As filed with the Securities and Exchange Commission on November 30, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMLI RESIDENTIAL PROPERTIES TRUST
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(Exact Name of Registrant as Specified in Its Charter)
Maryland 36-3925916
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(State of Organization) (I.R.S. Employer
Identification Number)
Allan J. Sweet
125 South Wacker Drive 125 South Wacker Drive
Suite 3100 Suite 3100
Chicago, Illinois 60606 Chicago, Illinois 60606
(312) 443-1477 (312) 443-1477
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(Address, Including Zip Code, (Name, Address, Including
and Telephone Number, Zip Code and Telephone Number,
Including Area Code, of Including Area Code, of
Registrant's Principal Agent for Service)
Executive Offices)
Copy of Service to:
Edward J. Schneidman
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
(312) 782-0600
Approximate date of commencement of proposed sale to the public: From
time to time after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box:[ X ]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering: [ ]
__________
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ] __________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
Title of each Amount offering aggregate Amount of
class of security to be price per offering registration
to be registered registered share (1) price (1) fee
- ----------------- ------------------------ ---------- ------------
Series D Cumula-
tive Convertible
Redeemable Pre-
ferred Shares of
Beneficial In-
terest, par value
$.01 per share 800,000 shares $25.00 $20,000,000 $4,780
Common shares of
beneficial in-
terest, par value
$.01 per share 800,000 shares ------ ----------- ------
- ----------
(1) Pursuant to Rule 457(a) and (i) under the Securities Act of 1933, the
registration fee has been calculated on the basis of a bona fide
estimate of the maximum offering price of the Series D Preferred
Shares.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
======================================================================
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS DATED NOVEMBER 30, 2001
PROSPECTUS
- ----------
AMLI RESIDENTIAL PROPERTIES TRUST
800,000 Series D Preferred Shares of Beneficial Interest
800,000 Common Shares of Beneficial Interest
This prospectus relates to the offer and sale of 800,000 Series D
Preferred Shares of Beneficial Interest in AMLI Residential Properties
Trust and 800,000 Common Shares of Beneficial Interest in AMLI Residential
Properties Trust from time to time.
The Equitable Life Assurance Society of the United States purchased
the Series D Preferred Shares from AMLI in a private placement. Equitable
and/or its permitted transferees may sell these preferred and common shares
from time to time. AMLI may issue common shares of beneficial interest
from time to time upon exchange of the Series D Preferred Shares.
We will not receive any proceeds when the selling shareholders sell
any of the preferred or common shares. However, we have agreed to pay
certain expenses of the registration of the Series D Preferred Shares and
the common shares.
Our common shares are listed on the New York Stock Exchange under the
symbol "AML." Our Series D Preferred Shares are not listed on any exchange
or quoted on any national quotation system.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED ON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is November 30, 2001
1
We have not authorized any person to give any information or to make
any representation not contained in this prospectus in connection with any
offering of these common and preferred shares. This prospectus is not an
offer to sell any security other than the Series D Preferred Shares and the
common shares into which the Series D Preferred Shares may be converted,
and this prospectus is not soliciting an offer to buy any security other
than the Series D Preferred Shares and the common shares into which the
Series D Preferred Shares may be converted. This prospectus is not an
offer to sell to any person the Series D Preferred Shares and the common
shares into which the Series D Preferred Shares may be converted, and this
prospectus is not soliciting an offer from any person to buy the Series D
Preferred Shares and the common shares into which the Series D Preferred
Shares may be converted in any jurisdiction where the offer or sale to that
person is not permitted. You should not assume that the information
contained in this prospectus is correct on any date after the date of this
prospectus, even though this prospectus is delivered or the Series D
Preferred Shares and the common shares into which the Series D Preferred
Shares may be converted are offered or sold on a later date.
TABLE OF CONTENTS
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Page
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AMLI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 3
Description of Common Shares. . . . . . . . . . . . . . . . . 3
Description of Provisions of Maryland Law and of
AMLI's Declaration of Trusts and By-Laws. . . . . . . . . . 16
Federal Income Tax Considerations . . . . . . . . . . . . . . 18
Selling Shareholder . . . . . . . . . . . . . . . . . . . . . 28
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . 28
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . 29
Where You Can Find More Information . . . . . . . . . . . . . 29
2
AMLI
AMLI is a self-administered and self-managed real estate investment
trust (a REIT) which owns, manages, leases, acquires and develops
institutional quality apartment communities. AMLI's communities are
located in specific markets in the Southwest, Southeast, Midwest and
Mountain areas of the United States. AMLI also holds interests in co-
investment ventures involving residential apartment communities.
Additionally, AMLI engages in development activities on its own and through
co-investment joint ventures.
AMLI is operated through AMLI Residential Properties, L.P., AMLI
Management Company, AMLI Management Company's wholly-owned construction
subsidiary AMLI Residential Construction, LLC and AMLI Institutional
Advisors, Inc. AMLI is the sole general partner of AMLI Residential
Properties, L.P., a Delaware limited partnership, through which it owns the
communities and its interests in the co-investment communities. AMLI
Residential Properties, L.P. is referred to in this prospectus as AMLI,
L.P. As of October 31, 2001, AMLI owned 85.4% of the units of partnership
interest in AMLI, L.P. AMLI Management Company provides management and
leasing services to each of the communities, the co-investment communities
and several additional properties in which AMLI has no interest. AMLI
Institutional Advisers, a qualified professional asset manager, renders
real estate investment advice to institutional capital sources, primarily
pension plans, endowments, foundations and insurance companies. AMLI
actively pursues co-investments through relationships administered by AMLI
Institutional Advisers as a way of diversifying the sources of its equity
capital for investment in apartment communities. AMLI Residential
Construction provides general contracting, construction management and
landscaping services to AMLI and its managed ventures. AMLI Institutional
Advisors, AMLI Management Company and AMLI Residential Construction are
referred to in this prospectus as the service companies.
AMLI was formed in 1993 and is organized as a REIT under the laws of
Maryland. Its principal executive offices are located at 125 South Wacker
Drive, Suite 3100, Chicago, Illinois 60606, and its telephone number is
(312) 443-1477.
USE OF PROCEEDS
AMLI will not receive any proceeds from the sale of any of the
Series D Preferred Shares or the common shares into which the Series D
Preferred Shares are convertible. The selling shareholder will receive all
proceeds from the sale of the Series D Preferred Shares and the common
shares into which the Series D Preferred Shares are convertible.
DESCRIPTION OF COMMON SHARES
GENERAL
AMLI's declaration of trust authorizes AMLI to issue up to
150,000,000 shares of beneficial interest, par value $0.01 per share,
consisting of common shares, preferred shares and such other types or
classes of shares of beneficial interest as AMLI's board of trustees may
create and authorize from time to time. AMLI's board of trustees may amend
AMLI's declaration of trust without shareholder consent to increase or
decrease the shares of any class which AMLI has authority to issue. At
October 31, 2001, approximately 17,808,398 common shares of beneficial
interest in AMLI were issued and outstanding and held of record by
approximately 330 shareholders. At October 31, 2001, 350,000 Series A
cumulative convertible preferred shares, 3,125,000 Series B cumulative
convertible preferred shares, and 800,000 Series D cumulative convertible
preferred shares were issued and outstanding.
3
The following description of certain general terms and provisions of
the common shares is not complete and you should refer to AMLI's
declaration of trust and bylaws for more information.
The outstanding common shares are fully paid and, except as described
below under "-- Shareholder liability," non-assessable. Each common share
entitles the holder to one vote on all matters requiring a vote of
shareholders, including the election of trustees. Holders of common shares
do not have the right to cumulate their votes in the election of trustees,
which means that the holders of a majority of the outstanding common shares
can elect all of the trustees then standing for election.
Holders of common shares are entitled to those distributions that
AMLI's board of trustees may declare from time to time out of funds legally
available for the payment of distributions. Holders of common shares have
no conversion, redemption, preemptive or exchange rights to subscribe to
any securities of AMLI. If there is a liquidation, dissolution or winding
up of AMLI's affairs, the holders of the common shares are entitled to
share equally in AMLI's assets remaining after AMLI pays, or sets aside
assets to pay, all liabilities to its creditors and subject to the rights
of the holders of AMLI's preferred shares.
PURCHASE RIGHTS
On November 2, 1998, AMLI's board of trustees declared a dividend of
one preferred share purchase right for each common share outstanding, which
was made to holders of common shares of record at the close of business on
November 13, 1998. The holders of any additional common shares issued
after that date and before the redemption or expiration of the preferred
share purchase rights also receive one preferred share purchase right for
each additional common share. Each preferred share purchase right entitles
the holder under certain circumstances to purchase from AMLI one one-
thousandth of a share of a series of participating preferred shares, par
value $0.01 per share, at a price of $70.00 per one one-thousandth of a
participating preferred share. AMLI will adjust that price from time to
time to prevent dilution. Preferred share purchase rights will be
exercisable if:
(1) a person or group of persons acquires 15% or more of the
outstanding common shares, or files a document with a
governmental agency indicating an intention to acquire 15% or
more of the outstanding common shares, or
(2) a person or group of persons announces a tender offer or
exchange offer for 15% or more of the outstanding common
shares.
Under certain circumstances, each preferred share purchase right will
entitle the holder to purchase, at the preferred share purchase right's
then current exercise price, a number of common shares having a market
value at the time equal to twice the preferred share purchase right's
exercise price. If any person or group acquires AMLI in a merger or other
business transaction, each holder will have the right to purchase, at the
preferred share purchase right's then current exercise price, a number of
the acquiring company's common shares having a market value at the time
equal to twice the preferred share purchase right's exercise price. The
preferred share purchase rights will expire on November 2, 2008 and AMLI
may redeem them in whole, but not in part, at a price of $0.01 per
preferred share purchase right payable in cash, shares of AMLI or any other
form of consideration determined by AMLI's board of trustees.
4
The preferred share purchase rights have certain anti-takeover
effects. The preferred share purchase rights will cause substantial
dilution to a person or group that attempts to acquire AMLI on terms not
approved by AMLI's board of trustees. The preferred share purchase rights
should not interfere with any merger or other business combination approved
by AMLI's board of trustees since the preferred share purchase rights may
be redeemed by AMLI at the redemption price prior to the time that a person
or group has acquired 15% or more of AMLI's outstanding common shares.
TRANSFER AGENT
The transfer agent and registrar for the common shares is EquiServe
Trust Company, N.A. The common shares are listed on the NYSE under the
symbol "AML."
RESTRICTIONS ON SIZE OF HOLDINGS OF SHARES
For AMLI to qualify as a REIT under the Internal Revenue Code of
1986, no more than 50% in value of AMLI's shares, after taking into account
options to acquire shares, may be owned, directly or indirectly, by five or
fewer individuals during the last half of each taxable year or during a
proportionate part of any short taxable year. "Individuals" are defined in
the Internal Revenue Code to include certain entities and constructive
ownership among specified family members. AMLI's shares must also be
beneficially owned by 100 or more persons during at least 335 days of each
taxable year or during a proportionate part of any short taxable year.
AMLI's declaration of trust prohibits any shareholder from owning, or
being deemed to own by virtue of the attribution provisions of the Internal
Revenue Code or Section 13(d) of the Securities Exchange Act of 1934, more
than 9.8% in number of shares or value of AMLI's outstanding shares.
