EXHIBIT 3.3
AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
AMERICAN REAL ESTATE PARTNERS, L.P.
Amendment No. 1, dated as of February 22, 1995 (the
"Amendment"), by and among American Property Investors, Inc., a
Delaware corporation, as general partner (the "General Partner"),
and all other persons and entities who are or shall in the future
become limited partners (the "Limited Partners") of American Real
Estate Partners, L.P., a Delaware limited partnership (the
"Partnership").
WHEREAS, the Partnership was formed pursuant to an
Agreement of Limited Partnership, dated as of April 29, 1987, which
was amended and restated in its entirety on May 12, 1987 (the
"Partnership Agreement"); and
WHEREAS, the Partnership proposes to distribute at no
cost to holders of record as of the close of business on or about
February 24, 1995 of depositary units representing limited partner
interests in the Partnership ("Depositary Units") one subscription
right (each, a "Right") for each seven Depositary Units held (the
"Rights Offering"); and
WHEREAS, pursuant to the authority expressly granted to
and vested in the General Partner by Section 4.05 of the
Partnership Agreement and in connection with the Rights Offering,
the General Partner intends to create a series of 5% cumulative
pay-in-kind redeemable preferred units representing limited partner
interests in the Partnership; and
WHEREAS, the General Partner desires to further amend the
Partnership Agreement to establish the series of Preferred Units
upon the terms and conditions set forth herein and fix the
designation and number of units thereof and fix the powers,
preferences and relative participating, optional or other special
rights, and the qualifications, limitations and restrictions
thereof and to incorporate certain changes conforming with the
Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the foregoing, the
Partnership Agreement is amended as follows:
Section 1. DEFINITIONS. Terms used but not otherwise
defined in this Amendment shall have the respective meanings
ascribed to such terms in the Partnership Agreement.
Section 2. CERTAIN ADDITIONAL DEFINITIONS. As used herein
the following terms and phrases shall have the meanings set forth
below:
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account
maintained for each Partner for each Fiscal Year: (i) increased by
any amounts which such Partner is obligated to restore pursuant to
any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentence of Treasury Regulation
Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the
items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions
of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"BOARD OF DIRECTORS" shall mean the Board of Directors of
the General Partner.
"DISTRIBUTION PERIOD" means the applicable period from
and including a Payment Date (as defined below) to and excluding
the next Payment Date, or, as to particular Preferred Units, such
shorter period during which such Preferred Units are outstanding
(including the first day but excluding the last day of such shorter
period).
"LEGAL HOLIDAY" means any day on which banking
institutions are authorized or obligated by law or executive order
to close in New York, New York.
"NONRECOURSE DEDUCTIONS" means the nonrecourse deductions
as defined in Treasury Regulation Section 1.704-2(b)(1). The
amount of Nonrecourse Deductions for a Fiscal Year equals the net
increase, if any, in the amount of Partnership Minimum Gain during
such Fiscal Year reduced by any distributions during such Fiscal
Year of proceeds of a Nonrecourse Liability that are allocable to
an increase in Partnership Minimum Gain, determined according to
the provisions of Treasury Regulation Section 1.704-2(c)
and 1.704-2(h).
"NONRECOURSE LIABILITY" means a liability as defined in
Treasury Regulation Section 1.704-2(b)(3).
"PARTNER MINIMUM GAIN" means an amount, with respect to
each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were
treated as a Nonrecourse Liability, determined in accordance with
Treasury Regulation Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" means a liability as defined
in Treasury Regulation Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" means the partner
nonrecourse deductions as defined in Treasury Regulation Section
1.704-2(i)(2). The amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Fiscal Year equals the
net increase, if any, in the amount of Partner Minimum Gain during
such Fiscal Year attributable to such Partner Nonrecourse Debt,
2
reduced by any distributions during that Fiscal Year to the Partner
that bears the economic risk of loss for such Partner Nonrecourse
Debt to the extent that such distributions are from the proceeds of
such Partner Nonrecourse Debt and are allocable to an increase in
Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined according to the provisions of Treasury Regulation
Section 1.704-2(h) and 1.704-2(i).
"PARTNERSHIP MINIMUM GAIN" means the aggregate gain, if
any, that would be realized by the Partnership for purposes of
computing book income or loss with respect to each Partnership
asset if each Partnership asset subject to a Nonrecourse Liability
were disposed of for the amount outstanding on the Nonrecourse
Liability by the Partnership in a taxable transaction. Partnership
Minimum Gain with respect to each Partnership asset shall be
further determined in accordance with Treasury Regulation Section
1.704-2(d) and any subsequent rule or regulation governing the
determination of minimum gain. A Partner's share of Partnership
Minimum Gain at the end of any Fiscal Year shall equal the
aggregate Nonrecourse Deductions allocated to such Partner (or his
predecessors in interest) up to that time, less such Partner's (and
predecessors') aggregate share of decreases in Partnership Minimum
Gain determined in accordance with Treasury Regulation Section
1.704-2(g).
Additionally, all references to a "Majority Interest", as
defined in the Partnership Agreement, shall not include holders of
Preferred Units.
Section 3. DESIGNATION AND AMOUNT; LIQUIDATION PREFERENCE.
There shall be hereby created a series of Units (the "Preferred
Units") representing limited partner interests in the Partnership
designated as "5% Cumulative Pay-in-Kind Redeemable Preferred
Units" and the number of Units constituting such series shall be
15,000,000. The Preferred Units will be represented by
certificates issuable solely in whole Preferred Units. No
certificates representing fractional Preferred Units will be
issued, but record of the ownership of such fractional Preferred
Units will be kept on the books of the Partnership and allocations,
distributions, voting rights, rights with respect to redemption or
conversion and the like shall be determined in accordance with
fractional Unit ownership. Record Holders of the Preferred Units
shall be entitled to exercise the voting rights, to participate in
the distributions and to have the benefit of all other rights and
be subject to all limitations of Record Holders of Preferred Units
as set forth herein and in the Partnership Agreement. The
liquidation preference (the "Liquidation Preference") of each
Preferred Unit shall be $10.
