalonBay Communities, Inc.; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a 15(e) and 15d 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants Board of Directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date:
February 28, 2007
|
||||
|
||||
|
/s/ Thomas J. Sargeant
|
|||
|
Chief Financial Officer |
Date:
February 28, 2007
|
||||
|
||||
|
/s/ Bryce Blair | |||
|
|
|||
|
Chief Executive Officer | |||
|
||||
|
||||
|
/s/ Thomas J. Sargeant | |||
|
|
|||
|
Chief Financial Officer |