AMLI's board of trustees, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence satisfactory to
AMLI's board of trustees and on any other conditions as AMLI's board of
trustees may direct, may exempt a proposed transferee from the ownership
limit. The proposed transferee must give written notice to AMLI of the
proposed transfer at least 15 days prior to any transfer which, if
consummated, would result in the proposed transferee owning AMLI's shares
in excess of the ownership limit. AMLI's board of trustees may require any
opinions of counsel, affidavits, undertakings or agreements that it
believes are necessary or advisable in order to determine or ensure AMLI's
status as a REIT. Any transfer of AMLI's shares that would:
(1) create a direct or indirect ownership of shares in excess of
the ownership limit;
(2) result in AMLI's shares being beneficially owned by fewer than
100 persons, determined without reference to any rules of
attribution, as provided in Section 856(a) of the Internal
Revenue Code; or
(3) result in AMLI being "closely held" within the meaning of
Section 856(h) of the Internal Revenue Code,
will not have any effect, and the intended transferee will acquire no
rights to the shares. These restrictions on transferability and ownership
will not apply if AMLI's board of trustees determines, and AMLI's
shareholders approve that determination, that it is no longer in the best
interests of AMLI to attempt to qualify, or to continue to qualify, as a
REIT.
5
AMLI's declaration of trust excludes from these ownership
restrictions some of the investors and their transferees who received
shares of AMLI, or units in AMLI, L.P., in exchange for apartment
communities in connection with the formation of AMLI. AMLI's board of
trustees by resolution has excluded from the ownership restrictions UICI, a
Delaware corporation, and Gregory T. Mutz to the extent that (1) UICI
individually beneficially owns 29.9% or less of AMLI's outstanding shares,
(2) Mr. Mutz individually beneficially owns 24.9% or less of AMLI's
outstanding shares and (3) UICI and Mr. Mutz collectively beneficially own
34.9% or less of AMLI's outstanding shares as a group.
If there is any purported transfer of AMLI's shares which would
result in a person owning AMLI's shares in excess of the ownership limit,
except as permitted above, or would cause AMLI to become "closely held"
under Section 856(h) of the Internal Revenue Code, those shares will
constitute "excess shares." These excess shares will be transferred
pursuant to AMLI's declaration of trust to AMLI as the trustee of a trust
for the benefit of the person or persons to whom the excess shares are
ultimately transferred, until the excess shares are transferred to a person
whose ownership will not violate the restrictions on ownership. Subject to
the ownership limit, the trustee will transfer the excess shares at the
direction of the purported transferee to any person if the excess shares
would not be excess shares in the hands of that person. The purported
transferee will receive the lesser of:
(1) the price paid by the purported transferee for the excess
shares or, if no consideration was paid, the fair market value
of the excess shares on the day of the event which caused the
excess shares to be held in trust; and
(2) the price received from the sale or other disposition of the
excess shares.
Any amount received by the purported transferee in excess of that price
will be paid to AMLI. In addition, AMLI will have the right to purchase
the excess shares held in trust for a 90-day period at a purchase price
equal to the lesser of:
(1) the price paid by the purported transferee for the excess
shares or, if no consideration was paid, the fair market value
of the excess shares on the day of purchase by AMLI; and
(2) the fair market value of the excess shares on the date AMLI
elects to purchase them.
Fair market value, for these purposes, means the last reported sales
price on the NYSE on the trading day immediately preceding the relevant
date, or if those shares are not then traded on the NYSE, the last reported
sales price on the trading day immediately preceding the relevant date as
reported on any exchange or quotation system on which those shares are then
traded. If the shares are not then traded on any exchange or quotation
system, the fair market value will be the market price on the relevant date
as determined in good faith by AMLI's board of trustees.
From and after the purported transfer to the purported transferee of
the excess shares, the purported transferee will cease to be entitled to
distributions, voting rights and other benefits with respect to the excess
shares except the right to payment on the transfer of the excess shares as
described above. If the purported transferee receives any distributions on
excess shares prior to AMLI's discovery that those excess shares have been
transferred in violation of the provisions of AMLI's declaration of trust,
the purported transferee must repay those distributions to AMLI upon
demand.
6
If the restrictions on transferability and ownership are determined
to be void, invalid or unenforceable by any court of competent
jurisdiction, then AMLI may treat the purported transferee of any excess
shares to have acted as an agent of AMLI in acquiring those excess shares
and to hold those excess shares on behalf of AMLI.
All certificates evidencing shares will bear a legend referring to
the restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Internal Revenue Code, more than 5%, or such other
percentage between 0.5% and 5%, as provided in the rules and regulations of
the Internal Revenue Code, of the number or value of AMLI's outstanding
shares must give a written notice containing certain information to AMLI by
January 31 of each year. In addition, each shareholder is upon demand
required to disclose to AMLI in writing information with respect to its
direct, indirect and constructive ownership of AMLI's shares as AMLI's
board of trustees deems reasonably necessary to comply with the provisions
of the Internal Revenue Code applicable to a REIT, to determine AMLI's
status as a REIT, to comply with the requirements of any taxing authority
or governmental agency or to determine any such compliance.
The restrictions on share ownership in AMLI's declaration of trust
are designed to protect the REIT status of AMLI. The restrictions could
have the effect of discouraging a takeover or other transaction in which
holders of some, or a majority, of the common shares might receive a
premium for their shares over the then prevailing market price or which
such holders might believe to be otherwise in their best interest.
INDEMNIFICATION OF TRUSTEES AND OFFICERS
As permitted by Maryland law, AMLI's declaration of trust provides
that a trustee or officer of AMLI will not be liable for money damages to
AMLI or the shareholders for any act or omission in the performance of his
or her duties, except to the extent that (1) the person actually received
an improper benefit or (2) the person's action or failure to act was the
result of active and deliberate dishonesty and was material to the cause of
action adjudicated.
AMLI's officers and trustees are and will be indemnified under AMLI's
declaration of trust and bylaws and the partnership agreement of AMLI, L.P.
against certain liabilities. AMLI's declaration of trust requires AMLI to
indemnify its trustees and officers against claims and liabilities and
reasonable expenses actually incurred by them in connection with any claim
or liability by reason of their services in those or other capacities
unless it is established that:
(1) the act or omission of the trustee or officer was material to
the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate
dishonesty;
(2) the trustee or officer actually received an improper personal
benefit; or
(3) in the case of any criminal proceeding, the trustee had
reasonable cause to believe that the act or omission was
unlawful.
7
However, AMLI may not indemnify for an adverse judgment in a suit by
or in the right of AMLI. As permitted by Maryland law, AMLI's declaration
of trust allows AMLI to advance reasonable expenses to a trustee upon
AMLI's receipt of (1) a written affirmation by the trustee of his or her
good faith belief that he or she has met the standard of conduct necessary
for indemnification by AMLI and (2) a written undertaking by or on his or
her behalf to repay the amount paid or reimbursed by AMLI if it is
ultimately determined that the trustee did not meet the standard of
conduct. Additionally, AMLI has entered into indemnification agreements
with AMLI's officers and trustees providing substantially the same scope of
coverage afforded by provisions in AMLI's declaration of trust.
The partnership agreement of AMLI, L.P. also provides for
indemnification of AMLI and its officers and trustees to the same extent
indemnification is provided to officers and trustees of AMLI in its
declaration of trust. In addition, the partnership agreement of AMLI, L.P.
limits the liability of AMLI to AMLI, L.P. and its partners to the same
extent the liability of AMLI's officers and trustees to AMLI and its
shareholders is limited under AMLI's declaration of trust.
SHAREHOLDER LIABILITY
Both the Maryland statutory law governing REITs and AMLI's
declaration of trust provide that shareholders shall not be personally or
individually liable for any debt, act, omission or obligation of AMLI or
AMLI's board of trustees. AMLI's declaration of trust further provides
that AMLI shall indemnify and hold each shareholder harmless from all
claims and liabilities to which the shareholder may become subject by
reason of his or her being or having been a shareholder. AMLI shall
reimburse each shareholder for all legal and other expenses reasonably
incurred by the shareholder in connection with any such claim or liability,
provided that the claim or liability did not arise from the shareholder's
bad faith, willful misconduct or gross negligence, and the shareholder
gives AMLI prompt notice of the claim or liability and permits AMLI to
conduct the defense of the claim or liability.
In addition, AMLI's policy is to include a clause in its contracts,
including the partnership agreement of AMLI, L.P., providing that
shareholders assume no personal liability for obligations entered into on
behalf of AMLI. Nevertheless, with respect to tort claims, contractual
claims where shareholder liability is not so negated, claims for taxes and
some statutory liabilities, the shareholders may, in some jurisdictions, be
personally liable to the extent that those claims are not satisfied by
AMLI. Inasmuch as AMLI carries public liability insurance which it
considers adequate, any risk of personal liability to shareholders is
limited to situations in which AMLI's assets plus its insurance coverage
would be insufficient to satisfy the claims against AMLI and its
shareholders.
DESCRIPTION OF SERIES D PREFERRED SHARES
GENERAL
On the date of this Prospectus, 800,000 Series D Preferred Shares of
Beneficial Interest in AMLI are outstanding. The board of trustees is
authorized, without the approval of the shareholders, to cause AMLI to
issue preferred shares of beneficial interest in one or more series, to
determine the number of shares of each series and to set the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption of each
series, which may be senior to the rights of the common shares.
This section describes certain general terms and provisions of the
Series D Preferred Shares. This description is not complete and you should
refer to AMLI's declaration of trust and by-laws for more information.
8
RANKING
Any class or series of shares of AMLI shall be deemed to rank:
1. senior to the Series D Preferred Shares, as to the payment of
distributions and as to the distribution of assets upon
liquidation, dissolution or winding up, if the holders of such
class or series are entitled to the receipt of distributions or
amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in preference or priority to the
holders of Series D Preferred Shares (Such shares are referred
to as Senior Shares.);
2. on a parity with the Series D Preferred Shares, as to the
payment of distributions and as to the distribution of assets
upon liquidation, dissolution or winding up, whether or not
the distribution rates, distribution payment dates or
redemption or liquidation prices per share are different from
those of the Series D Preferred Shares, if the holders of such
class or series and the Series D Preferred Shares are entitled
to the receipt of distributions and amounts distributable upon
liquidation, dissolution or winding up in proportion to their
respective amounts of accrued and unpaid distributions per
share or liquidation preferences, without preference or
priority one over the other (Such shares are referred to as
Parity Shares.); and
3. junior to the Series D Preferred Shares, as to the payment of
distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series
is common shares or if the holders of Series D Preferred Shares
are entitled to the receipt of distributions or amounts
distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of
shares of such class or series (Such shares are referred to as
Junior Shares.).
The Series D Preferred Shares (i) are Parity Shares with respect to
the Series B Cumulative Convertible Redeemable Preferred Shares of AMLI,
(ii) are Junior Shares with respect to the Series A Cumulative Convertible
Preferred Shares of AMLI, (iii) must be at least on parity with any future
preferred shares of AMLI, and (iv) are Senior Shares with respect to the
common shares.