3
Section 4. Distributions.
-------------
(a) Prior to redemption of Preferred Units or Liquidation
(as defined below) and dissolution of the Partnership, Record
Holders of Preferred Units shall be entitled to receive
distributions solely in additional Preferred Units. The
distribution rate per Preferred Unit shall be 5.0% per annum on the
Liquidation Preference plus all accumulated and unpaid
distributions. Distributions shall be payable annually on March 31
of each year (each, a "Payment Date"), commencing March 31, 1996
(except that, if any Payment Date is a Saturday, Sunday or Legal
Holiday, then such distribution shall be payable on the next day
that is not a Saturday, Sunday or Legal Holiday), subject to
declaration thereof by the Board of Directors, to holders of
record as they appear upon the books of the Partnership at the
close of business on the Record Date therefor. Such Record Date
shall be not more than sixty days nor less than ten days prior to
the applicable Payment Date, as fixed by the Board of Directors
from time to time.
(b) The aggregate distribution paid to a Record Holder of
Preferred Units shall be based on the aggregate number of Preferred
Units held by such Record Holder at the close of business on the
applicable Record Date and rounded to the nearest whole cent (with
one-half cent rounded upward). Unless otherwise provided herein,
distributions on each Preferred Unit will be cumulative from and
including the date the Preferred Units are first issued to and
excluding the earliest to occur of (i) the Redemption Date (as
defined below) and (ii) the date of final distribution of assets
upon any liquidation or winding up of the Partnership, whether
voluntary or involuntary (any such event referred to in this clause
(ii), a "Liquidation").
(c) Any reference to "distribution" contained in this
Section 4 shall not include any distribution made in connection
with any Liquidation.
Section 5. Liquidation Preference.
----------------------
(a) In the event of any Liquidation, each Record Holder
of Preferred Units shall be entitled to receive, and be paid out of
the assets of the Partnership available for distribution to its
Record Holders, the amount of the Record Holder's Capital Account
in respect of the Preferred Units, which amount is intended to
equal the Liquidation Preference, plus all accumulated and unpaid
distributions on such Preferred Units to the date of final
distribution to the Record Holders of Preferred Units, whether or
not declared, without interest, and no more, before any payment
shall be made or any assets distributed to Record Holders of
Depositary Units or any other class or series of the Partnership's
Units or other equity ranking junior to the Preferred Units upon
such Liquidation. If, upon any Liquidation, the amounts payable
with respect to liquidation preferences of the Preferred Units and
any other class or series of the Partnership's Units or other
4
equity securities ranking on a parity with the Preferred Units upon
such Liquidation are not paid in full, the Record Holders of the
Preferred Units and of such other securities will share pro rata in
the amounts payable and other property distributable with respect
to such Liquidation so that the per unit amounts to which Record
Holders of Preferred Units and such other securities are entitled
will in all cases bear to each other the same ratio that the
liquidation preferences of the Preferred Units and such other
securities bear to each other. After payment in full of the
Liquidation Preference and any accumulated and unpaid distributions
in respect of the Preferred Units upon Liquidation, the Record
Holders of such Preferred Units in their capacity as such shall not
be entitled to any further right or claim to any remaining assets
of the Partnership.
(b) Neither the merger nor consolidation of the
Partnership into or with any other entity, nor the merger or
consolidation of any other entity into or with the Partnership, nor
a sale, transfer or lease of all or any part of the assets of the
Partnership, shall be deemed to be a Liquidation for purposes of
this Amendment.
(c) Written notice of any Liquidation, stating the
payment date or dates when and the place or places where the
amounts distributable in such circumstances shall be payable, shall
be given by first class mail, postage prepaid, not less than thirty
(30) days prior to any payment date stated therein, to the holders
of record of the Preferred Units at their respective addresses as
the same shall appear on the books of the Partnership or the
Transfer Agent for the Preferred Units.
Section 6. Optional Redemption.
-------------------
(a) On any Payment Date, commencing with the Payment Date
on March 31, 2000, the Partnership, with the approval of the Audit
Committee, may redeem all, but not less than all, of the Preferred
Units, out of funds legally available therefor, at a price per
Preferred Unit equal to the Liquidation Preference plus any
accumulated and unpaid distributions thereon, whether or not
declared, up to but excluding the date fixed for redemption (such
sum being hereinafter referred to as the "Redemption Price"). The
aggregate Redemption Price paid to a Record Holder of Preferred
Units shall be the product of the aggregate number of Preferred
Units redeemed from such Record Holder and the per unit Redemption
Price, with such product being rounded to the nearest whole cent
(with one-half cent rounded upward) and shall be payable either in
all cash or, as provided in Section 6(b) below, Depositary Units.
Upon any Redemption, the Redemption Price may be paid either all in
cash or all in Depositary Units but not in a combination thereof.
(b) If the Redemption Price is paid in Depositary Units,
each Record Holder of Preferred Units shall be entitled to receive
an amount of Depositary Units equal to the Redemption Price;
provided that if the Redemption Price payable with respect to any
5
Record Holder's Preferred Units is not an integral multiple of the
value of one Depositary Unit, as determined in accordance with the
formula set forth below, the difference between the Redemption
Price of such Preferred Units of such Preferred Units and the
highest integral multiple of the value of one Depositary Unit which
is less than the Redemption Price of such Preferred Units shall be
paid to such Record Holder in cash (the "Cash Payment").