DISTRIBUTIONS
The holders of Series D Preferred Shares shall be entitled to
receive, when, as and if authorized and declared by the board of trustees
of AMLI, out of funds legally available for that purpose, cumulative
quarterly distributions payable in cash in an amount per share equal to the
greater of (i) $0.540625 per quarter or (ii) the cash distributions
declared on the number of common shares, or portion thereof, into which a
Series D Preferred Share would then be convertible. Such distributions
shall be cumulative from the date of original issue, whether or not such
distributions are declared or there are funds of AMLI legally available for
the payment of such distributions, and shall be payable quarterly in
arrears on the date on which cash distributions are paid on the common
shares for that quarter (Each payment date is referred to as a Distribution
Payment Date.). Each such distribution shall be payable in arrears to the
holders of record of the Series D Preferred Shares, as they appear on the
share records of AMLI at the close of business on such record date as is
fixed by the board of trustees of AMLI. The record date shall not be more
than sixty (60) calendar days prior to the corresponding Distribution
Payment Date and, within such sixty (60) calendar day period, shall be the
same date as the record date as the record date for the regular quarterly
distribution payable on the common shares for that quarter, if any.
9
The distribution period for any period shorter than a full quarter
will be prorated based on a 360-day year of twelve (12), thirty (30) day
months. Except as provided in the immediately following sentence, holders
of Series D Preferred Shares are not entitled to any distributions in
excess of the cumulative distributions described above. In the event that
a distribution on the Series D Preferred Shares is not made on the
Distribution Payment Date on which such distribution is payable, the unpaid
distribution shall accrue interest, compounded quarterly, at a rate equal
to 8.65% per annum until such distribution is paid.
So long as any of the Series D Preferred Shares are outstanding, (i)
AMLI may not declare, pay or set apart for payment any distributions or
declare or make any other distribution with respect to any class or series
of Parity Shares, and (ii) AMLI may not redeem, purchase or otherwise
acquire any Parity Shares for any consideration, unless, in each case, AMLI
has paid or declared and set apart a sum sufficient to pay (or
contemporaneously pays or declares and sets apart a sum sufficient to pay)
full cumulative distributions on the Series D Preferred Shares for all past
distribution periods. Furthermore, AMLI may not authorize, take or cause
or permit to be taken or caused any action in its capacity as general
partner of AMLI, L.P., that will result in (i) the declaration or payment
by AMLI, L.P. of any distributions with respect to any class or series of
Parity Units or (ii) the redemption or purchase, or the setting aside of
any funds or other assets for the redemption or purchase, of any Parity
Units, unless, in each case, AMLI has paid or declared and set apart a sum
sufficient to pay (or contemporaneously pays or declares and sets apart a
sum sufficient to pay) full cumulative distributions on the Series D
Preferred Shares for all past distribution periods. When distributions are
not paid in full or a sum sufficient for such payment is not set apart for
payment as provided above, all distributions declared on the Series D
Preferred Shares and all distributions declared on any other class or
series of Parity Shares shall be declared ratably in proportion to the
respective amounts of distributions accumulated, accrued and unpaid on the
Series D Preferred Shares and on such Parity Shares.
So long as any of the Series D Preferred Shares is outstanding, (i)
AMLI may not declare, pay or set apart for payment any distributions (other
than distributions paid in, or options, warrants or rights to subscribe for
or purchase Junior Shares) or declare or make any other distribution with
respect to any class or series of Junior Shares, and (ii) AMLI may not
redeem, purchase or otherwise acquire any Junior Shares (other than a
redemption, purchase or other acquisition of common shares made for
purposes of an employee incentive or benefit plan of AMLI or any
subsidiary) for any consideration (or any moneys paid to or made available
for a sinking fund for the redemption of any Junior Shares) (except by
conversion into or exchange for Junior Shares), unless, in each case, AMLI
has paid or declared and set apart a sum sufficient to pay (or
contemporaneously pays or declares and sets apart a sum sufficient to pay)
full cumulative distributions on the Series D Preferred Shares for all past
distribution periods and then current distribution period. Furthermore,
AMLI may not authorize, take or cause or permit to be taken or caused any
action in its capacity as general partner of AMLI, L.P., that will result
in (i) the declaration or payment by AMLI, L.P. of any distributions (other
than distributions paid in, or options, warrants or rights to subscribe for
or purchase Junior Units) with respect to any class or series of Junior
Units or (ii) the redemption or purchase or the setting aside of any funds
or other assets for the redemption or purchase of any Junior Units, unless,
in each case, AMLI has paid or declared and set apart a sum sufficient to
pay (or contemporaneously pays or declares and sets apart a sum sufficient
to pay) full cumulative distributions on the Series D Preferred Shares for
all past distribution periods and then current distribution periods.
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LIQUIDATION PREFERENCE
Upon any liquidation, dissolution or winding up of AMLI, whether
voluntary or involuntary, before any payment or distribution of the assets
of AMLI shall be made to or set apart for the holders of Junior Shares, the
holders of Series D Preferred Shares shall be entitled to receive the
greater of (i) $25.00 per share, plus interest, plus a redemption premium
(as discussed below), if applicable, and (ii) the amount that would be
received if the Series D Preferred Shares were converted into common shares
immediately prior to liquidation. If, upon any liquidation, dissolution or
winding up of AMLI, the assets of AMLI are insufficient to pay in full such
preferential amount and liquidating payments on the Series D Preferred
Shares and all Parity Shares, then AMLI shall distribute such assets among
the holders of Series D Preferred Shares and Parity Shares in proportion to
the respective amounts which would be payable on such Series D Preferred
Shares and such Parity Shares if all liquidating payments were paid in
full.
If the liquidating payments are payable before the second anniversary
of the date the Series D Preferred Shares were first issued, the redemption
premium that shall be included in the liquidating payments shall equal 2%
of $25.00. If the liquidating payments are payable on or after the second
anniversary of the date the Series D Preferred Shares were first issued
and before the fifth anniversary of the date the Series D Preferred Shares
were first issued, the redemption premium that shall be included in the
liquidating payments shall equal 1% of $25.00. No redemption premium shall
be included in liquidating payments made on or after the fifth anniversary
of the date the Series D Preferred Shares were first issued.
Upon any liquidation, dissolution or winding up of AMLI, after
payment has been made in full to the holders of Series D Preferred Shares
and any Parity Shares, the holders of Junior Shares will be entitled to
receive any and all assets remaining to be paid or distributed.
A consolidation or merger of AMLI with or into one or more
corporations, a sale or transfer of all or substantially all of AMLI's
assets or a statutory share exchange will not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of AMLI.
REDEMPTION
AMLI must redeem the Series D Preferred Shares in whole in August,
2051. The redemption price, in such case, shall be payable, at the option
of AMLI, either: (i) in cash in an amount equal to the aggregate
conversion price (as in effect at the time) of the Series D Preferred
Shares; or (ii) by issuance of that number of fully paid and non-assessable
common shares equal to the quotient obtained by dividing (A) the product of
the number of Series D Preferred Shares to be redeemed multiplied by
$25.00, plus all unpaid distributions by (B) the conversion price (as in
effect at the time).
AMLI may not redeem the Series D Preferred Shares before the fifth
anniversary of the date of first issuance of the Series D Preferred Shares.
On or after the fifth anniversary, AMLI may redeem all, but not less than
all, of the outstanding Series D Preferred Shares at any time.
Series D Preferred Shares shall be redeemed by AMLI on the date
specified in the notice to holders. The date specified in the notice of
redemption must be not less than thirty (30) days nor more than sixty (60)
days after the date the notice of redemption is sent by AMLI.
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Unless all distributions have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment of the
distributions is set apart for payment with respect to the Series D
Preferred Shares and all past and current distribution periods with respect
to any Parity Shares, AMLI may not redeem any Series D Preferred Shares
unless it redeems all outstanding Series D Preferred Shares and AMLI and
its affiliates may not redeem, purchase or acquire any Series D Preferred
Shares or Parity Shares, except pursuant to a purchase or exchange offer
made on the same terms to all holders of Series D Preferred Shares.
If AMLI redeems Series D Preferred Shares, notice of such redemption
shall be given to each holder of record of shares to be redeemed not less
than thirty (30) days nor more than sixty (60) days before the date of the
notice of redemption. The notice will be sent to each holder's address as
it appears on the share records of AMLI. The notice will state, as
appropriate: (i) the redemption date; (ii) the number of Series D Preferred
Shares to be redeemed; (iii) the place or places at which certificates
representing the Series D Preferred Shares are to be surrendered; (iv) the
redemption price; and (v) the then-current conversion price. If AMLI has
mailed notice of the redemption of Series D Preferred Shares as provided
above and deposits the funds necessary for the redemption in trust, then,
beginning on the date of redemption, distributions will cease to accumulate
or accrue on the shares called for redemption, those shares will no longer
be deemed to be outstanding and all rights of the holders of those shares
will cease (except the right to receive the redemption price).
CONVERSION RIGHTS UPON A CHANGE OF CONTROL
In the event AMLI experiences a Change of Control, the holders of the
Series D Preferred Shares will have the option, upon written notice to AMLI
within thirty (30) calendar days of such Change of Control, to require AMLI
to redeem all, but not part, of the Series D Preferred Shares at a price
equal to the liquidating payments as determined as of the date of the
Change of Control.
The term "Change of Control" means each occurrence of any of the
following: (i) the acquisition, directly or indirectly, by any individual,
entity or group (other than The Equitable Life Assurance Society of the
United States, Gregory T. Mutz, UICI, Amli Realty Co., Ronald L. Jensen, or
any of their respective affiliates) of beneficial ownership of (A) AMLI's
outstanding shares of beneficial interest with voting power, excluding the
outstanding shares with contingent voting rights, to cast more than 30% of
the votes entitled to be cast to elect trustees, but only if such
acquisition is not assented to by AMLI's board of trustees, or more than
30% of the aggregate fair market value of AMLI's outstanding shares of
beneficial interest, but only if such acquisition is not assented to by
AMLI's board of trustees, or (B) AMLI's outstanding shares of beneficial
interest with voting power, excluding the outstanding shares with
contingent voting rights, to cast more than 51% of the votes entitled to be
cast to elect trustees of AMLI or more than 51% of the aggregate fair
market value of AMLI's outstanding shares of beneficial interest; (ii)
other than with respect to the election, resignation or replacement of any
trustee designated, appointed or elected by the holders of the Series D
Preferred Shares (each referred to as a "Preferred Trustee"), during any
period of two consecutive years, individuals who at the beginning of such
period constituted AMLI's board of trustees cease for any reason to
constitute a majority of the board of trustees then in office; (iii) the
failure of AMLI to qualify as a REIT; (iv) the conveyance, transfer or
lease by AMLI of all or substantially all of its assets (including, but not
limited to, real property investments) to any individual or entity; or (v)
(A) the consolidation with or merger into another entity by AMLI or (B) the
consolidation with or merger of another entity into AMLI, which in either
event (A) or (B) is pursuant to a transaction in which the holders of a
majority of AMLI's outstanding shares of beneficial interest with voting
power immediately prior to such transaction beneficially own less than a
majority of the surviving entity's outstanding shares of beneficial
interest with voting power immediately after such transaction.
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CONVERSION RIGHTS
A holder of Series D Preferred Shares has the right, at any time, and
from time to time, to convert all or any portion of such shares (unless
previously redeemed) into the number of fully paid and non-assessable
shares of common shares obtained by dividing (i) the product of $25.00
multiplied by the number of shares to be converted by (ii) the conversion
price as in effect at the time. The right to convert shares called for
redemption (as described above) will terminate at the close of business on
the fifth business day prior to the date of redemption, unless AMLI
defaults in making the payment required to redeem the Series D Preferred
Shares to be redeemed at that time.
In order to exercise the conversion right, the holder of each
Series D Preferred Share to be converted must surrender the certificate
representing such share, duly endorsed or assigned to AMLI or in blank, at
the office of the transfer agent, accompanied by written notice to AMLI
that such holder elects to convert such Series D Preferred Shares.
Holders of Series D Preferred Shares at the close of business on a
distribution payment record date will be entitled to receive the
distribution payable on such shares on the corresponding Distribution
Payment Date, even if they convert the Series D Preferred Shares into
common shares between those two dates. Except as provided above, AMLI will
make no payment or allowance for unpaid distributions, whether or not in
arrears, on converted shares or for distributions on the common shares
issued upon such conversion.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for
Series D Preferred Shares have been surrendered and such notice has been
received by AMLI as provided above. No fractional common share will be
issued upon conversion of Series D Preferred Shares. Instead of any
fractional interest in a common share, AMLI will pay to the holder of such
share an amount in cash based upon the current market price of the common
shares on the day before the date of conversion.
CONVERSION PRICE ADJUSTMENTS
AMLI will adjust the conversion price if it (i) makes a distribution
on any of its common shares, (ii) subdivides, combines or reclassifies its
outstanding common shares, (iii) issues rights, options or warrants to all
holders of common shares entitling them to purchase common shares at a
price per share less than the fair market value, (iv) makes a distribution
on its common shares other than in cash or common shares, or (v) pays
consideration per common share with a value greater than the current market
price of the common shares in a tender offer.
No adjustment to the conversion price shall be required unless such
adjustment would require a cumulative increase or decrease of at least 1%
in the conversion price. AMLI will carry forward any adjustments not
required to be made and take such adjustments into account in any
subsequent adjustments.
If AMLI is a party to any transaction as a result of which common
shares are converted into the right to receive shares, securities or other
property, then each Series D Preferred Share will be convertible into the
kind and amount of shares, securities and other property (including cash or
any combination of the foregoing) which the holder of that share would have
received if it had converted the share immediately before such transaction.
AMLI may not be a party to any transaction unless the terms of the
transaction are consistent with the terms described above.
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VOTING RIGHTS
Holders of Series D Preferred Shares will not have any voting rights,
except as described in this section or as applicable law may otherwise
require from time to time.
If and whenever (i) four quarterly distributions (whether or not
consecutive) payable on the Series D Preferred Shares are in arrears (which
shall, with respect to any such quarterly distribution, mean that any such
distribution has not been paid in full), whether or not earned or declared,
(ii) for four consecutive quarterly distribution periods, AMLI fails to pay
distributions on the common shares in an amount per share at least equal to
$0.418 per share per quarter, or (iii) AMLI fails to satisfy the test set
forth in the section entitled "Fixed Charge Coverage," then the number of
trustees then constituting the board of trustees shall be increased by two
(or by three if the number of trustees then constituting the board of
trustees is ten or more (without including any trustees elected as set
forth in this section) and the holders of Series D Preferred Shares,
together with the holders of every other series or class of Parity Shares
(with any other such series, the "Voting Preferred Shares"), voting as a
single class regardless of series, will have the right to elect the
additional trustees at any annual meeting of holders of beneficial interest
or a special meeting. The voting rights of the holders of the Series D
Preferred Shares and the term of the trustees elected by the Voting
Preferred Shares will cease whenever (A) in the case of an arrearage in
distributions described in clause (i), all distributions in arrears on the
Series D Preferred Shares and the Voting Preferred Shares then outstanding
have been paid and a sum sufficient for the payment of distributions for
two consecutive quarters has been set aside, (B) in the case of an
arrearage in distributions described in clause (ii), AMLI makes a quarterly
distribution payment on the common shares in an amount per share equal to
or exceeding $0.418 per share per quarter for two consecutive quarters, or
(C) in the case of a failure described in clause (iii), AMLI satisfies the
test set forth in the section entitled "Fixed Charge Coverage" for two
consecutive quarters.
So long as any of the Series D Preferred Shares is outstanding, the
affirmative vote of at least two-thirds of the holders of the Series D
Preferred Shares, will be necessary to (i) make any amendment to AMLI's
declaration of trust or bylaws which materially and adversely affects the
voting powers, rights or preferences of the holders of the Series D
Preferred Shares; (ii) authorize, reclassify, create, or increase the
authorized amount of any class of Senior Shares or any security convertible
into any class of Senior Shares; or (iii) issue any class of Senior Units
in AMLI L.P. or any security convertible into any class of Senior Units.
AMLI may authorize, reclassify, create, or increase the authorized
amount of any class of Senior Shares or any security convertible into any
class of Senior Shares without the consent of the holders of the Series D
Preferred Shares if provision is made for the redemption of all of the
outstanding Series D Preferred Shares, if the Series D Preferred Shares are
then redeemable at the option of AMLI. AMLI may also issue any class of
Senior Units in AMLI L.P. or any security convertible into any class of
Senior Units without the consent of the holders of the Series D Preferred
Shares if provision is made for the redemption of all of the outstanding
Series D Preferred Shares, if the Series D Preferred Shares are then
redeemable at the option of AMLI.
Except as otherwise required by applicable law or as described above,
the holders of the Series D Preferred Shares will not have any voting
rights and powers. The consent of the holders of the Series D Preferred
Shares will not be required for the taking of any corporate action.
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FIXED CHARGE COVERAGE TEST
So long as any Series D Preferred Shares are outstanding, AMLI must
maintain a fixed charge coverage ratio of aggregate Consolidated EBITDA (as
defined below) to aggregate Consolidated Fixed Charges (as defined below)
for every fiscal quarter equal to or greater than 1.625 to 1.
"Consolidated EBITDA" for any period means the consolidated net
income of AMLI (before minority interest, extraordinary items and other
gains and losses) as reported in AMLI's financial statements filed with the
Securities and Exchange Commission plus (i) income and state franchise
taxes paid or accrued by AMLI, (ii) interest expense paid or accrued by
AMLI, (iii) depreciation and depletion, (iv) amortization, (v) fees (to the
extent such fees were treated as expenses in the calculation of the
consolidated net income of AMLI) with respect to any interest rate
protection agreement and/or currency protection agreement and (vi) other
non-cash charges or discretionary prepayment penalties deducted from
consolidated net income.
"Consolidated Fixed Charges" for any period means the sum of (i)
interest expense paid or accrued by AMLI, (ii) preferred share distribution
requirements for such period, whether or not declared or paid and (iii)
fees (to the extent such fees were treated as expenses in the calculation
of the consolidated net income of AMLI) with respect to any interest rate
protection agreement and/or currency protection agreement.
RESTRICTIONS ON TRANSFER
The restrictions on transfer and ownership limitations described
above under "Description of Common Shares - Restrictions on size of
holdings of shares" also apply to the Series D Preferred Shares. You
should refer to that description and AMLI's declaration of trust and bylaws
for more information.
15
DESCRIPTION OF PROVISIONS OF MARYLAND LAW AND OF
AMLI'S DECLARATION OF TRUST AND BYLAWS
The following description of some general provisions of Maryland law
and of AMLI's declaration of trust and bylaws is not complete and you
should refer to Maryland law, AMLI's declaration of trust and AMLI's bylaws
for more information.
BOARD OF TRUSTEES
AMLI's declaration of trust provides that AMLI's board of trustees
will have not less than three nor more than fifteen trustees, as determined
from time to time by AMLI's board of trustees. AMLI's declaration of trust
further provides that a majority of AMLI's trustees must be "disinterested
trustees." Disinterested trustees are persons who are not affiliated with
AMLI Realty Co., which has been succeeded by UICI, and its affiliates and
successors. The trustees are divided into three classes. Each trustee will
hold office for three years and until his or her successor is duly elected
and qualified. At each annual meeting of shareholders, the successors to
the class of trustees whose term expires at that meeting will be elected to
hold office for three years.
A majority of the trustees then in office, even if less than a
quorum, may fill vacancies on AMLI's board of trustees, except that a
vacancy resulting from an increase in the number of trustees will be filled
by a majority of the entire board of trustees. In the event that a
majority of AMLI's board of trustees are not disinterested trustees, the
remaining disinterested trustees, or, if there are no disinterested
trustees, the remaining members of AMLI's board of trustees, must promptly
appoint that number of disinterested trustees necessary to cause the board
to include a majority of disinterested trustees. Any trustees so appointed
by the trustees then in office will hold office until the next annual
meeting of shareholders.
The classified board provision may have the effect of making it more
difficult for a third party to acquire control of AMLI without the consent
of AMLI's board of trustees, even if a change in control would be
beneficial to AMLI and its shareholders.
BUSINESS COMBINATIONS
Under Maryland law, certain "business combinations," including a
merger, consolidation, share exchange, or, in certain circumstances, an
asset transfer or issuance or reclassification of equity securities,
between a Maryland REIT and an "interested shareholder" or an affiliate of
an interested shareholder are prohibited for five years after the most
recent date on which the interested shareholder became an interested
shareholder. After the five-year period, these business combinations must
be recommended by the board of trustees of the REIT and approved by at
least 80% of the votes entitled to be cast by shareholders of the REIT,
including at least two-thirds of the votes entitled to be cast by
shareholders other than the interested shareholder with whom the business
combination is to be effected, unless, among other things, the REIT's
common shareholders receive a minimum price (as defined under Maryland law)
for their shares and they receive the consideration in cash or in the same
form as previously paid by the interested shareholder for its shares. An
"interested shareholder" is a person who either beneficially owns 10% or
more of the voting power of the REIT's outstanding shares or is an
affiliate of the REIT and, at any time during the prior two years,
beneficially owned 10% or more of the voting power of the REIT's then
outstanding shares. These provisions of Maryland law do not apply, however,
to business combinations which are approved or exempted by the board of
trustees of the REIT prior to the time that the interested shareholder
becomes an interested shareholder.
16
AMLI's declaration of trust exempts any business combination with
Gregory T. Mutz, Baldwin & Lyons, Inc., an Indiana corporation, AMLI Realty
Co., which has been succeeded by UICI, and their affiliates and successors
from these provisions of Maryland law.
CONTROL SHARE ACQUISITIONS
Maryland law provides that "control shares" of a Maryland REIT
acquired in a "control share acquisition" have no voting rights except to
the extent approved by a vote of two-thirds of the votes entitled to be
cast by shareholders other than the acquirer or officers or trustees who
are employees of the REIT. "Control shares" are voting shares which, if
aggregated with all other voting shares previously acquired by the acquirer
or in respect of which the acquirer is able to exercise voting power, would
entitle the acquirer to exercise at least one-tenth of the voting power in
electing trustees. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained
shareholder approval. A "control share acquisition" means the acquisition
of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions, including an
undertaking to pay expenses, may compel the board of trustees of the REIT
to call a special meeting of shareholders to be held within 50 days of
demand to consider voting rights for the shares. If no request for a
meeting is made, the REIT may itself present the question at any
shareholders' meeting.