Depositary Units will be valued at (i) if the Depositary Units are
listed or admitted to trading on one or more national securities
exchange, the average price at which the Depositary Units had been
trading over the 20-day period immediately preceding such
Redemption on the principal national securities exchange on which
the Depositary Units are listed or admitted to trading; (ii) if the
Depositary Units are not listed or admitted to trading on a
national securities exchange but are quoted by NASDAQ, the average
bid price per Depositary Unit at which the Depositary Units had
been trading over the 20-day period immediately preceding such
Redemption, as furnished by the National Quotation Bureau
Incorporated ("Bureau") or such other nationally recognized
quotation service as may be selected by the General Partner for
such purpose, if such Bureau is not at the time furnishing
quotations; or (iii) if the Depositary Units are not listed or
admitted to trading on a national securities exchange or quoted by
NASDAQ, an amount equal to the book value as reflected in the most
recent audited financial statement of the Partnership as of the
date of Redemption.
(c) Not more than sixty nor less than thirty days prior
to the date fixed by the Partnership for redemption (the
"Redemption Date"), notice by first class mail, postage prepaid,
shall be given to the Record Holders of Preferred Units to be
redeemed addressed to such Record Holders at their last addresses
as shown upon the books of the Partnership. Each such notice of
redemption shall specify, as applicable, (i) the Redemption Date,
(ii) the Redemption Price, (iii) whether the Redemption Price is
payable in cash or Depositary Units, (iv) if the Redemption Price
is payable in Depositary Units, the number of Depositary Units to
be delivered and the amount of the Cash Payment, if any, (v) the
place or places of delivery and payment, (vi) that delivery and
payment will be made upon presentation and surrender of the
certificates representing Preferred Units at the place designated
in such notice and (vii) that on and after the Redemption Date,
distributions will cease to accumulate on the Preferred Units
(unless the Partnership defaults in the payment of the Redemption
Price).
(d) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the
Record Holder of Preferred Units receives such notice; and failure
to give such notice by mail, or any defect in such notice to the
Record Holders of any Preferred Units designated for redemption,
shall not affect the validity of the proceedings for the redemption
of any other Preferred Units. On or after the Redemption Date, as
stated in such notice, each Record Holder of Preferred Units shall
6
surrender the certificate evidencing such Units to the Partnership
at the place designated in such notice and shall thereupon receive
payment in the amount and form specified in such notice. Notice
having been given as aforesaid, if funds and any Depositary Units
necessary for the redemption shall be legally available therefor
and shall have been irrevocably deposited or set aside on or before
the Redemption Date, then on and after the close of business on the
Redemption Date, notwithstanding that the certificates evidencing
any Preferred Units so called for redemption shall not have been
surrendered, (i) distributions with respect to the Preferred Units
shall cease to accumulate on the Redemption Date, (ii) such
Preferred Units shall no longer be deemed outstanding, (iii) the
Record Holders thereof shall cease to be Limited Partners of the
Partnership to the extent of their interest in such Preferred Units
(provided that such Record Holders shall be deemed admitted as
Limited Partners with respect to any Depositary Units issued in
payment of the Redemption Price for their Preferred Units) and (iv)
all rights whatsoever with respect to the Preferred Units so called
for redemption (except the right of the Record Holders to receive
the Redemption Price for each such Preferred Unit, without interest
or any sum of money in lieu of interest thereon, upon surrender of
their certificates therefor at the place designated in such notice)
shall terminate.
(e) Except as provided in Section 7 hereof, holders of
Preferred Units shall have no right to require redemption of the
Preferred Units.
Section 7. MANDATORY REDEMPTION. On March 31, 2010, the
Partnership must redeem all, but not less than all, of the
Preferred Units on the same terms as any optional redemption set
forth in Section 6 hereof.
Section 8. BUSINESS COMBINATIONS. In the event that the
Partnership shall effect any capital reorganization or
reclassification of its Units or shall consolidate or merge with or
into, or shall sell or transfer all or substantially all of its
assets to, any other entity, the holders of Preferred Units then
outstanding shall be entitled to receive the same kind and amount
of securities, cash, property, rights or interests as shall have
been receivable for each Depositary Unit by the holders thereof in
such reorganization, reclassification, consolidation, merger, sale
or transfer had such Preferred Units been redeemed for Depositary
Units in accordance with Section 6 immediately prior to such
reorganization, reclassification, consolidation, merger, sale or
transfer. The above provisions of this Section 8 shall similarly
apply to successive reorganizations, reclassifications,
consolidations, mergers, sales or transfers.
Section 9. STATUS OF ACQUIRED PREFERRED UNITS. Preferred
Units acquired by the Partnership upon a redemption pursuant to
Sections 6 or 7 or otherwise acquired by the Partnership will be
retired and restored to the status of authorized but unissued
Preferred Units and may not thereafter be reissued. Preferred
7
Units held by the Partnership shall not be deemed outstanding for
any purpose and shall have no voting rights or rights to
allocations or distributions.
Section 10. Voting Rights.