If the shareholders do not approve voting rights at the meeting or if
the acquiring person does not deliver an acquiring person statement as
required by Maryland law, then, subject to certain conditions and
limitations, the REIT may redeem any or all of the control shares, except
those for which voting rights have previously been approved, for fair
market value. Fair market value will be determined without regard to the
absence of voting rights for the control shares as of the date of the last
control share acquisition by the acquirer or of any meeting of shareholders
at which the voting rights of those shares were considered and not
approved. If the shareholders approve voting rights for control shares and
the acquirer becomes entitled to exercise a majority of the voting power in
electing trustees, all other shareholders may exercise appraisal rights.
The fair value of the shares for purposes of the appraisal rights may not
be less than the highest price per share paid by the acquirer for the
control shares.
The control share acquisition law does not apply to shares acquired
in a merger, consolidation or share exchange if the REIT is a party to the
transaction, or to acquisitions approved or exempted by the declaration of
trust or bylaws of the REIT. AMLI's declaration of trust exempts Gregory
T. Mutz, Baldwin & Lyons, AMLI Realty Co., which has been succeeded by
UICI, and their affiliates and successors from these provisions of Maryland
law.
AMENDMENTS TO AMLI'S DECLARATION OF TRUST
Maryland law requires the shareholder of a REIT to approve any
amendment to its declaration of trust, with certain exceptions. As
permitted by Maryland law, AMLI's declaration of trust permits AMLI's board
of trustees, by a two-thirds vote, to amend AMLI's declaration of trust to
enable AMLI to qualify as a REIT. A majority of the votes entitled to be
cast by shareholders must approve any other amendment to AMLI's declaration
of trust.
17
TERMINATION OF AMLI
AMLI has a perpetual term and intends to continue its operations for
an indefinite time period. However, AMLI's declaration of trust permits the
termination of AMLI after the holders of a majority of AMLI's outstanding
shares approve the termination.
ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS
For a shareholder to properly bring nominations or other business
before an annual meeting of shareholders, AMLI's bylaws require the
shareholder to deliver a notice to the secretary, absent specified
circumstances, not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting setting forth:
(1) as to each person whom the shareholder proposes to nominate for
election or reelection as a trustee, all information relating
to that person that is required to be disclosed in
solicitations of proxies for the election of trustees pursuant
to Regulation 14A of the Securities Exchange Act of 1934;
(2) as to any other business that the shareholder proposes to bring
before the meeting, a brief description of that business, the
reasons for conducting that business at the meeting and any
material interest of that shareholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and
(3) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is
made, the name and address of that shareholder as they appear
on AMLI's stock records and of that beneficial owner and the
number of shares which are owned beneficially and of record by
that shareholder and that beneficial owner.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of the federal income tax consequences
to AMLI and its shareholders of the treatment of AMLI as a REIT. Since
these provisions are highly technical and complex, each prospective
purchaser of the common shares is urged to consult his or her own tax
advisor with respect to the federal, state, local, foreign and other tax
consequences of the purchase, ownership and disposition of the common
shares.
Based upon certain representations of AMLI, in the opinion of Mayer,
Brown & Platt, counsel to AMLI, AMLI has been organized in conformity with
the requirements for qualification as a REIT, and its proposed method of
operation described in this prospectus and as represented by management
will enable it to satisfy the requirements for such qualification.
This opinion is conditioned upon representations made by AMLI as to
factual matters relating to AMLI's organization and intended or expected
manner of operation. In addition, this opinion is based on the law
existing and in effect on the date hereof. AMLI's qualification and
taxation as a REIT will depend on AMLI's ability to meet on a continuing
basis, through actual operating results, asset composition, distribution
levels and diversity of stock ownership, the various qualification tests
imposed under the Internal Revenue Code discussed below. Mayer, Brown &
Platt will not review compliance with these tests on a continuing basis.
No assurance can be given that AMLI will satisfy such tests on a continuing
basis.
18
In brief, if certain detailed conditions imposed by the REIT
provisions of the Internal Revenue Code are met, entities such as AMLI that
invest primarily in real estate and that otherwise would be treated for
federal income tax purposes as corporations, are generally not taxed at the
corporate level on their "REIT taxable income" that is currently
distributed to shareholders. This treatment substantially eliminates the
"double taxation", at both the corporate and shareholder levels, that
generally results from the use of corporations. However, as discussed in
greater detail below, such an entity remains subject to tax in certain
circumstances even if it qualifies as a REIT.
If AMLI fails to qualify as a REIT in any year, however, it will be
subject to federal income taxation as if it were a domestic corporation,
and its shareholders will be taxed in the same manner as shareholders of
ordinary corporations. In this event, AMLI could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to its shareholders would be reduced or eliminated.
AMLI's board of trustees believes that AMLI has been organized and
operated and currently intends that AMLI will continue to operate in a
manner that permits it to qualify as a REIT. There can be no assurance,
however, that this expectation will be fulfilled, since qualification as a
REIT depends on AMLI continuing to satisfy numerous asset, income and
distribution tests described below, which in turn will be dependent in part
on AMLI's operating results.
The following summary is based on the Internal Revenue Code, its
legislative history, administrative pronouncements, judicial decisions and
Treasury regulations, subsequent changes to any of which may affect the tax
consequences described herein, possibly on a retroactive basis. The
following summary is not exhaustive of all possible tax considerations and
does not give a detailed discussion of any state, local, or foreign tax
considerations, nor does it discuss all of the aspects of federal income
taxation that may be relevant to a prospective shareholder in light of his
or her particular circumstances or to various types of shareholders
(including insurance companies, tax-exempt entities, financial institutions
or broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the
federal income tax laws.
TAXATION OF AMLI
GENERAL
In any year in which AMLI qualifies as a REIT, it will not, in
general, be subject to federal income tax on that portion of its REIT
taxable income or capital gain which is distributed to shareholders. AMLI
may, however, be subject to tax at normal corporate rates upon any taxable
income or capital gain not distributed. To the extent that AMLI elects to
retain and pay income tax on its net long-term capital gain, shareholders
are required to include their proportionate share of AMLI's undistributed
long-term capital gain in income but receive a credit for their share of
any taxes paid on the gain by AMLI.
Notwithstanding its qualification as a REIT, AMLI may also be subject
to taxation in other circumstances. If AMLI should fail to satisfy either
the 75% or the 95% gross income test, as discussed below, and nonetheless
maintains its qualification as a REIT because other requirements are met,
it will be subject to a 100% tax on the greater of the amount by which AMLI
fails to satisfy either the 75% test or the 95% test, multiplied by a
fraction intended to reflect AMLI's profitability. AMLI will also be
subject to a tax of 100% on net income from any "prohibited transaction,"
as described below, and if AMLI has net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or other non-qualifying income
19
from foreclosure property, it will be subject to tax on the income from
foreclosure property at the highest corporate rate. In addition, if AMLI
should fail to distribute during each calendar year at least the sum of:
(1) 85% of its REIT ordinary income for the year;
(2) 95% of its REIT capital gain net income for the year, other
than capital gains AMLI elects to retain and pay tax on as
described below; and
(3) any undistributed taxable income from prior years,
AMLI would be subject to a 4% excise tax on the excess of the required
distribution over the amounts actually distributed.
To the extent that AMLI elects to retain and pay income tax on its
long-term capital gain, the retained amounts will be treated as having been
distributed for purposes of the 4% excise tax. AMLI may also be subject to
the corporate "alternate minimum tax," as well as tax in various situations
and on some types of transactions not presently contemplated. AMLI will
use the calendar year both for federal income tax purposes and for
financial reporting purposes.
In order to qualify as a REIT, AMLI must meet, among others, the
following requirements:
SHARE OWNERSHIP TEST
AMLI's shares must be held by a minimum of 100 persons for at least
335 days in each taxable year, or a proportional number of days in any
short taxable year. In addition, at all times during the second half of
each taxable year, no more than 50% in value of the shares of AMLI may be
owned, directly or indirectly and by applying constructive ownership rules,
by five or fewer individuals, which for this purpose includes some tax-
exempt entities. Any shares held by a qualified domestic pension or other
retirement trust will be treated as held directly by its beneficiaries in
proportion to their actual interest in such trust rather than by such
trust. If AMLI complies with the Treasury regulations for ascertaining its
actual ownership and did not know, or exercising reasonable diligence would
not have reason to know, that more than 50% in value of its outstanding
shares were held, actually or constructively, by five or fewer individuals,
then AMLI will be treated as meeting such requirement.
In order to ensure compliance with the 50% test, AMLI has placed
restrictions on the transfer of its shares to prevent additional
concentration of ownership. Moreover, to evidence compliance with these
requirements under Treasury regulations, AMLI must maintain records which
disclose the actual ownership of its outstanding shares and the regulations
impose penalties against AMLI for failing to do so. In fulfilling its
obligations to maintain records, AMLI must and will demand written
statements each year from the record holders of designated percentages of
shares disclosing the actual owners of the shares as prescribed by Treasury
regulations. A list of those persons failing or refusing to comply with
the demand must be maintained as a part of AMLI's records. A shareholder
failing or refusing to comply with AMLI's written demand must submit with
his or her tax returns a similar statement disclosing the actual ownership
of AMLI's shares and other information. In addition, AMLI's declaration of
trust provides restrictions on the transfer of shares that are intended to
assist AMLI in continuing to satisfy the share ownership requirements. For
more information, see "Description of Common Shares--Restrictions on size
of holdings of shares." AMLI intends to enforce the 5% limitation on
ownership of its shares to assure that its qualification as a REIT will not
be compromised.
20
ASSET TESTS
At the close of each quarter of AMLI's taxable year, AMLI must
satisfy tests relating to the nature of its assets determined in accordance
with generally accepted accounting principles. First, at least 75% of the
value of AMLI's total assets must be represented by interests in real
property, interests in mortgages on real property, shares in other REITs,
cash, cash items, government securities and qualified temporary
investments. Second, for taxable years beginning after December 31, 2000
not more than 20% of the value of AMLI's total assets may be represented by
securities of one or more "taxable REIT subsidiaries." Third, although the
remaining 25% of AMLI's assets generally may be invested without
restriction, securities in this class may not exceed, in the case of
securities of any one non-government issuer (the "Single Issuer Tests"),
except with respect to a taxable REIT subsidiary, (1) 5% of the value of
AMLI's total assets, (2) 10% of the outstanding voting securities of the
issuer or (3) for taxable years beginning after December 31, 2000, 10% of
the total value of the outstanding securities of the issuer (the "10% Value
Test"). The 10% Value Test was added by the Tax Extension Act of 1999.
For purposes of the 10% Value Test, securities are generally defined to
exclude certain safe-harbor debt owned by a REIT if the issuer is an
individual or if the REIT owns no other securities of the issuer; where a
REIT owns securities of a partnership, safe-harbor debt is excluded from
the definition of securities only if the REIT owns at least 20% or more of
the profits interest in the partnership.
A broad exception to the Single Issuer Tests applies in the case of a
"taxable REIT subsidiary" that meets certain requirements. To qualify as a
taxable REIT subsidiary, both the REIT and the subsidiary corporation must
join in an election. In addition, any corporation (other than another
REIT) of which a taxable REIT subsidiary owns, directly or indirectly, more
than 35% of the vote or value is automatically treated as a taxable REIT
subsidiary. AMLI and each of the AMLI Management Company and AMLI
Institutional Advisors, Inc. have made taxable REIT subsidiary elections.
GROSS INCOME TESTS
There are two separate percentage tests relating to the sources of
AMLI's gross income which must be satisfied for each taxable year. For
purposes of these tests, where AMLI invests in a partnership, such as AMLI,
L.P., AMLI will be treated as receiving its share of the income and loss of
the partnership, and the gross income of the partnership will retain the
same character in the hands of AMLI as it has in the hands of the
partnership.
1. THE 75% TEST. At least 75% of AMLI's gross income for the
taxable year must be "qualifying income." Qualifying income
generally includes:
(1) rents from real property, except as modified below;
(2) interest on obligations collateralized by mortgages on,
or interests in, real property;
(3) gains from the sale or other disposition of "non-dealer
property," which means interests in real property and
real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of
AMLI's trade or business;
(4) dividends or other distributions on shares in other
REITs, as well as gain from the sale of the shares;
(5) abatements and refunds of real property taxes;
21
(6) income from the operation, and gain from the sale, of
"foreclosure property," which means property acquired at
or in lieu of a foreclosure of the mortgage
collateralized by the property;
(7) commitment fees received for agreeing to make loans
collateralized by mortgages on real property or to
purchase or lease real property; and
(8) certain qualified temporary investment income
attributable to the investment of new capital received by
AMLI in exchange for its shares during the one-year
period following the receipt of the capital.
Rents received by AMLI, L.P. from a tenant (other than a taxable REIT
subsidiary) will not qualify as rents from real property in satisfying the
75% gross income test described above, or the 95% gross income test
described below, if AMLI, or an owner of 10% or more of AMLI, directly or
constructively owns 10% or more of the tenant. However, rents that are
paid by taxable REIT subsidiaries and that meet a limited rental exception
(when 90% of space is leased at comparable rents) quality as rents from
real property. In addition, if rent attributable to personal property
leased in connection with a lease of real property is greater than 15% of
the total rent received under the lease, then the portion of rent
attributable to the personal property will not qualify as rents from real
property. Moreover, an amount received or accrued will not qualify as
rents from real property or as interest income for purposes of the 75% and
95% gross income tests if it is based in whole or in part on the income or
profits of any person, although an amount received or accrued generally
will not be excluded from "rents from real property" solely by reason of
being based on a fixed percentage or percentages of receipts or sales.
Finally, for rents received to qualify as rent from real property, AMLI
generally must not operate or manage the property or furnish or render
services to residents, other than through an "independent contractor" from
whom AMLI derives no income, except that the "independent contractor"
requirement does not apply to the extent that the services provided by AMLI
are "usually or customarily rendered" in connection with the rental of
multifamily units for occupancy only, or are not otherwise considered
"rendered to the occupant for his convenience." However, a REIT is
permitted to render a de minimis amount of impermissible services to
tenants, or in connection with the management of property, and still treat
amounts received with respect to that property as rent from real property.
The amount received or accrued by the REIT during the taxable year for the
impermissible services with respect to a property may not exceed one
percent of all amounts received or accrued by the REIT directly or
indirectly from the property. The amount received for any service or
management operation for this purpose shall be deemed to be not less than
150% of the direct cost of the REIT in furnishing or rendering the service
or providing the management or operation. However, the de minimis amount
itself will not qualify as "rent from real property." A taxable REIT
subsidiary can engage in certain business activities that under prior law
could disqualify a REIT because the taxable REIT subsidiary's activities
and relationship with the REIT could have prevented certain income from
qualifying as rents from real property. Effective December 31, 2000, the
taxable REIT subsidiary can provide services to tenants of REIT property
(even if such services were not considered services customarily furnished
in connection with the rental of real property), and can manage or operate
properties, generally for third parties, without causing amounts received
or accrued directly or indirectly by the REIT for such activities to fail
to be treated as rents from real property.
22
2. THE 95% TEST. In addition to deriving 75% of its gross income
from the sources listed above, at least 95% of AMLI's gross income for the
taxable year must be derived from the above-described qualifying income, or
from dividends, interest or gains from the sale or disposition of shares or
other securities that are not dealer property. Dividends, other than on
REIT shares, and interest on any obligations not collateralized by an
interest in real property are included for purposes of the 95% test, but
not for purposes of the 75% test. In addition, payments to AMLI under an
interest rate swap, cap agreement, option, futures contract, forward rate
agreement or any similar financial instrument entered into by AMLI to hedge
indebtedness incurred or to be incurred, and any gain from the sale or
other disposition of these instruments, are treated as qualifying income
for purposes of the 95% test, but not for purposes of the 75% test.
AMLI believes that, for purposes of both the 75% and the 95% gross
income tests, its investment in the communities and the co-investment
communities through AMLI, L.P. will, in major part, give rise to qualifying
income in the form of rents, and that gains on the sales of the communities
and the co-investment communities, or AMLI's interest in AMLI, L.P.,
generally will also constitute qualifying income.
AMLI Management Company receives and anticipates continuing to
receive fee income in consideration of the performance of property
management and other services with respect to properties not owned by AMLI
or AMLI, L.P. and receives and anticipates continuing to receive fee income
in consideration of the performance of general contracting and construction
management services. AMLI Institutional Advisors receives and anticipates
continuing to receive fee income for providing investment advisory
services. Substantially all the income derived by AMLI from the service
companies will be in the form of dividends and interest on the securities
of each of the service companies owned by AMLI, L.P. The dividends and
interest income will satisfy the 95% gross income test, but not the 75%
gross income test, as discussed above.
For purposes of determining whether AMLI complies with the 75% and
95% income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property,
excluding foreclosure property, unless the property is held by AMLI for at
least four years and certain other requirements relating to the number of
properties sold in a year, their tax bases, and the cost of improvements
made thereto are satisfied. For more information, see "--Taxation of AMLI-
- -General."
Even if AMLI fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may still qualify as a REIT for such
year if it is entitled to relief under provisions of the Internal Revenue
Code. These relief provisions will generally be available if: (1) AMLI's
failure to comply was due to reasonable cause and not to willful neglect;
(2) AMLI reports the nature and amount of each item of its income included
in the tests on a schedule attached to its tax return; and (3) any
incorrect information on this schedule is not due to fraud with intent to
evade tax. If these relief provisions apply, however, AMLI will
nonetheless be subject to a special tax upon the greater of the amount by
which it fails either the 75% or 95% gross income test for that year.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, AMLI is required to make
distributions, other than capital gain dividends, to its shareholders each
year in an amount at least equal to
(1) the sum of
(a) 90% of AMLI's REIT taxable income, computed without
regard to the dividends paid deduction and REIT net
capital gain, plus
23
(b) 90% of its net income after tax, if any, from foreclosure
property, minus
(2) the sum of some items of excess non-cash income.
Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before AMLI timely
files its tax return for such year and if paid on or before the first
regular dividend payment after such declaration. To the extent that AMLI
does not distribute all of its net capital gain or distributes at least 90%
but less than 100%, of its REIT taxable income, as adjusted, it will be
subject to tax on the undistributed amount at regular capital gains or
ordinary corporate tax rates, as the case may be. For taxable years
beginning after August 5, 1997, a REIT is permitted, with respect to
undistributed net long-term capital gains it received during the taxable
year, to designate in a notice mailed to shareholders within 60 days of the
end of the taxable year, or in a notice mailed with its annual report for
the taxable year, such amount of such gains which its shareholders are to
include in their taxable income as long-term capital gains. Thus, if AMLI
made this designation, the shareholders of AMLI would include in their
income as long-term capital gains their proportionate share of the
undistributed net capital gains as designated by AMLI and AMLI would have
to pay the tax on such gains within 30 days of the close of its taxable
year. Each shareholder of AMLI would be deemed to have paid such
shareholder's share of the tax paid by AMLI on such gains, which tax would
be credited or refunded to the shareholder. A shareholder would increase
his tax basis in his AMLI stock by the difference between the amount of
income to the holder resulting from the designation less the holder's
credit or refund for the tax paid by AMLI.
AMLI intends to make timely distributions sufficient to satisfy the
annual distribution requirements. It is possible that AMLI may not have
sufficient cash or other liquid assets to meet the 90% distribution
requirement, due to timing differences between the actual receipt of income
and actual payment of expenses on the one hand, and the inclusion of such
income and deduction of such expenses in computing AMLI's REIT taxable
income on the other hand. To avoid any problem with the 90% distribution
requirement, AMLI will closely monitor the relationship between its REIT
taxable income and cash flow and, if necessary, intends to borrow funds in
order to satisfy the distribution requirement. However, there can be no
assurance that such borrowing would be available at such time.
If AMLI fails to meet the 90% distribution requirement as a result of
an adjustment to AMLI's tax return by the Internal Revenue Service, AMLI
may retroactively cure the failure by paying a "deficiency dividend," plus
applicable penalties and interest, within a specified period.
FAILURE TO QUALIFY
If AMLI fails to qualify for taxation as a REIT in any taxable year
and relief provisions do not apply, AMLI will be subject to tax, including
applicable alternative minimum tax, on its taxable income at regular
corporate rates. Distributions to shareholders in any year in which AMLI
fails to qualify as a REIT will not be deductible by AMLI, nor generally
will they be required to be made under the Internal Revenue Code. In that
event, to the extent of current and accumulated earnings and profits, all
distributions to shareholders will be taxable as ordinary income, and
subject to limitations in the Internal Revenue Code, corporate distributees
may be eligible for the dividends-received deduction. Unless entitled to
relief under specific statutory provisions, AMLI also will be disqualified
from reelecting taxation as a REIT for the four taxable years following the
year during which qualification was lost.
24
TAXATION OF AMLI'S SHAREHOLDERS
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as AMLI qualifies as a REIT, distributions made to AMLI's
taxable domestic shareholders out of current or accumulated earnings and
profits, and not designated as capital gain dividends, will be taken into
account by them as ordinary income and will not be eligible for the
dividends-received deduction for corporations. Distributions and
undistributed amounts that are designated as capital gain dividends will be
taxed as long-term capital gains, to the extent they do not exceed AMLI's
actual net capital gain for the taxable year, without regard to the period
for which the shareholder has held its shares. However, corporate
shareholders may be required to treat up to 20% of some capital gain
dividends as ordinary income. To the extent that AMLI makes distributions
in excess of current and accumulated earnings and profits, these
distributions are treated first as a tax-free return of capital to the
shareholder, reducing the tax basis of a shareholder's shares by the amount
of the distribution, but not below zero, with distributions in excess of
the shareholder's tax basis taxable as capital gains, if the shares are
held as a capital asset. In addition, any dividend declared by AMLI in
October, November or December of any year and payable to a shareholder of
record on a specific date in those months shall be treated as both paid by
AMLI and received by the shareholder on December 31 of that year, provided
that the dividend is actually paid by AMLI during January of the following
calendar year. Shareholders may not include in their individual income tax
returns any net operating losses or capital losses of AMLI. Federal income
tax rules may also require that minimum tax adjustments and preferences be
apportioned to AMLI shareholders.