-------------
(a) The Record Holders of Preferred Units will not have
any voting rights except as set forth below or as otherwise from
time to time required by applicable law. If a distribution is not
declared and made to the Record Holders of Preferred Units on any
two Payment Dates (which Payment Dates need not be consecutive),
the Record Holders of more than 50% of all outstanding Preferred
Units, including the General Partner and its affiliates, voting as
a class, shall be entitled to appoint two nominees for the Board of
Directors of the General Partner. Once elected, the nominees will
be appointed to the Board of Directors by action of the General
Partner. As directors, the nominees will, in addition to their
other duties as directors, be specifically charged with reviewing
all future distributions to the Record Holders of the Preferred
Units. Such additional directors shall serve until the full
distributions accumulated on all outstanding Preferred Units have
been declared and paid or set apart for payment. If and when all
accumulated distributions on the Preferred Units have been declared
and paid or set aside for payment in full, the holders of Preferred
Units shall be divested of the special voting rights provided by
this paragraph, subject to revesting in the event of each and every
subsequent default. Upon termination of such special voting rights
attributable to all holders of Preferred Units with respect to
payment of distributions, the term of office of each director
nominated by the holders of Preferred Units (the "Preferred Unit
Director") pursuant to such special voting rights shall forthwith
terminate and the number of directors constituting the entire Board
of Directors shall be reduced by the number of Preferred Unit
Directors. So long as a distribution default shall continue, any
vacancy in the office of a Preferred Unit Director may be filled by
written consent of the Preferred Unit Director remaining in office
or, if none remain in office, by vote of the holders of Preferred
Units who are then entitled to participate in the appointment of
such Preferred Unit Directors as provided above.
(b) The General Partner or Record Holders of Preferred
Units owning at least 10% of all outstanding Preferred Units,
including the General Partner and its affiliates, may call a
meeting of the Record Holders of Preferred Units to elect such
nominees. Any Record Holder of Preferred Units calling a meeting
shall specify the number of Preferred Units as to which such Record
Holder is exercising the right to call a meeting and only those
specified Preferred Units shall be counted for the purpose of
determining whether the required ten percent (10%) standard of the
preceding sentence has been met. Record Holders of Preferred Units
desiring to call a meeting shall deliver to the General Partner one
or more calls in writing stating that the Record Holders signing
such writing wish to call a meeting. Action at the meeting shall
be limited to appointing two nominees for the Board of Directors
8
and the Record Holders of Preferred Units will have no right to
call or participate at other meetings under Section 14.04 of the
Partnership Agreement or otherwise. Within sixty (60) days after
receipt of such a call from Record Holders of Preferred Units, or
within such greater time as may be reasonably necessary for the
Partnership to comply with any statutes, rules, regulations,
listing agreements or similar requirements governing the holding of
a meeting or the solicitation of proxies for use at such a meeting,
the General Partner shall send a notice of the meeting to the
Record Holders of Preferred Units directly. A meeting shall be
held at a reasonable time and convenient place determined by the
General Partner or the Liquidating Trustee, as the case may be, on
a date not more than sixty (60) days after the mailing of notice of
the meeting. Record Holders of Preferred Units may vote either in
person or by proxy at any meeting. Each Record Holder shall have
one vote for each whole Preferred Unit held of record by such
Record Holder. No action shall be taken by the Record Holders of
Preferred Units without a meeting duly called and held or without
written consent in accordance with Section 12 hereof.
(c) Notice of a meeting called pursuant to this Section
10 shall be given either personally in writing or by mail or other
means of written communication addressed to each Record Holder of
Preferred Units at the address of the Record Holder appearing on
the books of the Partnership. An affidavit or certificate of
mailing of any notice or report in accordance with the provisions
of this Section 10 executed by the General Partner, Transfer Agent
or mailing organization shall constitute conclusive (but not
exclusive) evidence of the giving of notice. If any notice
addressed to a Record Holder of Preferred Units at the address of
such Record Holder appearing on the books of the Partnership is
returned to the Partnership by the United States Postal Service
marked to indicate that the United States Postal Service is unable
to deliver such notice, the notice and any subsequent notices or
reports shall be deemed to have been duly given without further
mailing if they are available for the Record Holder of Preferred
Units at the principal office of the Partnership for a period of
one year from the date of the giving of the notice to all other
Record Holders of Preferred Units.
(d) For purposes of determining the Record Holders
entitled to notice of or to vote at a meeting of the Record Holders
of Preferred Units, the General Partner or the Liquidating Trustee,
as the case may be, may set a record date, which shall not be less
than ten (10) days nor more than sixty (60) days prior to the date
of such meeting (unless such requirement conflicts with any rule,
regulation, guideline, or requirement of any securities exchange on
which the Preferred Units are listed for trading, in which case the
rule, regulation, guidelines, or requirement of such securities
exchange shall govern).
(e) Record Holders with respect to more than fifty
percent (50%) of the total number of all outstanding Preferred
Units then held by all Record Holders of Preferred Units, whether
9
represented in person or by proxy, shall constitute a quorum at a
meeting of Record Holders of Preferred Units. The Record Holders
present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment of such
meeting, notwithstanding the withdrawal of enough Record Holders of
Preferred Units to leave less than a quorum, if any action taken
(other than adjournment) is approved by the requisite number of
Record Holders specified in this Amendment. In the absence of a
quorum, any meeting of Record Holders of Preferred Units may be
adjourned from time to time by the affirmative vote of a majority
of the Preferred Units represented either in person or by proxy at
such meeting. When a meeting is adjourned to another time or place
notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the holders of Preferred Units
may transact any business which might have been transacted at the
original meeting.