In general, any loss upon a sale or exchange of shares by a
shareholder who has held the shares for six months or less, after applying
holding period rules, will be treated as a long-term capital loss, to the
extent of distributions from AMLI were required to be treated by the
shareholder as long-term capital gains.
BACKUP WITHHOLDING
AMLI will report to its domestic shareholders and to the Internal
Revenue Service the amount of distributions paid during each calendar year,
and the amount of tax withheld, if any, with respect thereto. Under the
backup withholding rules, a shareholder may be subject to backup
withholding at applicable rates with respect to distributions paid unless
the shareholder is a corporation or comes within other exempt categories
and, when required, demonstrates this fact or provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder that does not provide AMLI with
its correct taxpayer identification number may also be subject to penalties
imposed by the Internal Revenue Service. Any amount paid as backup
withholding will be credited against the shareholder's income tax
liability. In addition, AMLI may be required to withhold a portion of
capital gain distributions made to any shareholders who fail to certify
their non-foreign status to AMLI.
25
TAX CONSEQUENCES UPON CONVERSION OF SERIES D PREFERRED SHARES
INTO COMMON SHARES
Generally, except with respect to cash received in lieu of fractional
shares, no gain or loss will be recognized upon the conversion of Series D
Preferred Shares into common shares. The tax basis of a holder of Series D
Preferred Shares (each referred to as a "Preferred Holder") in the common
shares received will equal that holder's tax basis in the Series D
Preferred Shares surrendered in the conversion reduced by any basis
attributable to fractional shares deemed received and the holding period
for the common shares will include the Preferred Holder's holding period
for the Series D Preferred Shares. Based on the Internal Revenue Service's
present advance ruling policy, cash received in lieu of a fractional common
share upon conversion of Series D Preferred Shares should be treated as a
payment in redemption of the fractional share interest in those common
shares. See "--Redemption of Series D Preferred Shares" below.
DEEMED DIVIDENDS ON SERIES D PREFERRED SHARES
The conversion price of the Series D Preferred Shares may be adjusted
if AMLI makes certain distributions of stock, cash or other property to its
shareholders. While AMLI does not presently contemplate making such a
distribution, if AMLI makes a distribution of cash or property resulting in
an adjustment to the conversion price, a Preferred Holder may be viewed as
receiving a "deemed distribution" which is taxable as a dividend under
Section 301 and 305 of the Internal Revenue Code.
REDEMPTION OF SERIES D PREFERRED SHARES
The treatment to be accorded to any redemption by AMLI of Series D
Preferred Shares can only be determined on the basis of particular facts as
to each Preferred Holder at the time of redemption. In general, a
Preferred Holder will recognize capital gain or loss measured by the
difference between the amount realized by the Preferred Holder upon the
redemption and that holder's adjusted tax basis in the Series D Preferred
Shares redeemed (provided the Series D Preferred Shares are held as a
capital asset) if that redemption (i) results in a "complete termination"
of the Preferred Holder's share interest in all classes of shares of AMLI
under Section 302(b)(3) of the Internal Revenue Code, (ii) is
"substantially disproportionate" with respect to the holder's interest in
AMLI under Section 302(b)(2) of the Internal Revenue Code (which generally
will not be the case if only Series D Preferred Shares are redeemed, since
the holders of Series D Preferred Shares generally do not have voting
rights) or (iii) is "not essentially equivalent to a dividend" with respect
to the Preferred Holder under Section 302(b)(1) of the Internal Revenue
Code. In determining whether any of these tests have been met, shares
considered to be owned by the Preferred Holder by reason of certain
constructive ownership rules set forth in the Internal Revenue Code, as
well as shares actually owned, must generally be taken into account.
Because the determination as to whether any of the alternative tests of
Section 302(b) of the Internal Revenue Code will be satisfied with respect
to any particular Preferred Holder depends upon the facts and circumstances
at the time when the determination must be made, prospective investors are
advised to consult their own tax advisors to determine their tax treatment.
If the redemption does not meet any of the tests under Section 302(b)
of the Internal Revenue Code, then the redemption proceeds received from
the Series D Preferred Shares will be treated as a distribution on the
Series D Preferred Shares as described under "--Taxation of taxable
domestic shareholders." If the redemption is taxed as a dividend, the
Preferred Holder's adjusted tax basis in the Series D Preferred Shares will
be transferred to any other share holdings in AMLI. If, however, the
Preferred Holder has no remaining share holdings in AMLI, that basis could
be transferred to a related person or it may be lost.
26
OTHER TAX CONSIDERATIONS
THE SERVICE COMPANIES
A portion of the cash to be used by AMLI, L.P. to fund distributions
to partners, including AMLI, is expected to come from the service companies
through dividends and interest on the securities of the service companies
held by AMLI, L.P. In addition, the service companies will each receive
income from AMLI, AMLI, L.P. and unrelated third parties. Because the
service companies, AMLI, and AMLI, L.P. are related through stock or
partnership ownership, income of the service companies from services
performed for AMLI and AMLI, L.P. may be subject to rules under which
additional income may be allocated to the service companies. On account of
these ownership relationships, the allocation of some expenses and
reimbursements thereof among the service companies, AMLI and AMLI, L.P.,
could be subject to additional scrutiny by the Internal Revenue Service.
Each of the service companies will pay federal and state income taxes
at the full applicable corporate rates on its income prior to payment of
any dividends. Each of the service companies will attempt to minimize the
amount of the taxes, but there can be no assurance whether or to the extent
to which measures taken to minimize taxes will be successful. To the
extent that the service companies are required to pay federal, state or
local taxes, the cash available for distribution by AMLI to shareholders
will be reduced accordingly.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES
Prospective shareholders should recognize that the present federal
income tax treatment of an investment in AMLI may be modified by
legislative, judicial or administrative action at any time and that any
such action may affect investments and commitments previously made. The
rules dealing with federal income taxation are constantly under review by
persons involved in the legislative process and by the Internal Revenue
Service and the Treasury, resulting in revisions of regulations and revised
interpretations of established concepts as well as statutory changes.
Revisions in federal tax laws and interpretations of these laws could
adversely affect the tax consequences of an investment in AMLI.
STATE AND LOCAL TAXES
AMLI and its shareholders may be subject to state or local taxation
in various jurisdictions, including those in which it or they transact
business or reside. The state and local tax treatment of AMLI and its
shareholders may not conform to the federal income tax consequences
discussed above. Consequently, you should consult your own tax advisor
regarding the effect of state and local tax laws on an investment in the
Series D Preferred Shares or the common shares of AMLI.
You are advised to consult the applicable prospectus supplement, as
well as your tax advisor regarding the specific tax consequences to you of
the purchase, ownership and sale of any of the securities described in this
prospectus, including the federal, state, local, foreign, and other tax
consequences of the purchase, ownership, sale and election and of potential
changes in applicable tax laws.
27
SELLING SHAREHOLDER
On the date of this Prospectus, The Equitable Life Assurance Society
of the United States owns all of the issued and outstanding Series D
Preferred Shares. The 800,000 Series D Preferred Shares owned by Equitable
were purchased from AMLI in a private transaction and are convertible into
common shares (Such shares are referred to as the "Conversion Shares".).
Equitable may offer any and all of the Series D Preferred Shares and the
Conversion Shares pursuant to the Prospectus. If Equitable sells all of
the Series D Preferred Shares and the Conversion Shares, Equitable will not
own any Series D Preferred Shares or Conversion Shares after the completion
of this offering. Under the terms of the Registration Rights Agreement,
dated October 31, 2001, between Equitable and AMLI (the "Registration
Rights Agreement"), Equitable may also include persons holding shares of
beneficial interest in AMLI as a result of a transfer or assignment to that
person of Series D Preferred Shares or Conversion Shares from Equitable
other than pursuant to an effective registration or Rule 144 under the
Securities Act of 1933 ("Rule 144"). Information regarding the identity
and share ownership of any Selling Shareholder other than Equitable will be
described in a supplement to this Prospectus. Equitable has not had a
material relationship with AMLI or its affiliates in the past three years.
PLAN OF DISTRIBUTION
The Selling Shareholder may from time to time sell the Series D
Preferred Shares or the Conversion Shares at market prices or at negotiated
prices and offer and sell the Conversion Shares on the NYSE or otherwise.
The Selling Shareholders may sell the Series D Preferred Shares or
the Conversion Shares in ordinary brokerage transactions, in block
transactions, in privately negotiated transactions, through put or call
transactions relating to the Series D Preferred Shares and the Conversion
Shares, through short sales of the Series D Preferred Shares or the
Conversion Shares, pursuant to Rule 144 or otherwise. Those transactions
may or may not involve brokers or dealers. If the Selling Shareholder
sells the Series D Preferred Shares or Conversion Shares through brokers,
it expects to pay customary brokerage commissions and charges. AMLI is
registering the Series D Preferred Shares and Conversion Shares to permit
the Selling Shareholder to resell the Series D Preferred Shares and the
Conversion Shares and to permit public secondary trading from time to time.
AMLI is required to register the Conversion Shares under the terms of the
Registration Rights Agreement.
AMLI has agreed to pay all expenses (other than selling commissions,
underwriting discounts and share transfer taxes applicable to any sale of
the Conversion Shares) of the Selling Shareholder in connection with the
registration and sale of the Series D Preferred Shares and the Conversion
Shares.
The following table lists the estimated expenses in connection with
the registration and sale of the Series D Preferred Shares and the
Conversion Shares, all of which will be paid by AMLI:
TYPE OF FEE AMOUNT
----------- ------
Registration Fee $ 4,780
Transfer Agent Fees $ 2,500
Printing and Duplicating Expenses $ 1,500
Legal Fees and Expenses $20,000
Accounting Fees and Expenses $ 5,000
Miscellaneous Expenses $ 3,000
Total $36,780
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The Selling Shareholder and any, dealer, broker or other agent
selling the Series D Preferred Shares or the Conversion Shares for the
Selling Shareholder or purchasing the Series D Preferred Shares or the
Conversion Shares from the Selling Shareholder for purposes of resale may
be deemed an underwriter under the Securities Act and any compensation
received by the Selling Shareholder, dealer, broker or other agent may be
deemed to be underwriting compensation. The amount of such compensation
cannot currently be estimated. AMLI knows of no existing arrangements
between the Selling Shareholder and any dealer, broker or other agent.
To comply with certain states' securities laws, if applicable, the
Series D Preferred Shares and the Conversion Shares may be sold in those
states only through brokers or dealers. In addition, the Series D
Preferred Shares and the Conversion Shares may not be sold in certain
states unless they have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and
followed.
AMLI has agreed to indemnify the Selling Shareholder and its
respective directors, officers and controlling persons against certain
liabilities relating to the registration statement, including certain
liabilities under the Securities Act. The Selling Shareholder has agreed
to indemnify AMLI and its trustees, officers and controlling persons
against certain liabilities relating to information furnished by the
Selling Shareholder to AMLI in writing for inclusion in the registration
statement, including certain liabilities under the Securities Act.