(f) The General Partner or the Liquidating Trustee, as
the case may be, shall be solely responsible for convening,
conducting, and adjourning any meeting of Record Holders of
Preferred Units, including, without limitation, the determination
of Persons entitled to vote at such meeting, the existence of a
quorum for such meeting, the satisfaction of the requirements of
Section 10(b) with respect to such meeting, the conduct of voting
at such meeting, the validity and effect of any proxies represented
at such meeting, and the determination of any controversies, votes,
or challenges arising in connection with or during such meeting or
voting. The General Partner or the Liquidating Trustee, as the
case may be, shall designate a Person to serve as chairman of any
meeting and further shall designate a Person to take the minutes of
any meeting, which Person, in either case, may be, without
limitation, a Partner or any employee or agent of the General
Partner. The General Partner or the Liquidating Trustee, as the
case may be, may make all such other regulations, consistent with
applicable law and this Amendment, as it may deem advisable
concerning the conduct of any meeting of the Record Holders of
Preferred Units, including regulations in regard to the appointment
of proxies, the appointment and duties of inspectors of votes, and
the submission and examination of proxies and other evidence of the
right to vote.
(g) So long as any Preferred Units are outstanding, the
Partnership shall not amend, alter or repeal any provisions of the
Partnership Agreement or this Amendment so as to alter or change
the express powers, preferences or special rights of the Preferred
Units set forth herein so as to affect them adversely without the
consent of the holders of at least two-thirds of the total number
of outstanding Preferred Units, including those held by the General
Partner and its affiliates, given in person or by proxy, by vote at
a meeting called for that purpose or by written consent as
permitted by law. For purposes of this paragraph and in
furtherance of the foregoing, any such amendment or any resolution
or action of the Board of Directors which would create or issue any
10
series of Preferred Units out of the authorized Preferred Units, or
which would authorize, create or issue any securities (whether or
not already authorized) ranking junior to, on a parity with or
senior to the Preferred Units with respect to payment of
distributions and distributions upon any Liquidation or having
special voting or other rights, shall not be considered to affect
adversely the powers, preferences or special rights of the
outstanding Preferred Units.
(h) The Record Holders of the Preferred Units will have
no other rights to participate in the management of the Partnership
and they will not be entitled to vote on any matters submitted to
a vote of the Record Holders of Depositary Units.
Section 11. PREEMPTIVE RIGHTS. No Record Holder of
Preferred Units shall have any preemptive right with respect to (a)
additional Capital Contributions, (b) issuance or sale of Units,
whether unissued, held in treasury or hereafter created, (c)
issuance of any obligations, evidences of indebtedness or other
securities of the Partnership convertible into or exchangeable for,
or carrying or accompanied by any rights to receive, purchase or
subscribe for, any such unissued Units or Units held in treasury,
(d) issuance of any right of, subscription to, or right to receive,
or any warrant or option for the purchase of, any of the foregoing
securities, or (e) issuance or sale of any other securities that
may be issued or sold by the Partnership.
Section 12. ACTION WITHOUT A MEETING. Any action that may
be taken at a meeting of the Record Holders of Preferred Units may
be taken without a meeting if a consent in writing setting forth
the action so taken is signed by Record Holders of Preferred Units
owning not less than the number of Preferred Units that would be
necessary to authorize or take such action at a meeting at which
all of the Record Holders of Preferred Units were present and
voted. Prompt notice of the taking of action without a meeting
shall be given to the Record Holders of Preferred Units who have
not consented thereto in writing. The General Partner may specify
that any written ballot submitted by the General Partner to Record
Holders of Preferred Units for the purpose of taking any action
without a meeting shall be returned to the Partnership within the
time, not less than twenty (20) days, specified by the General
Partner. If a ballot returned to the Partnership does not vote all
of the Preferred Units held by a Record Holder of Preferred Units,
the Partnership shall be deemed to have failed to receive a ballot
for the Preferred Units that were not voted. If consent to the
taking of any action by the Record Holders of Preferred Units is
solicited by any person other than by the General Partner, the
written consents shall have no force and effect unless and until
(i) they are deposited with the Partnership in care of the General
Partner, and (ii) consents sufficient to take the action proposed
are dated as of a date not more than ninety (90) days prior to the
date sufficient consents are deposited with the Partnership.
11
Section 13. ISSUANCE OF CERTIFICATES EVIDENCING PREFERRED
UNITS. On the closing date of the Rights Offering, the General
Partner shall cause the Partnership to issue certificates
evidencing the aggregate whole number of Preferred Units to which
the Record Holders of Preferred Units are entitled in the form of
Exhibit A annexed hereto. Upon a transfer of a Preferred Unit in
accordance with Section 14 hereof, the General Partner shall cause
the Partnership to issue replacement certificates, according to
such procedures as the General Partner shall establish. The
certificates issued pursuant to this Section 13 shall, upon
issuance, be distributed to the Record Holders of such Preferred
Units. The Preferred Units will not be evidenced by Depositary
Receipts and, although the Partnership intends to seek to list the
Preferred Units on the New York Stock Exchange, there is no
obligation to list the Preferred Units on the New York Stock
Exchange or any other national securities exchange.
Section 14. TRANSFER OF PREFERRED UNITS. Until a Preferred
Unit has been transferred on the books of the Partnership, the
Partnership and the Registrar and Transfer Company or any successor
appointed by the General Partner, as transfer agent, registrar and
distribution-paying agent for the Preferred Units (the "Transfer
Agent") will treat the Record Holder thereof as the absolute owner
for all purposes, notwithstanding any notice to the contrary or any
notation or other writing on the certificate representing such
Preferred Unit, except as otherwise required by law. Any transfers
of a Preferred Unit will not be recorded by the Transfer Agent or
recognized by the Partnership unless certificates representing the
Preferred Units are surrendered and the transferee executes and
delivers a Transfer Application to the Transfer Agent. By
executing and delivering a Transfer Application, the transferee of
Preferred Units is an assignee until admitted to the Partnership as
a substituted limited partner, and shall have been deemed to have
automatically requested admission to the Partnership as a
substituted limited partner, agreed to be bound by the terms and
conditions of the Partnership Agreement, represented that such
transferee has the capacity and authority to enter into the
Partnership Agreement and granted the powers of attorney to the
General Partner as set forth in the Partnership Agreement. On a
monthly basis, the Transfer Agent will, on behalf of transferees
who have submitted Transfer Applications, request the General
Partner to admit such transferees as substituted limited partners
in the Partnership. If the General Partner consents to such
substitution, a transferee will be admitted to the Partnership as
a substituted limited partner upon the recordation of such
transferee's name in the books and records of the Partnership.
Upon such admission, which is in the sole discretion of the General
Partner, he or she will be entitled to all of the rights of a
limited partner under the Delaware Act and pursuant to this
Amendment and the Partnership Agreement. A transferee will, after
submitting a Transfer Application to the Partnership but before
being admitted to the Partnership as a substituted unitholder of
record, have the rights of an assignee under the Delaware Act and
this Amendment and the Partnership Agreement, including the right
12
to receive his or her distributions. Preferred Units are
securities and are transferable according and subject to the laws
governing transfers of securities.
A transferee who does not execute and deliver a Transfer
Application to the Partnership will not be recognized as the Record
Holder of Preferred Units and will only have the right to transfer
or assign his Preferred Units to another transferee. Therefore,
such transferee will neither receive distributions from the
Partnership or have any other rights to which Record Holders of
Preferred Units are entitled under the Delaware Act or pursuant to
this Amendment or the Partnership Agreement. Distributions made in
respect of the Preferred Units held by such transferees will
continue to be paid to the transferor of such Preferred Units. The
Partnership and a transferor will have no duty to ensure the
execution of a Transfer Application by a transferee and will have
no liability or responsibility if such transferee neglects or
chooses not to execute and deliver the Transfer Application to the
Partnership.
Whenever Preferred Units are transferred, the Transfer
Application requires that a transferee answer a series of
questions. The required information is designed to provide the
Partnership with the information necessary to prepare its tax
information return. If the transferee does not furnish the
required information, the Partnership will make certain assumptions
concerning this information.
As used in this Amendment, the term Transfer Application
means an application and agreement for transfer of Preferred Units
in the form set forth on the back of the certificates evidencing
Preferred Units or in a form substantially to the same effect in a
separate instrument.
Section 15. REPLACEMENT OF LOST, STOLEN, DESTROYED OR
MUTILATED PREFERRED UNIT CERTIFICATES. The Partnership shall issue
or cause to be issued a new certificate representing a Preferred
Unit in place of any certificate representing a Preferred Unit
previously issued if the Record Holder of such certificate:
(a) makes proof, in form and substance satisfactory to
the General Partner, of the loss, theft or destruction, and of such
General Partner's ownership, of such previously issued certificate;
(b) surrenders any mutilated certificate;
(c) requests the issuance of a new certificate before the
Partnership has notice that such previously issued certificate has
been acquired by a purchaser for value in good faith and without
notice of an adverse claim;
(d) if requested by the General Partner, delivers to the
Partnership a bond, in form and substance satisfactory to the
General Partner, with such surety or sureties and with fixed or
13
open penalty, as the General Partner may direct, to indemnify the
Partnership against any claim that may be made on account of the
alleged loss, theft, destruction or mutilation of such previously
issued certificate; and
(e) satisfies any other reasonable requirements imposed
by the General Partner.
When a previously issued certificate representing a
Preferred Unit has been lost, stolen, destroyed or mutilated, and
the Record Holder fails to notify the Partnership within a
reasonable time after he has notice of such event, and a transfer
of Preferred Units represented by the certificate is registered
before such Partnership receives such notification, the Record
Holder of the Preferred Unit shall be precluded from making any
claim against the Partnership or any Transfer Agent with respect to
such transfer or for a new certificate.
Section 16. Allocations of Income and Loss.
------------------------------
(a) Section 5.01 of the Partnership Agreement is amended
by adding the following provisions:
(e) All distributions accrued to a Record Holder of Preferred
Units under Section 4(a) of the Amendment during a Fiscal Year
shall be treated as guaranteed payments to such Record Holder
pursuant to Section 707(c) of the Code for such Fiscal Year.
Record Holders of Preferred Units shall not be allocated any other
items of income, gain, loss or deduction of the Partnership in
respect of the Preferred Units except (i) upon the redemption of
such Preferred Units for Depository Units or (ii) as required under
paragraph (c) of Section 5.01.
(f) Upon any redemption of Preferred Units for Depositary
Units, the General Partner is authorized to allocate items of
income, gain, loss and deduction between the Record Holders of
Depositary Units received upon the redemption and the General
Partner and other Record Holders of Depositary Units in such
amounts, if any, as are required to cause the Capital Accounts of
the Record Holders of each Depositary Unit to be in proportion to
the number of Depositary Units held by each Record Holder.
(b) Sections 5.01(b) and (c) of the Partnership Agreement are
amended to provide as follows:
"(b)
(1) To the extent that any Partner has or would have, as a
result of an allocation of an item of loss or deduction, an
Adjusted Capital Account deficit, such amount of loss or deduction
shall be allocated to the other Partners (excluding Record Holders
of Preferred Units) in proportion to their respective Percentage
Interests, but in a manner which will not produce an Adjusted
Capital Account deficit as to any such Partner. To the extent such
14
allocation would result in all Record Holders of Depositary Units
and the General Partner having Adjusted Capital Account deficits,
such loss or deduction shall be allocated to the Record Holders of
Preferred Units in proportion to the number of Preferred Units held
by each Record Holder until they would have an Adjusted Capital
Account deficit. Any balance shall be allocated to the General
Partner.