EXPERTS
The consolidated financial statements and related financial statement
schedule of AMLI as of December 31, 2000 and 1999, and for each of the
years in the three-year period ended December 31, 2000, have been
incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, independent accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
Mayer, Brown & Platt will issue an opinion for AMLI on the validity
of the Series D Preferred Shares and the Conversion Shares offered. Mayer,
Brown & Platt has in the past represented and is currently representing
AMLI and some of its affiliates.
WHERE YOU CAN FIND MORE INFORMATION
AMLI files annual, quarterly and current reports, proxy statements
and other information with the SEC. AMLI's SEC filings are available to
the public over the Internet at the SEC's web site at http://www.sec.gov.
You may also read and copy any document AMLI files with the SEC at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference room. You may also read any document AMLI files with
the SEC at the offices of the NYSE.
We filed a registration statement on Form S-3 with the SEC. This
prospectus does not contain all of the information in the registration
statement. Please refer to the registration statement for more information
about us and our Series D Preferred Shares and the Conversion Shares.
Statements in this prospectus about any contract or any other document are
not necessarily complete and you should refer to the copy of that contract
or other document which we filed as an exhibit to the registration
statement. You may read a copy of the registration statement at any of the
sources described above.
29
The SEC allows AMLI to "incorporate by reference" the information it
files with them, which means that AMLI can disclose important information
to you by referring you to those documents. The information incorporated
by reference is an important part of this prospectus, and information that
AMLI files later with the SEC will automatically update and supersede this
information. AMLI incorporates by reference the documents listed below and
any future filings made with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until this offering is
terminated.
. AMLI's Annual Report on Form 10-K for the year ended
December 31, 2000;
. AMLI's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2001, June 30, 2001, and September 30, 2001;
. The description of AMLI's common shares contained in AMLI's
registration statement on Form 8-A; and
. The description of AMLI's preferred share purchase rights
contained in AMLI's registration statement on Form 8-A.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Secretary
AMLI Residential Properties Trust
125 South Wacker Drive
Chicago, IL 60606
(312) 443-1477
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection
with the registration and sale of the shares registered hereby, all of
which will be paid by the registrant:
SEC registration fee . . . . . . . . .$ 4,780
Transfer agent fees. . . . . . . . . . 2,500
Printing and duplicating expenses. . 1,500
Legal fees and expenses. . . . . . . . 20,000
Accounting fees and expenses . . . . . 5,000
Miscellaneous expenses . . . . . . . . 3,000
-------
Total. . . . . . . . . . . . . . .$36,780
=======
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
As permitted by Maryland law, AMLI's declaration of trust provides
that a trustee or officer of AMLI will not be liable for money damages to
the registrant or the shareholders for any act or omission in the
performance of his or her duties, except to the extent that (1) the person
actually received an improper benefit or (2) the person's action or failure
to act was the result of active and deliberate dishonesty and was material
to the cause of action adjudicated.
The registrant's officers and trustees are and will be indemnified
under the registrant's declaration of trust and bylaws and the partnership
agreement of AMLI, L.P. against certain liabilities. The registrant's
declaration of trust requires the registrant to indemnify its trustees and
officers against claims and liabilities and reasonable expenses actually
incurred by them in connection with any claim or liability by reason of
their services in those or other capacities unless it is established that:
(1) the act or omission of the trustee or officer was material to
the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate
dishonesty;
(2) the trustee or officer actually received an improper personal
benefit; or
(3) in the case of any criminal proceeding, the trustee had
reasonable cause to believe that the act or omission was
unlawful.
However, the registrant may not indemnify for an adverse judgment in
a suit by or in the right of AMLI. As permitted by Maryland law, the
registrant's declaration of trust allows the registrant to advance
reasonable expenses to a trustee upon the registrant's receipt of (1) a
written affirmation by the trustee of his or her good faith belief that he
or she has met the standard of conduct necessary for indemnification by the
registrant and (2) a written undertaking by or on his or her behalf to
repay the amount paid or reimbursed by the registrant if it is ultimately
determined that the trustee did not meet the standard of conduct.
Additionally, the registrant has entered into indemnification agreements
with the registrant's officers and trustees providing substantially the
same scope of coverage afforded by provisions in the registrant's
declaration of trust.
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The partnership agreement of AMLI, L.P. also provides for
indemnification of the registrant and its officers and trustees to the same
extent indemnification is provided to officers and trustees of the
registrant in its declaration of trust. The partnership agreement of AMLI,
L.P. limits the liability of the registrant to AMLI, L.P. and its partners
to the same extent the liability of the registrant's officers and trustees
to the registrant and its shareholders is limited under the registrant's
declaration of trust.
The registrant has agreed to indemnify the selling shareholders and
their respective trustees, officers and controlling persons against certain
liabilities relating to the registration statement, including certain
liabilities under the Securities Act of 1933. Each selling shareholder has
agreed to indemnify the registrant and its trustees, officers and
controlling persons against certain liabilities relating to information
furnished by that selling shareholder to the registrant in writing for
inclusion in the registration statement, including certain liabilities
under the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the exhibit index which is incorporated by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing,
any increase or decrease in the volume of securities
offered (if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
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(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a trustee,
officer, or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that AMLI Residential Properties
Trust, a Maryland real estate investment trust, and each of the undersigned
trustees and officers of AMLI Residential Properties Trust, hereby
constitutes and appoints Gregory T. Mutz, John E. Allen, Allan J. Sweet and
Charles C. Kraft, its, his or her true and lawful attorneys-in-fact and
agents, for it, him or her and in its, his or her name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
amendments to this registration statement, and to file each such amendment
to this registration statement with all exhibits thereto, and any and all
documents in connection therewith, with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform any and all acts
and things required and necessary to be done, as fully and to all intents
and purposes as it, he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them,
may lawfully do or cause to be done by virtue hereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago, State of Illinois on
November 28, 2001.
AMLI RESIDENTIAL PROPERTIES TRUST
By: /s/ John E. Allen
--------------------------------------
John E. Allen
Vice-Chairman of the Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Gregory T. Mutz
- ---------------------- Chairman of the Board
Gregory T. Mutz Board of Trustees
(Principal Executive Officer) November 30, 2001
/s/ Robert J. Chapman Executive Vice President
- ---------------------- (Principal Financial
Robert J. Chapman Officer) November 29, 2001
/s/ Charles C. Kraft
- ---------------------- Treasurer
Charles C. Kraft (Principal Accounting
Officer) November 29, 2001
/s/ John E. Allen
- ---------------------- Vice-Chairman of the
John E. Allen Board of Trustees November 28, 2001
/s/ Allan J. Sweet
- ---------------------- Trustee and President November 29, 2001
Allan J. Sweet
/s/ Philip N. Tague
- ---------------------- Trustee and
Philip N. Tague Executive Vice President November 29, 2001
/s/ Laura D. Gates
- ---------------------- Trustee November 29, 2001
Laura D. Gates
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Name Title Date
---- ----- ----
/s/ Marc S. Heilweil
- ---------------------- Trustee November 29, 2001
Marc S. Heilweil
/s/ Stephen G. McConahey
- ------------------------- Trustee November 30, 2001
Stephen G. McConahey
/s/ Quintin E. Primo, III
- ------------------------- Trustee November 30, 2001
Quintin E. Primo, III
- ------------------------- Trustee November ___, 2001
John G. Schreiber
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INDEX TO EXHIBITS
EXHIBIT DOCUMENT DESCRIPTION
- ------- --------------------
3.1 Amended and Restated Declaration of Trust of the Registrant
(Incorporated by reference to exhibit 3.1 to Registration
Statement No. 33-71566).
3.2 Amended and Restated By-laws of the Registrant (Incorporated by
reference to exhibit 3.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2001).
3.3 Articles Supplementary to the Amended and Restated Declaration of
Trust of the Registrant Classifying Shares of Beneficial Interest
in the Registrant as Series A Cumulative Convertible Preferred
Shares of Beneficial Interest (Incorporated by reference to
exhibit 4.9 to the Registrant's Current Report on Form 8-K dated
January 30, 1996).
3.4 Articles Supplementary to the Amended and Restated Declaration of
Trust of the Registrant Classifying Shares of Beneficial Interest
in the Registrant as Series B Cumulative Convertible Preferred
Shares of Beneficial Interest (Incorporated by reference to
exhibit 4 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1998).
3.5 Articles Supplementary to the Amended and Restated Declaration of
Trust of the Registrant Classifying Unissued Shares of Beneficial
Interest in the Registrant as Series C Junior Participating
Preferred Shares (Incorporated by reference to exhibit 3.5 to the
Registrant's Form S-3 filed September 24, 2001).
3.6 Articles Supplementary to the Amended and Restated Declaration of
Trust of the Registrant Classifying Shares of Beneficial Interest
in the Registrant as Series D Cumulative Convertible Preferred
Shares of Beneficial Interest (Incorporated by reference to
exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 2001).
4.1 Form of Common Share Certificate (Incorporated by reference to
exhibit 4.1 to Registration Statement No. 33-71566).
4.2 Form of Share Certificate for Series D Cumulative Convertible
Redeemable Preferred Shares of Beneficial Interest (Incorporated
by reference to exhibit 4.1 to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30, 2001).
4.3 Rights Agreement, dated as of November 2, 1998, between the
Registrant and Harris Trust and Savings Bank, as Rights Agent,
including Exhibit A thereto (Form of Articles Supplementary
relating to the Series C Junior Participating Preferred Shares)
and Exhibit B thereto (Form of Right Certificate) (Incorporated by
reference to exhibit 4 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998).
4.4 Registration Rights Agreement, dated January 29, 2001, among the
Registrant, AMLI Residential Properties, L.P. and certain
individuals (Incorporated by reference to exhibit 4.3 to the
Registrant's Form S-3 filed September 24, 2001).
4.5 Registration Rights Agreement, dated February 1, 2001, among the
Registrant, AMLI Residential Properties, L.P. and certain
individuals and entities (Incorporated by reference to exhibit 4.4
to the Registrant's Form S-3 filed September 24, 2001).
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4.6 Registration Rights Agreement, dated March 31, 2001, among the
Registrant, AMLI Residential Properties, L.P. and certain
individuals (Incorporated by reference to exhibit 4.5 to the
Registrant's Form S-3 filed September 24, 2001).
4.7 Registration Rights Agreement, dated August 6, 2001, among the
Registrant, AMLI Residential Properties, L.P. and TMC Apartments,
L.L.C. (Incorporated by reference to exhibit 4.6 to the
Registrant's Form S-3 filed September 24, 2001).
4.8 Registration Rights Agreement, dated March 9, 1998, by the
Registrant and Security Capital Preferred Growth Incorporated
(Incorporated by reference to exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998).
4.9 Registration Rights Agreement, dated October 31, 2001, by the
Registrant and The Equitable Life Assurance Society of the United
States (Incorporated by reference to exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001).
5.1 Opinion of Mayer, Brown & Platt.**
8.1 Tax Opinion of Mayer, Brown & Platt.**
23.1 Consent of KPMG LLP.**
23.2 Consent of Mayer, Brown & Platt (Included in the opinions filed as
Exhibits 5.1 and Exhibit 8.1 to this Registration Statement).**
24.1 Power of Attorney (Included on the page of the Registration
Statement immediately preceding the signature page).**
** Filed herewith.
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