(2) Notwithstanding any other provision of this Article V,
if there is a net decrease in Partnership Minimum Gain during any
Partnership Year, then, subject to the exceptions set forth in
Treasury Regulation Section 1.704-2(f)(2), (3), (4) and (5), each
Partner shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in
Partners Minimum Gain, as determined under Treasury Regulation
Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to
be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in such section of the Regulations in
accordance with Treasury Regulation Section 1.704-2(f). This
paragraph is intended to comply with the minimum gain chargeback
requirements in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(3) Notwithstanding any other provision of this Article V
except Section 5.01(b)(2), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any
Fiscal Year then, subject to the exceptions set forth in Treasury
Regulation Section 1.704-2(i)(4), each Partner who has a share of
the Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Treasury Regulation
Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the
net decrease in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treasury Regulation
Section 1.704-2(i)(4). The items to be so allocated shall be
determined in accordance with Treasury Regulation
Section 1.704-2(i)(4). This paragraph is intended to comply with
the minimum gain chargeback requirement in Treasury Regulation
Section 1.704-2(i) and shall be interpreted consistently therewith.
"(c)
(1) Notwithstanding any other provision of this Article V,
except Section 5.01(b), in the event any Partner receives any
adjustments, allocations or distributions described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), that cause
or increase an Adjusted Capital Account deficit of such Partner,
items of Partnership income and gain shall be specially allocated
to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulation, the Adjusted
Capital Account deficit of such Partner as quickly as possible.
15
(2) Nonrecourse Deductions for any Fiscal Year shall be
allocated between the General Partner and the Record Holders of
Depositary Units in proportion to their respective Percentage
Interests.
(3) Any Partner Nonrecourse Deductions for any Fiscal Year
shall be specially allocated to the Partner who bears the economic
risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i)(1).
(4) The allocations set forth in Sections 5.01(b) and
5.01(c)(1) and (3) above (the "Regulatory Allocations") are
intended to comply with certain requirements of Treasury Regulation
Section 1.704-1(b). The Regulatory Allocations shall be taken into
account for the purpose of equitably adjusting subsequent alloca-
tions of income, gain, loss and deduction, and items of income,
gain, loss, and deduction among the Partners so that, to the extent
possible, the net amount of such allocations of income, gain, loss
and deduction and other items to each Partner shall be equal to the
net amount that would have been allocated to each such Partner if
the Regulatory Allocations had not occurred.
(5) Pursuant to Treasury Regulation Section 1.752-3(a), for
the purpose of determining the General Partner's and each Record
Holders of Depositary Units' share of excess Nonrecourse Liabili-
ties of the Partnership, each such Person shall be treated as
having a share of the Partnership's profit and income equal to
their respective Percentage Interests. For this purpose, the
Percentage Interest allocable to Record Holders of Preferred Units
shall be zero.
(6) To the extent permitted by Treasury Regulation
Sections 1.704-2(h)(3) and 1.704-2(i)(6), the General Partner shall
endeavor to treat distributions as having been made from the
proceeds of Nonrecourse Liabilities or Partner Nonrecourse Debt
only to the extent that such distributions would cause or increase
a deficit balance in any Partner's Adjusted Capital Account."
(c) Section 5.02 of the Partnership Agreement is amended by
deleting paragraphs (c) and (d), relabelling paragraphs (e) through
(h) as paragraphs (c) through (f), respectively, and amending
paragraph (a) to read as follows:
"(a) Except as otherwise provided in this Section 5.02, all
items of income, gain, loss and deduction of the Partnership for
federal income tax purposes shall be allocated for federal income
tax purposes among the General Partner and Limited Partners in
accordance with the allocation of the corresponding items of book
income, gain, loss and deduction under Section 5.01 hereof."
Section 17. LIABILITY OF GENERAL PARTNER TO RECORD HOLDERS
OF PREFERRED UNITS. The General Partner and its Affiliates and all
partners, shareholders, directors, officers, employees or agents of
16
the General Partner and its Affiliates shall not be liable (for
monetary damages or otherwise) to the Record Holders of Preferred
Units for errors in judgment or for breach of fiduciary duty as the
General Partner of the Partnership or as a partner, shareholder,
director, officer, employee or agent of the General Partner of the
Partnership or any of its Affiliates, except for liability (i) for
any breach of such Person's duty of loyalty to the Partnership, as
such duty of loyalty may be set forth in or modified by this
Amendment or the Partnership Agreement, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or
knowing violation of law or (iii) for any transaction from which
such Person has derived an improper benefit.
Section 18. REIMBURSEMENT OF EXPENSES OF GENERAL PARTNER.
The Partnership shall reimburse the General Partner for all
expenses, disbursements and advances reasonably incurred by the
General Partner in connection with the registration of the Rights,
the Preferred Units and the Depositary Units under applicable
federal and state securities laws in connection with the Rights
Offering, the offering, sale and distribution of the Preferred
Units and the Depositary Units pursuant to the Rights Offering and,
as applicable, the listing of the Rights, the Preferred Units and
the Depositary Units on the New York Stock Exchange.
Section 19. REPORTS. The General Partner shall furnish
such reports and information to Record Holders of Preferred Units
at the same time and in the same manner as are required to be
furnished to Record Holders pursuant to Section 8.04 of the
Partnership Agreement.
Section 20. NOTICES. All notices, demands, requests or
other communications which may be or are required to be given,
served, or sent by a Record Holder of Preferred Units or the
Partnership pursuant to this Amendment shall be in writing and
shall be personally delivered, mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or
transmitted by telegram or telex, addressed as follows:
(a) If to the General Partner:
American Property Investors, Inc.
90 South Bedford Road
Mt. Kisco, New York 10549
Attention: John P. Saldarelli
(b) If to a Record Holder of Preferred Units:
The Last Known Business, Residence or
Mailing Address of Such Record Holder
Reflected in the Records of the
Partnership
17
(c) If to the Partnership:
American Real Estate Partners, L.P.
90 South Bedford Road
Mt. Kisco, New York 10549
Attention: John P. Saldarelli
The General Partner and each Record Holder of Preferred Units
and the Partnership may designate by notice in writing a new
address to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand,
request or communication which shall be delivered, mailed or
transmitted in the manner described above shall be deemed
sufficiently given, served, sent or received for all purposes at
such time as it is delivered to the addressee (with an affidavit of
personal delivery, the return receipt, the delivery receipt, or
(with respect to a telex) the answerback being deemed conclusive
(but not exclusive) evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
Section 21. SEVERABILITY. The invalidity of any one or
more provisions hereof or of any other agreement or instrument
given pursuant to or in connection with this Amendment shall not
affect the remaining portions of this Amendment or any such other
agreement or instrument or any part thereof, all of which are
inserted conditionally on their being held valid in law; and in the
event that one or more of the provisions contained herein or
therein should be invalid, or should operate to render this
Amendment or any such other agreement or instrument invalid, this
Amendment and such other agreements and instruments shall be
construed as if such invalid provisions had not been inserted.
Section 22. WAIVER. Neither the waiver by a Partner of a
breach or of a default under any of the provisions of this
Amendment, nor the failure of a Partner, on one or more occasions,
to enforce any of the provisions of this Amendment or to exercise
any right, remedy, or privilege hereunder shall be construed as a
waiver of any subsequent breach or default of a similar nature, or
a waiver of any such provisions, rights, remedies, or privileges
hereunder.
Section 23. LIMITATION ON BENEFITS OF THIS AGREEMENT. It
is the explicit intention of the Partners and the Partnership that
no person or entity other than the Partners and the Partnership is
or shall be entitled to bring any action to enforce any provision
of this Amendment against any Partners or the Partnership, and that
except as set forth in this Amendment, the covenants, undertakings,
and agreements set forth in this Amendment shall be solely for the
benefit of, and shall be enforceable only by, the Partners (or
their respective successors and assigns as permitted hereunder) and
the Partnership.
Section 24. CONSENT OF RECORD HOLDERS OF PREFERRED UNITS.
By acceptance of a Preferred Unit, each Record Holder thereof shall
18
be deemed to have applied for admission as a Limited Partner of the
Partnership with respect to the Depositary Units and Preferred
Units and to have agreed to be bound by all of the terms and
conditions of the Partnership Agreement. In addition, by
acceptance of a Preferred Unit, each Record Holder thereof
expressly consents and agrees that, whenever in this Amendment it
is specified that an action may be taken upon the affirmative vote
of less than all of the Record Holders of Preferred Units, such
action may be so taken upon the concurrence of less than all of the
Record Holders of Preferred Units and each such Record Holder of
Preferred Units shall be bound by the results of such action.
Section 25. PRONOUNS. All pronouns and any variation
thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or entity
may require.
Section 26. HEADINGS. Section and subsection headings
contained in this Amendment are inserted for convenience of
reference only, shall not be deemed to be a part of this Agreement
for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
Section 27. GOVERNING LAW. This Amendment, the rights and
obligations of the parties hereto, and any claims or disputes
relating thereto, shall be governed by and construed in accordance
with the Delaware Act and all other laws of Delaware (but not
including the choice of law rules thereof).
Section 28. AMENDMENTS. The Record Holders of Preferred
Units shall have no right to propose amendments to the terms of the
Preferred Units under Article 14 of the Partnership Agreement or
otherwise.
Section 29. EXECUTION IN COUNTERPARTS. To facilitate
execution, this Amendment may be executed in as many counterparts
as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures
of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of or on
behalf of, each party, or that the signatures of the person
required to bind any party, appear on one or more of the
counterparts. All counterparts shall collectively constitute a
single agreement. It shall not be necessary in making proof of
this Amendment to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
Section 30: INCONSISTENT TERMS; CONTINUATION OF PARTNERSHIP
AGREEMENT. In the event of any inconsistency between the terms of
the Partnership Agreement and the terms of this Amendment, the
Partnership Agreement is deemed amended to conform to the terms of
this Amendment. Except as amended by this Amendment, the
Partnership Agreement continues in full force and effect.
19
Section 31. POWERS OF GENERAL PARTNER. Record Holders of
Preferred Units acknowledge that the General Partner shall have the
right, power and authority, in the management and control of the
business and affairs of the Partnership, to do or cause to be done
any and all acts deemed by the General Partner to be necessary or
appropriate to carry out the purposes and business of the
Partnership, as set forth in the Partnership Agreement, and the
Record Holders of Preferred Units further acknowledge that their
rights are limited to those set forth in this Amendment and any
rights set forth in the Partnership Agreement consistent herewith.
IN WITNESS WHEREOF, the undersigned have duly executed
this Amendment, or have caused this Amendment to be duly executed
on their behalf, as of the day and year first hereinabove set
forth.
General Partner:
AMERICAN PROPERTY INVESTORS, INC.
By: /s/John P. Saldarelli
____________________________
Title: Treasurer
____________________________
Limited Partners:
By: American Property Investors,
Inc. (attorney-in-fact)
By: /s/John P. Saldarelli
____________________________
Title: Treasurer
____________________________
[Amendment No. 1 to Partnership Agreement]
20